By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
After roughly three months, the numbers aren't adding up. The ink smudges on the profit and loss statements are red instead of black. Still, Urban Market President Manuel Zambrana is thrilled. Why? Women stroll from across the street or from the lofts above in their pajamas and slippers in the morning to grab a paper and a cup of coffee. At night, they sometimes scurry through to pick up incidentals. If Zambrana can turn those pajama-clad ladies into a crowd, and maybe throw in a couple of men, toothpaste tubes will turn. Groceries will move. Money will be made.
But it will be a hard slog. In the annals of urban living, downtown Dallas is a gritty frontier outpost. That's why Urban Market is a risky plunge into this paved hinterland. It's also why it is a necessity. Without it, the residential development project in the Interurban Building couldn't go forward, and the viability of downtown living would be dead in the gutter.
"Development is a lot about the perception game," says Alice Murray, former interim president of the Central Dallas Association. "So it was very important that a grocery store land in the downtown area...It was huge."
So huge that the Dallas City Council made it the linchpin in the tax increment financing package the council approved for development of the circa-1916 Interurban Building. The structure at 1500 Jackson Street had been abandoned and crumbling for nearly 20 years. Now, developers have transformed it into a 134-unit collection of downtown lofts and penthouses ranging from 600-square-foot cubby holes for roughly $750 per month, to 1,900-square-foot penthouses for $2,500 per month.
"Dallas isn't Manhattan. Yet," says Jeff Benton, property manager for the Interurban building. "L.A. is kind of like Dallas. They still haven't got the whole downtown thing down yet. But they're getting there."
Benton says the building is filling mostly with urban professionals and empty nesters. And the 20,000-square-foot Urban Market is part of the draw. "It is now a viable lifestyle," Benton says. "It really wasn't before. The people who lived downtown were hard core."
Urban Market is part of a $27.5 million Interurban Building renovation project spearheaded by Barker Nichols Real Estate. The venture is divided into three parts: the 134 residential living spaces, the grocery store and the attached 460-space parking garage.
"You can't convince people to live downtown, and say get in your car and drive to the suburbs to get a roll of Charmin paper," says Barker Nichols partner Craig MacKenzie. "This store is such a tremendous amenity that it's really driving our leasing business."
That's why the city granted them some $5 million in financial assistance and a 10-year property tax abatement worth close to $1 million. "The development agreement...required us to develop the grocery component," MacKenzie says. "And in order to start collecting the TIF money, we had to open the grocery for business." (TIFs use the growth in tax revenue from a neighborhood to help pay for community improvements and spur development.)
The grocery store was developed with lots of advice from Zambrana, a food retailing consultant who trudged in the grocery trenches with H.E. Butt Co., Wild Oats Markets and Whole Foods Market. In the 1980s, he dreamed up his own upscale food emporium in Chicago's ritzy Lincoln Park. Will that experience be enough? Digesting an investment that exceeded $4 million, the grocery store features a limited supply of everything from tea and cheese to bacon and performance snacks in roughly three categories: conventional, specialty and natural/organic. Urban Market stocks Angus beef and a broad range of varietal wines in the $15 and under category with a handful peeking over $20. The store also features a 98-seat café and full bar serving three meals per day with everything from breakfast tacos and biscuits and gravy to grilled Atlantic salmon. It's this restaurant-bar component that MacKenzie hopes will float the grocery store until it lurches into profitability.
"We're probably a couple of years premature," MacKenzie admits. "We're not stabilized. We're going to try and limit losses."
These growing pains are in addition to the birthing pains Urban Market suffered before the first deodorant stick was scanned. Barker Nichols initially tapped grocer Daniel Furr to bring the urban grocery store to life. Furr once operated two Fresh Approach grocery stores in Dallas in the 1980s before they collapsed. Under their agreement, Barker Nichols would develop the market, and Furr would raise capital, lease the space and operate the store. "There came a point in time where we had to make a commitment to the city that we would deliver what you see here today," says MacKenzie. "[Furr] tried very hard, but raising that kind of capital for this type of venture is very tough." So caught without an operator to run the store keeping their development structure intact, MacKenzie says they scrambled to find an operator, courting a klatch of established grocers including Trader Joe's, Whole Foods Market and Central Market. "Frankly, there was very little interest," he says, explaining that current downtown dynamics and the demographics fell short of their business models. So they turned to Zambrana and made him a partner.