Tandy Center Owner Shifts Gears on 1M-SF Plan

"The downtown office market is getting mighty tight," David Porter, president of PNL Cos. in Dallas, says. As a result, he's telling GlobeSt.com that the going-forward plan is to find a residential developer for the south tower and mothball the north one for two years to give brokers time to find a large corporate user. He built in some flexibility after DR Horton Inc. took down 160,000 sf in City Center II at 301 Commerce St. and as his Holliday Fenoglio Fowler LP team of Jeff Stone and Andrew Levy started courting the capital markets for a residential developer to wed the $100-million redevelopment plan.

Porter says his announcement in a local newspaper about converting both towers into residential use sparked an outcry from the brokerage community. "There's just not much left," he says, noting brokers immediately knocked on his door to hold one tower for office use after word about Horton's headquarters relocation hit the streets. "Even though I'm now geared up for a residential deal, the office market's changed. The north tower is available." He says Tandy Center was "a weak second" for the DR Horton deal and decided to go all condo when it didn't materialize.

Porter says it's an 80% to 90% chance both towers are going to be condo. "The odds are there's not going to be another DR Horton coming to town in 24 months. As a betting man, the two-tower, residential plan is the strategy...unless we get an office user competitive with our alternative," he says. "But we do have flexibility to be responsive to a large office user."

Porter says a short list of residential developers will be in hand in September and a final decision made in November. He says the deal on the table will decide how much control he relinquishes for the four-block footprint. "We will be a substantial owner," he says. The buildings have 660,000 sf of gross space in two towers and 500,000 sf of retail space. Under the plan, retail space will be slashed to 78,265 sf by build-out. Condos will range from 750 sf to 4,000 sf. Porter says prices will run from $140,000 to finished efficiencies to as much as $1.5 million for penthouse shells.

Aside from a capital stake, Porter says PNL needs a developer capable of converting the floor plates into New York City-style apartments. "This is a $100-million rehab project, which is more challenging than a new building," he says. "This is too big of a project for us to learn on. We need some broader shoulders. PNL primarily is a real estate investment company not a developer."

As the HFF team continues to court equity partners, Porter's pushing forward on development issues so the project can be ready to go when RadioShack moves. He's also negotiating a deal with the skywalk-connected Renaissance Worthington Hotel for the condo project's amenity package.

PNL did a sale/leaseback three years ago with RadioShack Corp., which has a headquarters campus rising nearby on the bank of the Trinity River. The lease runs through April 2005.