Midland looks to revitalize its downtown....

Knudson & Associates is pleased to see this recent article in the Houston Chronicle that showcases the success of another Knudson redevelopment project.

'TallCity' building toward a new boom

By MARK BABINECK
Copyright 2006 Houston Chronicle

MIDLAND - There was a time when multimillion-dollar oil transactions were as routine as the burgers and fries on the menu at the Midland Savings Building cafeteria.

The Permian Basin churned out oil in the fields and dollars in the city, which thrived for more than five decades as the region's undisputed energy nerve center. Modern buildings that belied Midland's modest size sprouted downtown from the 1920s to the 1980s, housing major oil companies and independent wildcatters alike.

By the early 1980s, parking was at a premium, making for long walks in the heat of summer or chill of winter for the unlucky ones. The place was absolutely bustling.

Then the boom went bust. The wheeling and dealing went away, as did the Midland Savings cafeteria and everything else in the 14-story building — and several others.

Eventually Big Oil left the area altogether and the largest remaining player, Occidental Permian, is based at Greenway Plaza in Houston.

Now the boxy blue eyesore has a date with the wrecking ball. Planners hope eliminating distressed buildings such as Midland Savings, while converting those in better condition into non-office space, will breathe new life into a downtown skyline that created the "Tall City," visible from 30 miles away on the West Texas plains.

Midland is counting on tax dollars, creative investors and the desire of residents to live, eat and shop downtown. What it's not counting on is $70-a-barrel oil.

"These buildings probably will never be office buildings again," said At-large City Councilman Wes Perry. "We tried to identify the ones that needed to be taken down, and (Midland Savings) was No. 1 on the list."

Of course, oil still is big business here. The number of active drilling rigs in West Texas has more than tripled since early 2000, local oil field service companies have more work than they can handle and other businesses, such as corporate back-office paperwork functions, have been outsourced to Midland from elsewhere.

An empty feeling

John Breier, president of the Midland Chamber of Commerce, said more than a quarter of the nearly 400,000-square-foot campus that Texas Instruments deserted in the past decade has been renovated.

"It has probably about 500 people doing back-office work," he said.

Yet downtown Midland still has an empty feel, seemingly bypassed even in the city's current era of good feeling.

Though some buildings are tidy and full, others look like Midland Savings, where little more than rubble and stripped floors are visible through the windows. A peek through padlocked exterior doors on one side reveals an out-of-place sports trophy on an otherwise barren, dirty countertop.

Similar scenes are strewn across downtown, such as the forlornly open window allowing unhindered access to Gihls Tower. Or the 1998 March of Dimes fundraiser poster still taped inside the Building of the Southwest, where the exterior windows sport gang-style graffiti applied by a finger dragged through the omnipresent dust.

Per-square-foot lease rates for downtown office space hover in the $5 to $10 range today, but were $15 or more at the peak of the boom. That would equate to $30 per square foot and upward in today's dollars.

Midlanders have mulled revitalizing the central business district for years, but other priorities came first: developing the suburban north side, infusing the school system, remodeling the airport and building a sports complex.

Talk of reshaping downtown turned serious about five years ago, yet little changed. Now a combination of investment by the city, a special taxing district and private developers is prompting action.

"No one wanted to be first. That's what held them back for the last five years," said Colleen Fuglaar, a Midland High School graduate who now works for California-based RTI Properties. She and developer Robert Abbasi successfully bid $1 million for the vacant Vaughn Building, which they plan to convert to loft-style condominium units with retail space on the ground floor.

Midland County values the 153,000-square-foot tower and four-story parking garage at just $125,760, about the median price in Houston for an 1,800-square-foot home. Architects say it would cost at least $11 million to construct a similar building today.

New use for bank building

Work already has begun elsewhere. Perry and some partners already are reshaping the old First National Bank building on Wall Street into a mixed-use development.

"I paid about $300,000, and when it's all said and done it should be a $5 million to $7 million project," Perry said.

Public money is flowing, too. Downtown's signature thoroughfare, Wall Street, last week began a $4 million face-lift to expand and beautify the sidewalks to attract currently sparse retail, dining and entertainment business.

The Midland Municipal Management District, an entity headed by Perry that levies a 24-cent property tax on each $100 valuation for downtown properties worth more than $200,000, bought the Midland Savings Building for $150,000. The city will spend another half-million dollars or more to tear the asbestos-ridden structure down, he said.Perry said public participation was vital to kick-start the process.

"People will say, 'If Midland doesn't care enough to do something, why should I?' " Perry said of the tax money invested in improvements and blight removal. "It really does say Midland is going to change its future."

Selective demolition

When Midland started focusing on its downtown earlier this decade, economist Ray Perryman said that redevelopment would be meaningless unless useless buildings were pruned from the cityscape.

He said that selective demolition, combined with a rapid surge of urban living in the tight Midland housing market, could make for a quick turnaround of the central city's fortunes.

"I think if units can be brought online fairly quickly at the right prices, they can probably have some success, because people are looking for housing opportunities," said Perryman, who lives in neighboring Odessa. "They can't build (homes) as fast as people want right now." Karr Ingham, who compiles a monthly index of the Permian Basin economy for an area bank and the Midland Reporter-Telegram, said virtually every objective measure points to a boom.

Retail sales, building permits, airport boardings, employment and hotel tax receipts all are up, in some cases sharply. None of it guarantees the vastly overbuilt downtown can become an asset again, he said, but it can't hurt.

"The sun is shining on Midland, Texas," Ingham said. "It's time to do something about that problem if you're ever going to do something."

Moved to Houston

Downtown was a bustling business core until the price of oil plunged in the 1980s, prompting a steady exodus of jobs and people. Over time, the major producing companies picked up stakes altogether and the industry's nerve center consolidated in Houston.

Businesses that stayed put began consolidating within Midland, fleeing lower-quality buildings in favor of better, more modern accommodations. The structures left empty, including Midland Savings, the Vaughn Building and others, slowly decayed.

Vacant or not, the glass, steel and brick legacy left by the oil business is impressive for a city of about 98,000 people. Midland boasts 23 buildings that are at least 10 stories high. Lubbock is more than twice as big and has just 10, according to architecture Web site skyscraperpage.com. El Paso has only 15, despite being almost six times more populous than Midland.

Downtown property owners once paid about 10 percent of the property taxes but now only pay about 3 percent, said Perry, who noted that Midland County values office space based on its ability to earn income. If Midland knocks down some buildings and refurbishes a few others, he predicted that valuations and tax payments should rise in tandem.

"I always tell people I want to pay more taxes, because that means my building is making money," Perry said.

To learn more about the Downtown Midland Revitalization Project and Knudson & Associates involvement, please click here. (Acrobat Reader required)