Three and a half years of doing anything is bound to teach you – at a minimum – patience.
The perspective gleaned from the ups and downs of Quadrant Investment Properties’ overhaul of The Centrum along Dallas’ winding Oak Lawn Avenue has shaped the firm’s founder and its approach to the city’s Design District.
Chad Cook found his footing in commercial real estate working first with Emerson Partners in leasing and dispositions before an eight-year stretch at Hillwood Investment Properties as vice president of Acquisitions.
Now armed with lessons learned in the adaptive reuse space where QIP first blossomed, Cook and the firm announced a foray into a new frontier earlier this year: ground-up development.
Thirteen Thirty Three and River Edge both feature flexible floor plates, must-have amenities, sweeping and unimpeded skyline views, and gobs of natural light. And that includes the backdrop of the firm working to get creative within the confines of respective sites and adding crucial and convenient parking.
There is a restraint in the design of the new buildings, brought to life by Merriman Anderson Architects, that reflects QIP’s intention to work with the existing features of the Design District, rather than reshape them.
That measured approach is already beginning to take shape in QIP’s Manufacturing District, in addition to the renaissance of The International, as it looks to its adaptive reuse know-how to breathe new life into existing spaces.
The value proposition behind QIP’s vision for the Design District is simple: While the product might not be for everyone, there’s substantive demand for the firm’s differentiated approach as users look to woo and retain workers.
“We're not here to do one building. We'd like this to be a forever play for us,” said Cook in a recent interview.
QIP has teamed up with Maryland-based FCP as an equity partner on the ground-up developments, as well as The International project. Transwestern has been tapped to market the office space at the Manufacturing District, The International and the new office developments, while Shop Cos. is addressing retail at the new office towers and The International.
Cook spoke more about the need to get the new office product in the Design District right; the tension between returns and density; and more:
I think a lot about density and its relationship to returns coupled with the sympathy for maintaining the identity of a neighborhood like the Design District. What does it look like to find the right equity partner for something like this?
That relationship was a huge area of focus. As great as Uptown is, we did not want to build another Uptown. If it became dense here and went vertical on every single corner, you would ruin the feel of the neighborhood.
Several of the projects we’ve worked on and others we’re planning to roll out involve much less density than is allowed on the site. Over the long term, we felt that was the best thing for the neighborhood – to create a unique, eclectic experience.
Regarding equity, we started with what the vision for the project was; what we wanted that building to look like; what we could see make sense on the site, and then we ran the math. When we were raising capital around that idea, we didn’t have to say, “Well, you could do it this way, or you could do it that way.”
We've been lucky with the equity partner we've worked with on most of the projects down here aside from our first aggregation, FCP. They get the adaptive-reuse and urban-adjacent plays and have been extremely supportive.
It’s not like a chicken-or-the-egg scenario then. If you have a specific vision, you need the right equity partner for something like this, not one that might want to see the maximum capacity out of a site. That still keeps me coming back to returns, especially in a town like Dallas.
We all have to think about returns. We’re not going as vertical as we can, but these buildings will be profitable. We talk about this internally as a team: We’ll figure out a way to make money, but we need to build this the right way.
There’s this compounding effect that we’ve never had anywhere else. The Design District is its own little subdistrict. Every brick we paint, and every roof deck we add creates a direct value lift for everything else. Everything we do feeds off everything else we're doing. I believe we've hit the tipping point. It's going to accelerate and it's going to be something special.
What’s it like to build something from the ground up that’s still “of” the Design District but also creates a new product to meet office demand?
In a word: Stressful. Our biggest concern was, "How do we not screw this up?" This neighborhood has a distinct culture with quality restaurants and a unique feel.
You can’t come in as the greedy developer and build a bunch of big glass and steel towers with rectangular floor plates. If you read Office 101 educational books, that's what they'll tell you to do. We felt that we had to do something more individual to the neighborhood if we were going to do it right and create the right long-term effect. We're not here to do one building. We'd like this to be a forever play for us.
You have a varied background within commercial real estate. Is there anything from those other roles that have helped you in the venture and in moving into ground-up development?
My original leasing background helps a lot. Any deal we look at – whether it's an empty warehouse or something we’re going to renovate or a high-rise office building – it helps to understand how am I going to ultimately sell it to someone. I think about what my marketing tour is going to look like and what that experience would be like.
My finance background helps too because you have to be able to understand money in and money out and how returns are going to work. You can’t waste a lot of time on something that doesn’t work financially, and you need to be able to do that quickly.
The most helpful experience was The Centrum, where we saw that you have to have patience. I describe it as a roller coaster – and I hate roller coasters. The reason that roller coasters are such a thrill is because there's always a point when you're still going down and you're ready to come back up, but, no, you have to go down a little bit further.
With these aggressive renovations, you can be off-schedule, over-budget, not have proof of concept and not have any space leased, but you still have to lead everyone forward and push through that. We’re starting to come up on the roller coaster in the Design District. Our leasing is going well. There’s tenant demand, and that is always humbling, especially when you have such a different idea and it works.
What does it look like to balance as many projects as y’all have right now that are in different phases? Building the right team is huge, of course.
It looks like a lot less gray hair before I started. That's for sure.
(Laughing)
It has helped that we've scaled our team.
We’re also using Merriman for the ground-up buildings so we can have the same team and have crossover. We’re self-taught when it comes to office. A lot of our lingo and terminology are distinctive to us. Once you get a team to understand that and what you're looking for – whether it's a leasing team or architects – that helps. It’s also an advantage that the work is in a single neighborhood. If we were doing this same scale in four markets, it would be a lot harder.
I always feel like I’m belaboring supply chain and commodity pricing issues by asking about them, but are those the challenges you’re keeping an eye on? Are there others? The supply chain issues are a major hurdle, especially since December when everything started to compound. Trying to maneuver around that and trying to hold pricing from one week to the next is very hard. You have to be committed and willing to financially commit with the right groups and support and lock in your pricing when you can.
The supply chain issues are a major hurdle, especially since December when everything started to compound. Trying to maneuver around that and trying to hold pricing from one week to the next is very hard. You have to be committed and willing to financially commit with the right groups and support and lock in your pricing when you can.
I’m personally glad we’re past the point where people have stopped asking if the office is still relevant. We still need office space, but it might not look the same as it traditionally has. There's a serious reckoning coming for the world of office in a bifurcation between the haves and have-nots. The haves will be the differentiated office that’s providing something more than just a commodity. I don't know what happens with the have-nots. Maybe they'll be fine?
There's a serious reckoning coming for the world of office in a bifurcation between the haves and have-nots. The haves will be the differentiated office that’s providing something more than just a commodity. I don't know what happens with the have-nots. Maybe they'll be fine?
The users we're targeting are focused on hiring, retention and the kind of culture they can build within their companies. That's what helps us sleep well at night – that office is not going away because you can't build a culture on a video call. It doesn't work that way.