City of Dallas Suspends Real Estate Purchases After Quagmire

The City of Dallas got itself into a money pit trying to create a one-stop shop for building permits, leading it to reassess how it handles real estate transactions across the board.

Its $14.1 million purchase of the 219,000-square-foot office building at 7800 North Stemmons Freeway in 2022 has ballooned into a $29 million quagmire, and the city is ready to cut bait.

Carrying costs are running about $73,000 a month, and officials estimate it would take “many millions” more to bring the building up to occupiable standards, the Dallas Business Journal reported.

The city plans to sell the building, and City Manager Kimberly Tolbert directed staff to “immediately suspend all real estate purchases unless previously approved by Dallas voters or the City Council.”

According to a memo from Tolbert, the city “failed to be as thorough as it should have been, and did not designate a clear project leader.” The memo blames the debacle on the administration of her predecessor, T.C. Broadnax, who left Dallas last year to serve as city manager of Austin.

The city failed in its due diligence before purchasing the building, Tolbert said. It received no disclosures from the seller, conducted only a surface-level review and failed to identify “significant deficiencies in major building systems.”

“This failure to properly evaluate the condition of the building prior to purchase put the city at risk and resulted in wasted taxpayer dollars,” Tolbert wrote.

The city plans to work with Dallas-based CBRE in “creating new policies and procedures, review staffing and structural needs and explore necessary technology upgrades.” That will lead to the creation of a real estate master plan for the city, Tolbert said. CBRE’s suggestions are expected to be presented for funding during the city’s budget legislation in late summer.

“This master plan will serve as a roadmap to guide future decision-making and investment across the city’s property portfolio,” she wrote.

—Rachel Stone