I love the Statler Hilton and am too hyper to wait for an official progress report. So I pinged the city’s newest real estate developer, Leobardo Trevino, and asked if I could have a look see. Turns out they are knee-deep in asbestos removal, so he gave me these hot shots straight from his Blackberry so I could see what they are up to. (In case you don’t know it, asbestos was widely used as an insulating and flame retardant in buildings in the 1950s and early ’60s until it was discovered that inhalation of asbestos fibers cause a rare form of lung cancer known as mesothelioma. Removal is tricky and super costly and to be around the stuff, you practically have to wear a HazMat suit.) Instead of a Statler tour — I got a rain check and for-my-eyes-only look at the new presentation video– I toured and snapped 1600 Pacific, LTV Tower, one of three downtown buildings owned by Ricchi Dallas Investments, LLC, Trevino’s development company. And of course, I took the chance to get to know the man, the preservationist, who is helping transform downtown Dallas real estate one historical chunk at a time: 1600 Pacific, the Statler Hilton, and the old Dallas Public Library. His name is Leobardo Trevino, he was born in Monterrey, Mexico where he went to college, and he came to the U.S. in 1998 and lives in San Antonio. And get this — he’s a classicist with a passionate love of history. Trevino collects classical cars. The inspiration to buy these three relics actually came from restoring classic cars. When you find a car in a barn that’s all¬† dirty and dusty, as soon you start cleaning it up it comes back to life, says Trevino. Very soon you have a crowd of people interested in either buying it or admiring it. Naturally, he is applying the same process to some great old buildings in Dallas.
I’m fascinated with the man for several reasons — one, he loves real estate (ditto), and two, he has stuck his developer’s neck out, way out with these three projects. Not only are these going to be expensive buildings to remodel, we are still swimming out of the worst recession since the Great Depression in a real estate economy that acts like its choking on those asbestos fibers. A more conservative investor might have passed — in fact, many did.
In 2008, the 1956 William Tabler-designed Statler Hilton was placed on the endangered-building lists of local, state, and national preservation groups. Everyone wanted to see a future for what was once the coolest hotel in Dallas, the W-Ritz clone of its day — the Beatles stayed there, so did Elvis. It is also a nod back to the Stanley Marcus drenched days of Dallas grandeur and sophistication. Some swore redevelopment would never happen. The Statler was under contract three times in five years, according to the attorney who represents the building‚Äôs former owners, Hong Kong-based Hamsher International Ltd. Hamsher’s real estate holdings are concentrated in Asia; the firm bought the building in the real estate dead late 1980’s and tried for years to unload it.
Why was it such a hard sell?
Price: northward of $25 a square foot, real estate experts said the price was too high at $14.7 million.¬† (Trevino tells me he paid $18 million for the Statler, $16 million for 1600 N. Pacific.) The cost of the interior demolition — floors and walls are constructed of poured concrete, so those 8.6-foot tall ceilings can’t be easily raised– is hefty. It contains asbestos, which can cost $30 per square foot to take out, out-of-date wiring and I am dying to see how they solve the cell phone reception issue with those concrete floors. Trevino tells me there is nothing wrong with the ceiling height, that many new hotels are being built with 8.6 ft ceilings. Still, the to-do list is exhausting: upgrade building systems, environmental studies and abatement’s, and getting that asbestos out without killing anyone made the cost of preserving and re-vamping this baby an expensive, risky process. And what sane developer wants more than the mother lode of risk already existing in 2010?
And the interiors were a gross, dilapidated mess — check out this 2008 slide show from the Dallas Observer showing a few of the many nasty spaces inside the Statler.
So I had to sit down with Trevino and see the man who took on this challenge. How, I asked, are you going to do this, when, and whose coming on board?
Trevino proceeded to tell – -and show me — the way commercial development works in 2011.
“We work differently,” he said, “we have a system that adapts to the current economy.”
He develops these buildings, he says, in phases.
In other words, I said, you make a shell. Exactly. Ricchi goes in and demolishes interiors, removes the asbestos, cleans up the building, pulls in the services, and leaves a nice clean building-ready shell that is not touched until a tenant is ready, signed lease (and deposit) in hand.
“The old method was build it, finish it out and they will come,” says Trevino. ” This is our response to the recession — find the tenants, then do the build-out.”
Kind of a cool trick: to keep from disturbing settled tenants, the building has an internal warehouse and huge junk elevator at one end of each floor so debris can be cleared and hauled down without disruption or dust affecting the main areas. The elevator can become a freight elevator when construction is 100% complete. The Statler will be developed in the exact same way.
This is no different than what developers do in subdivisions: grade, level, pull in utilities and put in the curbs, then wait until a buyer comes along for an individual lot.
A building like 1600 Pacific would have cost $80 million to finish out, and at 5% that would be $4 million a year in carry. The way he’s doing it, the cost has been less than $40 million as a shell and so half the carry.
He won’t tell me what his plans are for the Statler yet, whether a hotel or apartments, he just says the market will dictate. LTV will be office condos, a 180 room, four-star hotel (a deal is close to being completed) and retail. One room that is not a shell is the second-floor walnut-paneled bank National bank of Commerce lobby — Trevino did not want to touch a nick of wood or the massive brass chandelier. Trevino asked for $13 million in subsidies from City Hall to help with the project, a far lower sum that previous developers asked for to turn around the building. Originally he had also said the building would be “hotel and residential condominiums,¬† condos that will be built as they are sold, although some units will be built.”
Now, he tells me, no plans for hotel condos at 1600.
“Condo hotels are done by necessity or option,” he told me. “They began in industrial neighborhoods zoned commercial, or in transitional neighborhoods.”
Most cities, he said, put strict limitations on condo hotels and how they are advertised, how many days per year an owner can stay. Condo hotel are more common in resort cities or areas.
Trevino is quite bullish on Dallas, obvi.
“We are sitting on the next boom, and it is here,” he says. “Downtown Dallas is amazing — the crime is down 19%, the streets are clean, there are more parks, more restaurants, more people living downtown.”
There are more hotels coming along to bring in more conventions.
“We are buying properties at a discount,” says Trevino.
The day we talked Case-Shiller had reported a decrease of 2% in Dallas home values. Hey, says Trevino, be thankful: 2% is a miracle compared to what other states have suffered.
But he thinks his home town of San Antonio, and also Houston, may be booming a bit more than Dallas. Part of the reason: the influx of wealthy Mexicans seeking refuge there. Texas real estate is definitely benefiting from the crime spree in his native country. The cream of the crop of Mexicans, he says, are investing in Texas, some buying a home permanently, others buying a second home. In San Antonio, Trevino is developing The Ricchi at La Cantera, on the northern edge of town: a 91 condo complex and commercial strip center plaza. He’s also developing “smart mansions”, more on those in a future post.
One big difference between the two cities that draws him to Dallas is our booming, vibrant downtown. You visit downtown San Antonio, he says, you don’t live there.
And he thinks you can function in downtown Dallas without a car. Trevino tells me he never uses a car when he’s in town. He rents an apartment at The Gables and walks everywhere, downtown.
“It’s a novelty to me,” says Trevino. “I walk to dinner and walk home after eating, far healthier than sitting in a car.”
And no better way to keep an eye on his investment in the city he thinks is about to rise to the top.