Cost overruns on a South Dallas retail building lead to a request that the city move its loan to second in line

A small retail project at the corner of Malcolm X Boulevard and Al Lipscomb Way in South Dallas came in about $700,000 over its original budget, and its lender is asking the City of Dallas to take a back seat on repayment.

The City Council's Economic Development Committee gets a memo on the Malcolm's Point Retail Project at its Monday meeting, and the full council is scheduled to consider the change on Nov. 10.

How the deal was built

In November 2024 the council approved a loan of up to $1,190,354 from the South Dallas/Fair Park Opportunity Fund and a grant of up to $312,500 from the city's Public Private Partnership Fund for the 4,859-square-foot building at 2807 Al Lipscomb Way.

The developer is Southfair Community Development Corporation, a nonprofit that, by the city's count, has put over $35 million into the neighborhood across three decades.

At approval the project was estimated at $2.3 million, with Texas Mezzanine Fund committed to a $675,000 loan that would rank behind the city's. Financing closed on Oct. 17, 2025, and construction began a month later.

What changed

Construction costs pushed the total to roughly $3 million, according to the Oct. 27 memo from Assistant City Manager Robin Bentley. Texas Mezzanine Fund's loan grew to $1.4 million to cover the gap, and because of that larger amount the lender has asked the city to subordinate its loan, giving Texas Mezzanine Fund the senior claim.

The proposed amendment would also:

• stretch the amortization on the city's loan from 25 to 30 years, matching the other lender
• add one more year of interest-only payments
• keep the repayment period on both loans at 10 years

Staff estimate the changes would lower the monthly payment on the city's loan by about $600 and give the building a year to lease up before principal payments begin. In exchange, Southfair's required minimum investment would rise by $50,000, from $1.65 million to $1.7 million.

Where the project stands

The building is substantially complete, and Southfair held a ribbon-cutting on Oct. 8, the memo says. A doughnut franchise Southfair was awarded is set to take about 1,500 square feet and is expected to open in early 2027. On Oct. 26, the advisory board that oversees the South Dallas/Fair Park Opportunity Fund recommended approving the amendment.

Moving behind another lender means the city would be repaid after Texas Mezzanine Fund if the project ran into trouble. Staff present the changes as a way to improve the building's cash flow and put it on track to succeed.

Sources

cityofdallas.legistar1.com

webapi.legistar.com