What had seemed like a real estate chip shot in Dallas turned to a bogey last April when Ross Perot, Jr. “sold” his interest in Victory, the near downtown mega development, to his German creditors in cancellation of $275 million in debt.
It’s not a new story. Give a real estate developer the opportunity — and the equity — to develop a million square feet and ten of them will do it simultaneously. In this case, Perot was all ten.
Between 2006 and 2008 his company, Hillwood Investments, built almost 400 condos, 400 apartments, 250 hotel rooms and 500,000 square feet of retail on only 75 acres just north of downtown. Oh, and the 840,000 square foot American Airlines arena.
By the end of 2008 Victory had generated a half billion dollars of tax base for the City of Dallas. The city had contributed to its birth with incentives which enabled Perot to kick off the Arena with little or no equity. Despite his family’s wealth, Perot was no different from most developers who couldn’t resist building on thin equity.
What went wrong?
First, overbuilding. Second, easy money went hard to get. Third, many markets collapsed; the Perots’ hedge fund lost $2.5billion, much of it family money. Fourth, even before the collapses the urban design, which faced inward onto a spine road rather than outward onto a major city thoroughfare, was dependent on internally generated mass including the planned Mandarin Oriental Hotel which got deferred. So retailers came and then went, very, very visibly. It gave Victory the public aroma of aging fish. Fifth, Victory aimed for the well heeled; condos went for $500 per foot, equal to what was being sold in Uptown (where condos also later cratered) but without Uptown’s infrastructure. When the well-heeled switched to running shoes Victory’s clientele went elsewhere.
A note: at Property Tax Protest we have represented condo owners in Victory who saw their taxable market values get reduced from $625 per foot in 2008 to $520 per foot in 2009 through a combination of protest to the Appraisal Review Board and Arbitration following a Board ruling that was inadequate.
Will Victory come back? Las Colinas crashed in the mid eighties for many of the same reasons. It’s back in spades. Victory will come back also in time. But its landmark may just become a tower called, appropriately, Siegessaule. It’s the Victory Tower built in Berlin in 1873; it’s still standing through multiple wars and civic destruction far worse than Victory will ever experience.
