Untapped Opportunity

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It’s considered one of Fort Worth’s best remaining interior-city infill opportunities: Historic Southside, the former Terrell Heights, Fort Worth’s first middle-class black neighborhood, dating to 1900. For years, the fading, once-vibrant neighborhood — bounded by Interstate 35 on the west, East Rosedale Street to the south, Vickery Boulevard to the north, and Riverside Drive on the east — has sat, awaiting revitalization, while the neighboring Near Southside on the other side of I-35 has roared ahead.

Public investments — including a new library, public plaza, street improvements on Rosedale and the bisecting Evans Avenue, city office building, and new Fort Worth elementary school — have provided critical infrastructure. The financial toolbox local governments can use to provide public incentives to developers is deep. The city and Fort Worth Chamber of Commerce have identified the Evans-Rosedale intersection as a key economic development focus, given its proximity to the Near Southside, downtown, highways and the unusual amount of property that public entities control. But whither private investment?

It’s finally surfacing, even if belied by the vacant lots and dearth of activity. The Dallas developer and restaurateur Mike Hoque, chosen earlier this year to be master developer of 14 acres owned by the city and other public entities in the Evans-Rosedale corridor, is working on final plans and negotiating a development agreement. Details are slowly taking shape: Hoque says his first phase will likely include a maker space to incubate innovators, more than 200 apartments, and retail and offices in a single building of three to four stories. A hotel proposed previously by developers, but questioned by neighborhood skeptics who fear such a product would deteriorate and become an albatross, could end up in his development or elsewhere in the district, Hoque said. The neighborhood wants a grocery store, but Hoque, who has mentioned ALDI as a potential target, isn’t promising one in the food desert yet. He’s first prodding nearby Fort Worth businesses, such as practices in the rapidly growing hospital district, to commit to locating some of their operations in his planned office spaces.

“I’ve got to create a story before I go to ALDI,” said Hoque, credited with revitalizing downtown Dallas’ Main Street with a number of restaurants. He’s brought his Wild Salsa and Chop House Burger restaurants to downtown Fort Worth’s City Place and will open a Wicked Butcher steakhouse in the Sinclair Hotel project, underway downtown, and an Oven and Cellar Italian restaurant at City Place.

Hoque expects to sign the development agreement this fall and break ground in 2020. He doesn’t want to overpromise. “We’re going to try to get a grocery store; I don’t know how successful I’ll be,” he said. “We have to be realistic about what we can do. I’m going to challenge my neighbors to bring some of their jobs. We need the community to move their businesses.”

Elsewhere in the district, the Fort Worth real estate broker Will Northern and partners Jesse Hejny, who sold his stake in the successful Purple Land Management land company in 2018, and Frank Darden are using Historic Southside to launch HSS Development. They’ve acquired the former Bethlehem Community Center at 970 E. Humboldt St. and put it up for lease to potential office and other users. The partnership has also acquired two acres on East Broadway Avenue and I-35 on the northwest side of the neighborhood and is putting together a proposal for a multi-story, affordable housing building. Brian Dixon, a Fort Worth psychiatrist and president of the Historic Southside Neighborhood Association, is looking for a landing spot for a medical office building he wants to build that would focus on mental health. Dixon’s first idea — to locate next to a park on the east side of Historic Southside, leasing some of the land from the city — was blocked in August when he learned he couldn’t build on park land with a voter referendum. Basecom, a Fort Worth construction company, recently opened a new headquarters on the I-35 frontage road. Developers Jennifer and Robb Farmer are maintaining plans to convert the former Pinkston Funeral Home at 970 E. Terrell Ave. into a movie theater, with restaurant and retail, that would anchor the north end of Evans Avenue.

Investors have also increasingly waded into the neighborhood’s residential side, buying up lots with plans to build new, modestly priced homes, a product Fort Worth is short on, particularly inside Interstate 820 Loop. That’s driven up prices, complicating investors’ pricing models in a neighborhood where new homes will be built next to modest historic bungalows. The historic homes are protected by a restrictive city overlay that governs exterior renovation and new construction on lots west of Evans and Kentucky avenues. Investors have already run up against the overlay, which protects the neighborhood from being run over by homes that aren’t in keeping with the historic flavor.

City staff this year issued guidance to at least one investor group that it would be required to come up with a unique architectural plan for each of the two dozen homes it plans to build in the protected section of the neighborhood, potentially increasing costs and list prices, putting pressure on profit margins, and slowing development.

Kelly Allen Gray, the City Council member whose district includes Historic Southside, says she backs the requirement of unique architecture. “I’m really good with that,” she said in an interview. “First, you have to know where you’re building.”

Inflation in lot prices has moved ahead in less than two years. Thirty-two residential lots — typically 5,000 square feet in size — were for sale in the neighborhood in mid-August, at an average list price of $35,000, according to Multiple Listing Service data, the HSS partners said in an interview. Thirty lots sold over the last year at an average sale price of $21,000. “Eighteen months ago, we saw some offered for $5,000,” Darden said.

That’s touchy ground for a neighborhood in which no significant private development has occurred yet, Hejny said. “We’ve essentially doubled in prices, and nothing’s happened. We could essentially price ourselves out of the market if we’re not careful.”

Much of the property purchases are being made by investors who are waiting for prices to increase and don’t intend to develop. “People are buying properties and sitting on them,” Stacy Marshall, executive director of the Southeast Fort Worth Inc. economic development organization, said in an interview. “So, it’s hard for true development to happen.”

Development around Historic Southside suggests the neighborhood is poised to move ahead. Trinity Habitat for Humanity and private builders have been building new homes in the Hillside-Morningside neighborhood off of Evans Avenue, south of Rosedale, on the southern border of Historic Southside. And on Evans, south of Rosedale, the developers Matthijs and Jie Melchiors in December completed a 7,500-square-foot office complex called Connex, made of recycled shipping containers. With 32 leasable units, the complex is 60 percent occupied, the Melchiors said. A solar plant on the building generates the power it needs to operate; July’s electric bill was $100. Connex will do well, Matthijs Melchiors said. “The area’s going to do well. But now we’re waiting for other people to make their mark.”

Like others in the development community, the Melchiors are eagerly awaiting the issue this fall of final plans for Hoque Global’s piece, widely viewed as the biggest focal point on the area’s blank canvas. “If we honor the past and look forward to the future, I think it could be very dynamic and interesting,” Melchiors said.

Hoque was chosen from eight competitors by a group that included neighborhood and city officials. The bid process was triggered after a developer proposed a limited service hotel that residents balked at, and the city recognized its unusual opportunity. The 14 acres includes 46 parcels owned by the city and two related entities, acquired over years. “This is the only area in Fort Worth where the city has this kind of property and has already made this kind of investment [in infrastructure],” Brenda Hicks-Sorenson, assistant economic development manager for the city, said. “You don’t get too many urban villages where you get these blocks of empty space.”

Gray said she envisions a development that meshes with Historic Southside’s old vibrant history. “This is an opportunity to recreate some of the history that relates to music and culture, and also bring in the new,” she said. “It has the opportunity to be a great melting pot, which is what it was initially.” 

Residents, in response to a survey that was part of extensive community talks leading to the choice of Hoque, proposed a lengthy wish list of uses that included grocery, mixed-income housing and loft apartments, vibrant outdoor event space, open green space, bike trails, movie theater, skating rink, gym, FedEx store, coffee shop, bar, sandwich shop, services such as oil change and retail, restaurants and bars, brewery, social services, a new location for an African-American museum maintained by the Fort Worth activist Opal Lee, and dog park.

Marshall said in the interview he believes the most likely uses to come are mixed-income and affordable housing and the lofts, outdoor event space that would augment Evans Plaza, green space, bike trails, the theater already proposed, coffee and sandwich shops, and relocated museum. “It’s a slow process, but it’s about the market,” Marshall said. Grocery is at the top of the wish list, but it’s a hard sell without more homes and people living in the neighborhood, he said. “We’ve got to get these infill lots done.”

Hoque said he understands the robust wish list. “The wish list is grandiose because these people have been left behind for 30-plus years,” he said.

A maker space will be the first piece of Hoque’s phase-one plan, providing offices and showrooms for innovators. “They wanted space for entrepreneurs,” Hoque said of the neighborhood. It will include a coffee shop developed by his DRG Concepts restaurant company and operated by a local firm Hoque wants to recruit. He’s also talking to the SiNiCa Studios nonprofit glass-blowing studio on Fort Worth’s West Magnolia Avenue about relocating. The apartments in the residential piece of the first phase will include a certain number of units that will be rented at below-market rates, Hoque said, a requirement of residential developers in Fort Worth who are seeking public incentives for their projects. Hoque also wants to have the museum run by Lee in his development. “We want to create a destination.”

Southeast Fort Worth Inc. is working with Hoque on the idea for a hotel. Hoque said in the interview he believes the hotel will land somewhere else besides his 14 acres. “We want to work with Mike to ensure a hotel is the best use the property,” Marshall said. “If he feels it is not, we would work with him to find another potential site nearby. We’re working on someone else to acquire additional property that could fit.” If that’s the case, Hoque said, “we would like to be the development partner.”

The public incentive Hoque receives will depend on a number of factors in his plan, including square footage, parking and whether Hoque increases the size of a planned garage to allow public parking, total expenditure, affordable-rate rents, and affordable prices for condos he may include. Hoque and the city are looking at 10 percent of the rents being available at tenants who make 80 percent or less of area median income and another 10 percent at 60 percent or less of area median income, Hicks-Sorenson said. “We’re going to be as aggressive as we can but not go bankrupt,” Hoque said.

Tools the city could use to offer incentive include a “Chapter 380” agreement under state law that allows cities to make loans or grants of city funds; and money from a tax increment finance district that can be used for public infrastructure in mixed-use “catalytic” projects in Fort Worth urban villages where the developer is investing at least $5 million, Hicks-Sorenson said. Historic Southside also is covered by a “Neighborhood Empowerment Zone” that offers waivers of city fees to development projects, but it’s more likely the city will use a 380 agreement instead, Hicks-Sorenson said. Federal HOME funds could also be available to Hoque if he includes a certain number of residential units for sale at affordable prices in his plan. “On the draft sheet we’re working on, there’s a whole bunch of blanks,” Hicks-Sorenson said.

Gray, the city council member, said she expects the city will be aggressive in its incentive to Hoque. “We have the ability to layer everything we have in our toolbox to make it work,” she said. “I think you’ll see everything we have brought to bear.”

Hoque said his strategy to maintain “slow and steady” growth in the project. “People think I’m nuts for taking this on, but they thought I was nuts for opening a restaurant on Main Street in downtown Dallas,” said Hoque, whose DRG owns several restaurants on Main Street and is widely credited for turning the strip around. Hoque has moved on to another planned development called SoGood@Cedars in The Cedars, south of downtown Dallas, raising skepticism among some in the Fort Worth development community that he has the capacity to pull off the Fort Worth project at the same time.

Hoque said he initially passed on pursuing the Fort Worth project two years ago when another developer suggested it to him. “I didn’t have the bandwidth” then, he said. Hoque said he expects his office spaces will be attractive to professional and medical users. “We’ll be able to give them better rates,” he said. Hoque said he won’t be offering cut-rate deals to get tenants like restaurants. “Yes, I can buy those people,” he said. “But what happens after 36 months?”

Northern, Hejny and Darden chose Historic Southside to start their company because of its location and real estate economics. “The price points of everything on the Near Southside have just gone bananas,” Northern said in an interview. “Land and rents have gotten to the point where people can’t afford it.” In the Historic Southside, “you are so close to all the amenities.”

The partners are mindful of the pressure on land prices that comes with investing in Historic Southside. “The No. 1 thing is land acquisition costs,” Hejny said. “If you can’t buy dirt affordably, then you can’t create the missing middle. The places that stand the test of time came together as a community and go good for everyone.”

Day-care centers and medical office users have spoken to HSS about locating in their property at 970 E. Humboldt St., Northern said. “The rents we’ll be able to charge will be so much cheaper than anywhere else,” Hejny said.

HSS’ second project — the plan they’re putting together for an affordable housing property on I-35 — would fill a big need, the partners said. “Not only affordable housing, but affordable housing in close proximity to where you live, work and play,” Hejny said.

Getting more residents into Historic Southside will be critical to creating demand for the services residents want, but the balance is already delicate, developers and investors say.

A Fort Worth partnership including the brothers Rian and Rory Maguire and Stephen Mears two years ago purchased 26 residential lots in Historic Southside. It recently launched construction on its first home — three bedrooms, two baths, and one-car garage — at 920 E. Tucker St. The partnership has listed it at $195,000. “That’s pushing the envelope over there,” Mears said in an interview. “This is our test to see if the market’s come up enough to justify the price.”

The partnership ran into difficulty with the neighborhood’s historic overlay. City staff had the partners redesign the front of their home because it was too similar to nearby homes. “When this neighborhood was built, they were catalog homes,” Mears said. Then the staff told the partnership it couldn’t repeat a design anywhere else in the neighborhood, Mears and the Maguires said. “We were trying to rebuild this one eight blocks away,” Mears said. That means higher costs for architectural plans, the partners said. The partnership has four sets of plans that it hoped to use over its 26 lots, a practice which the city, for one, has allowed in the Near Southside’s Fairmount neighborhood. Near Southside for years promulgated a limited set of residential architectural plans that met city guidelines in historic districts, resulting in the construction of a number of similar-appearing homes built in Fairmount.

“I think we’d all like to see what the rule book is,” Rian Maguire said in an interview. Depending on their experience with the first home they build, they may not build another in Historic Southside, the partners said. “Where else are you going to find a home that costs $200,000?” Rian Maguire said.

The city’s historic overlays don’t specifically address investors who own multiple lots in the same neighborhood. Asked if staff has determined that groups with multiple lots must present unique architecture for every lot they own, Randle Harwood, the city’s planning and development director, said in an emailed response, “sort of. Each site is evaluated based on the historical and architectural context of the individual site. So, if you happen to have two vacant lots across the street from each other in a neighborhood comprised of a variety of period-appropriate houses and the rest are historic houses, you would not want to have identical houses facing each other.”

Asked if requiring unique architecture could conflict with the neighborhood’s goal of maintaining affordable prices, Gray, the council member, said, “It’s not going to kill you. I’m not concerned with the builder’s bottom line. I want to make sure the community has a good product.” Gray said she believes the ideal price point for a new home in the neighborhood is around $160,000 – $180,000. “That’s probably where the market is.”

The Maguire-Mears group is one of a number that’s acquired multiple residential lots in Historic Southside, with a model of using a limited set of plans across all of their lots, instead of presenting a new plan for each home. Dixon, the neighborhood association president, said he has no problem with that approach. “It’s very costly in time and money to figure out what they want,” he said of the city.

City staff has historically given significant weight to the feelings of neighborhood leaders in making rulings inside historic overlays, but in this case, it’s moved in the other direction. Gray, however, said neighborhood leaders fought for the overlay long before Dixon bought his home — a 1,200-square-foot, three-bedroom he paid $140,000 for in 2017 — and moved into Historic Southside. “The community pre-Brian worked hard to put that in place,” she said. “They wanted it to have the designation it so richly deserved.”

Conflict with the overlay also led the Catholic Diocese of Fort Worth recently to relocate its Cristo Rey high school in Historic Southside to another site on Altamesa Boulevard in south Fort Worth. The Diocese, in a plan to expand enrollment at the school, the former Our Mother of Mercy Catholic School elementary, sought to acquire surrounding land. But the plan stalled when the neighborhood opposed the Diocese’s plans to buy and demolish certain homes. “The Cristo Rey board made the decision that it had to find property that could meet its needs,” Pat Svacina, spokesman for the Diocese, said. The Diocese and Our Mother of Mercy Catholic Church are now discussing the school’s future, he said.

Another signature project that’s looking for a landing spot is Dixon’s Mindful, a mental health office complex he wanted to build overlooking Glenwood Park on the east side of the neighborhood. Dixon wanted to lease part of the site from the city, its owner, but learned in mid-August that would require a voter referendum. But he wants it to be in or around the neighborhood, in proximity to the city’s medical district, on a green space to facilitate things like “walking appointments.” Because of how insurance reimburses mental health, providers can’t locate in prime locations, Dixon said.

“The way we fund health care is stupid,” he said. “We can’t afford to be in the health care district. We can’t be downtown.”

Gray likes the idea and is trying to help Dixon find a site in her district. “He is absolutely on the right track in talking about mental health in our community,” she said.