Mar. 19, 2004 - Developers will begin construction Thursday on the W Dallas Victory Hotel and Residences, but they're not making a fuss. 

"We're just going to start digging a hole to build the underground parking lot," said Jonas Woods, president of Hillwood Capital. "There's no groundbreaking ceremony." 

The $100 million, 31-story high-rise northwest of downtown � right next to American Airlines Center � is expected to open in the first quarter of 2006. 

But the groundbreaking is a milestone for the Victory development, which has been planned by developers Tom Hicks and Ross Perot Jr. since the voters approved funding for the arena in 1998. 

"Victory is finally going to start happening," Mr. Hicks said Thursday. "I think it's great. It'll be a very exciting place for young people to live, work and play." 

The high-end W hotel will have about 250 rooms, and nearly 70 high-end condos will be built on top of the hotel. 

"Dallas doesn't have anything like this right now," said Marty Collins, president of Gatehouse Capital Corp, a private real estate investor that's a partner in the project with Mr. Perot's Hillwood Development Corp. and Mr. Hicks' Southwest Sports Realty. 

"This will be the first truly modern hotel and the first truly modern residences in Dallas." 

A full-service luxury hotel hasn't been built downtown in almost two decades. 

The W will enter a downtown market that's climbing out of its deepest trough in recent history � conditions caused by the struggling economy, a slowdown in business travel and the city's difficulty in attracting convention business. 

Occupancy levels for downtown hotels plunged below 50 percent in 2001 and aren't expected to climb above that until the end of this year, according to PKF estimates. 

"It's a very challenging market, there's no question about it," said Greg Crown, a Dallas-based lodging consultant with PKF Consulting. 

Hillwood and Southwest Sports Group originally envisioned the Victory project as $550 million worth of retail, offices and apartments surrounding the sports arena. 

Since voters approved funding for the arena in 1998, however, the lots around the arena remained mostly vacant. 

Mr. Hicks said that Victory "was originally envisioned on a much larger scale all at once. The original Palladium vision was larger than the market was able to undertake at one time," he said. (Related Urban Development, formerly called Palladium, pulled out of the Victory project last year.) "We're going to go with smaller phases now," Mr. Hicks said. "This [the W tower] is only the first piece. There will be other pieces." 

Ross Perot Jr. is out of the country and was unavailable for comment. 

City Council member Veletta Forsythe Lill said that some of the fears that business would never develop in the area were valid, but "we all hope they're wrong. We'll see. 

"It gives hope to all of us that we will see development on what was once a blighted, barren area." 

When Victory was announced, Dallas didn't have many high-powered real estate projects that combined residential, retail, entertainment and restaurant properties. 

The scene has changed dramatically. 

The West Village and Mockingbird Station, for instance, are phenomenally successful mixed-use developments. 

And established neighborhoods � such as Uptown and the Knox-Henderson area � have added condos and apartments and drawn new shops and restaurants. 

But how many Restoration Hardware stores and high-tone eateries can the area handle? 

Victory's success will depend, in part, on signing new attractions, which shouldn't be a problem for the development team, real estate experts said. 

"The challenge is to create a unique tenant mix. They're probably up to the challenge," said Mickey Ashmore, who heads Dallas-based UCR Retail Services. 

One pull is Victory's sheer size, which is matched by its ambitions, brokers said. 

"It's going to take 10 to 15 years to build it out," said Jill Tiernan, executive vice president of The Retail Connection, a Dallas real estate company. "They've got the land mass to do a real urban mixed-use project ... a truly international cosmopolitan project." 

She's one of the brokers who has been has been working � and waiting � for years to put tenants at Victory. 

Despite the delays, there's still widespread interest, she said. 

"Victory wants the best in the categories. They are being picky. And they can afford to be picky," Ms. Tiernan said. 

Instead of posing an obstacle for Victory, the home runs scored by the West Village and Mockingbird Station prove that "there are a lot of people who want these projects," said Ian Pierce of the Weitzman Group, a Dallas-based commercial brokerage firm. 

Victory developers anticipate another $200 million to $300 million worth of construction � residential, retail and office � south of the American Airlines center. 

Hillwood executives say they plan to build two three-story buildings on the south side of the arena for office space and retail. Overall, the retail space in the surrounding developments would be about 300,000 square feet. 

The developers say they expect many of these to be open when the hotel opens in the first quarter of 2006, but they declined to name any of the retail clients. 

"We've got several signed deals, but we're not ready to make any announcements," Mr. Woods said. 

The W Dallas Victory tower will be a wedge-shaped building with a cantilevered wing on the rooftop. 

"It's got a lot of glass, it's got a lot of stone and it's got a lot of stainless steel," said Mr. Woods of Hillwood Capital. 

The developers say they came up with a hotel-condo combo with the reasoning that the condos will help pay for the hotel. 

"The condo provides us with more captive users for the hotel's services," said Mr. Woods. 

The first 16 floors of the 31-story tower will be for hotel rooms and suites, and floors 17 to 30 will be condos. The 31st floor will house the Ghost Bar � similar to the bar atop the Palms casino resort in Las Vegas. 

"It's a very edgy and youthful hotel," said Mr. Woods. "You're either young or you feel young." 

The tower's first floor will have a restaurant featuring a yet-to-be-named celebrity chef, a lobby bar and a dozen retail stores, predominantly fashion retail, including apparel, accessories and shoes. No names have been announced yet. 

The 15th floor of the hotel has been designated the "Texas floor," with super-size everything. The ceilings will be 11 feet high, and the beds will be eight feet long � a configuration aimed partly at visiting sports teams that come to American Airlines Center. 

The 16th floor, which separates the hotel and the residences � will have The Bliss Spa and Infinity Pool. 

Developers say that a third of the condos will be single-bedroom units at 900 square feet. About half will be two-bedroom units at 2,000 square feet. The remainder will be three-bedroom condos at 3,500 square feet each and penthouses at up to 11,000 square feet. 

The condos will be sold at $400 per square foot, so prices could range anywhere from $360,000 to $4.4 million. 

Marketing for the condos will begin around the time of the groundbreaking. 

The project is being financed through a loan from Wells Fargo, Mr. Collins said, and a portion of the funding will come in the form of a mezzanine loan from W Hotels' manager, Starwood Hotels & Resorts Worldwide Inc. 

W Hotels, which are in 18 cities, have "a sophisticated urban reputation," councilwoman Ms. Lill said. 

"Development begets development," she said. "I suspect other businesses will follow." 

Staff writers Suzanne Marta, John Kirkpatrick and Dave Levinthal contributed to this report. 

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