03/17/2010

Stalled Texas Redevelopment Project Listed

Investment firm PNL Cos. is marketing a stalled 875,000-square-foot redevelopment project in Fort Worth, Texas.

The City Place project encompasses three buildings:

*A gutted tower, called One City Place, that was slated for conversion to about 330,000 sf of luxury condominiums from office space.

*A 329,000-sf office building, called Two City Place, that is 78% occupied.

*A vacant 215,000-sf retail/office building, called City Place Center Block.

Dallas-based PNL is willing to consider bids on individual buildings or the entire complex, which is on Throckmorton Street. Two City Place has an estimated value of $60 million. The entire complex might command only $15 million more, reflecting the renovation and leasing costs a buyer would incur. PNL would consider staying on as a development partner or minority owner. Jones Lang LaSalle has the listing.

The complex, which helped revitalize downtown Fort Worth when it was constructed in the late 1970s, was formerly the headquarters of Radio Shack and a 200,000-sf outlet mall. PNL bought the property in 2001 from the electronics company, which leased back the office space for three years while awaiting a move to its new headquarters three blocks away. PNL, which specializes in opportunistic investments, mapped plans for a $100 million-plus renovation and repositioning of the property upon Radio Shack's departure.

PNL planned to convert the 19-story One City Place into luxury condos. The 18-story Two City Place was slated for use by multiple office tenants. And the low-rise City Place Center Block, which connects the two other buildings, was going to be redeveloped into 106,000 sf of retail and office space, plus 402 parking spaces.

But the renovation stalled after the redevelopment of Two City Place. Although PNL drew up architectural plans for the condo tower, they were shelved as the credit crisis took hold in 2007. And the proposed downsizing and repositioning of the City Place Center Block never started.

PNL decided to hold on to the complex until the real estate market improved. Market players said the company is looking to exit the investment now that lending has loosened a bit for prospective buyers. The company will use the proceeds to buy distressed mortgages.

PNL began leasing Two City Place last April. A buyer would seek to fill the 22% of the space that is vacant.

Jones Lang is pitching One City Place as suitable for a hotel or luxury apartments. Another alternative would be reverting it into multi-tenant office space to take advantage of the steady demand in Fort Worth, whose 90% average occupancy rate is one of the best in the nation and well above the 75% level in neighboring Dallas.

PNL, which was formed in 1993 by David Porter and John Gilbert, initially focused on the acquisition of distressed thrift assets. It formed four partnerships with Resolution Trust Corp., the thrift-bailout agency, to buy $1 billion of thrift assets. It subsequently bought loans and properties from banks, insurance companies and opportunity funds, sometimes teaming up Blackacre Capital or other partners.

CORRECTION (3/24/10): This article has been corrected. The original version described the City Place redevelopment project of Fort Worth, Texas, as part of the Sundance Square development.

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