Fort Worth’s purchase of Pier 1 tower for City Hall seen as a ‘win-win’

December 6,2020


See full Fort Worth Star-Telegram article by Luke Ranker here.

Apart from surprise at the city’s bold move to buy the landmark Pier 1 tower in downtown Fort Worth, reaction to the concept of the 20-story building serving as city hall has been optimistic with city officials and real estate experts calling it a “win-win” for both taxpayers and commercial real estate in the business district.

City Manager David Cooke and Mayor Betsy Price announced Dec. 2 the city’s intention to buy the iconic tower at 100 Energy Way pending City Council approval on Dec. 15 and sale closure on Feb. 1. A purchase price has not been made public, but the property is worth $71 million according to the Tarrant Appraisal District. With renovations, Cooke said the cost would come in around $100 million, about half what the city had projected a new city hall would cost to build. If approved, city employees would move in by 2022. A newly built city headquarters would have opened in 2028 at the earliest.

“It’s a pretty amazing deal all around, I think,” Cooke said. “I think the taxpayers benefit, I think everybody benefits, by having a strategy that can move a lot faster and be a lot less expensive than what was in motion.”

City officials have promised taxes will not increase as a result of the purchase. Cooke plans to use tax notes that require a vote by City Council but do not need voters’ approval in a bond election. The tax notes are typically financed for seven to 10 years, he said, but allow flexibility for refinancing if interest rates or other factors change.

After the city moves into the tower in 2022, Cooke plans to explore selling several public buildings downtown, including the Central Library at 500 W. Third St., if the right buyer is found. The city estimates all of its downtown property to be worth around $35 million based on a 2018 calculation. That number may change if the city chooses not to sell some property or if the market shifts.

Cooke cautioned that the city hasn’t committed to selling individual properties, but high on the list are the Gordon Swift and Lone Star Gas buildings, directly across from City Hall as well as the Taylor Street parking garage. Those properties are valued at more than $10.4 million, according to the Tarrant Appraisal District. An “L” shaped property on Taylor and Lancaster has a market value of more than $1 million. The Central Library property is worth more than $14 million, according to the appraisal district.

These values would likely increase as the properties are redeveloped, Cooke said.

In August 2019, Cooke started floating the idea of consolidating city offices into a new city hall with downtown players like Downtown Fort Worth Inc., the Texas A&M law school and Visit Fort Worth. At the time the proposal included a brand new city hall off Lancaster Avenue on the south end of downtown that would cost $151 million to $200 million.

Cooke had wanted to hold public meetings about a new city hall before putting it on the 2022 bond election, but the coronavirus pandemic made meetings complicated. Then the city was approached with the concept of buying Pier 1 and Cooke said it was necessary to move quickly.

Councilwoman Ann Zadeh, who represents downtown, said the deal checked many boxes for the city’s long-term priorities. City officials have long discussed the need to both consolidate offices and have a more publicly accessible City Hall, she said.

“Some people were like ‘oh my god, this was fast,’” Zadeh said of the announcement. “It may seem fast for people but it’s definitely been a conversation that’s been going on.”

While city officials say the move is a win for taxpayers, it will also be a boon for downtown real estate, downtown real estate experts said.

Roughly three quarters of the Pier 1 floors are vacant and 260,000 of the 410,000 square feet of office space is unused. Leases remain on the top five floors but will begin expiring from 2024 to 2031. The city estimates the leases will generate about $3 million in revenue.

Selling or leasing that much office space (about 1.5% of Fort Worth’s total Class A office space) usually takes multiple transactions, said Andrew Matheny, a researcher for commercial real estate firm Transwestern. The firm handled leasing at 777 Main as well as Winfield Place and will be leasing the former Oncor building at 115 W. Seventh St. in downtown.

Mathney called the deal “a creative use of real estate.”

“It’s a big enough transaction to move the needle on a market wide occupancy level,” he said.

That’s a win for the remaining downtown office space. When occupancy rates drop, existing office spaces become more attractive to companies looking to move. Fewer options may also push companies to move quicker on deals, he said.

Matheny said it wasn’t clear if the deal would drive up downtown office leases, but it certainly would propel competition. The average lease is about $31 per square foot, according to Transwestern.

Johnny Campbell, President and CEO at City Center Management, agreed.

The Pier 1 tower may have attracted different interests at a different price point than the City Center towers because it’s farther from the core, but Campbell said it’s large enough to be competitive.

“I’m going to say yes, it does make all of the core buildings more attractive just for the simple reason that that option will go away,” he said of the city buying the Pier 1 building. “It probably would create more focus on the vacancy and availability that’s in that central core.”

A spokesperson for Sundance Square, one of the largest downtown property owners, said the company wouldn’t comment until a sale finalizes.

The purchase of the tower for government use likely wouldn’t impact the city’s ability to attract a corporate headquarters to the central business district, Matheny said. Fort Worth appears to be taking the right steps to lure a company to downtown — increasing housing and hotel space, promoting the core’s walkability and tweaking incentives, he said. While the large amount of space the tower offered may seem attractive to a company looking at Fort Worth, most would likely want space built to their tastes, not Pier 1’s.

“So you may think ‘oh there’s this big block of space it must be competitive for a new company,’ but another company may have a different space requirement that doesn’t fit that building,” he said.

NEW CITY HALL
In some form the city has been discussing the need for a new city hall since at least 2004 when city staff began exploring whether to move or renovate the current building.

Then-Mayor Mike Moncrief and other city officials had been in favor of buying the historic U.S. Post Office building at 251 W. Lancaster Ave., but the cost to renovate the building prevented the city from moving swiftly and the postal service ultimately backed out of the deal in 2014.

Moncrief didn’t return an email requesting comment for this story.

Mayor Pro tempore Jungus Jordan, the longest serving council member, recalled early discussions about city hall being on the table in 2005, his first year in office. Unclear costs associated with moving versus renovating held up many discussions as well as whether the city should centralize offices or spread them throughout the city, he said.

“I think every year, virtually, we’ve looked at our facilities,” Jordan said.

Talk of a new city hall was largely dropped during the Great Recession, Jordan said, and wasn’t earnestly picked up until a few years ago. In 2018 Mayor Betsy Price put a new city hall back on the agenda, telling the Star-Telegram the city was “busting at the seams” in the building.

Jordan and former mayor Ken Barr both said they remember the current city hall being controversial almost as soon as it opened in 1972. Though the area of around city hall has been the center of city business for 130 years, the area is landlocked. The building lacks significant outdoor space for public gatherings, has limited parking and is not easy to navigate inside.

The Pier 1 tower has a large lawn sloping toward Forest Park Boulevard, ample parking and a modern layout.

Barr called the plan to move to the Pier 1 tower “magnificent.”

“It’ll make an impressive City Hall,” he said.

Jordan said admittedly the deal does sound “too good to be true” but he has not come across anything that would raise a red flag.

“I gotta pinch myself, being a lifelong Fort Worthian, that here, finally, the city of Fort Worth has a city hall we can all be proud of with a financing package that is in the best interest of the taxpayer,” Jordan said.


Locations Mentioned: Fort Worth City Hall, Texas A&M University School of Law