The owner of the historic Texas & Pacific Warehouse on the south end of downtown was dealt a potential blow to the redevelopment of the mammoth property Friday when the board of a special taxing district put the project in default for its public funding.
Under contract terms with the Lancaster Avenue Tax Increment Finance District, the dispute moves to mediation. But if Fort Worth officials and and Dallas-based Cleopatra Inc. can’t reach a resolution regarding the issue of the default, the TIF board can vote to terminate the contract. The mediation could take place in the next 45 days.
In 2007, Dallas-based Cleopatra Inc., headed by Ola Assem, received $11.6 million in funding from the TIF. Under an agreement for the funding, Cleopatra Inc. was to meet milestones by certain dates, including completing the redevelopment project by June 5, 2012.
But for various reasons, the TIF board agreed to extend the agreement several times in the past nine years. Under the latest extension granted in October, the developer needed to show they had at least $35 million in construction funding by Dec. 29. When that didn’t occur, the TIF administration deemed the owner in default of the agreement.
Attorneys for Cleopatra argued the project has not moved as fast as the TIF had hoped for reasons beyond the owner’s control, among them alleged issues with temporary city easements on the property and the delay in the construction of the Hemphill-Lamar connector, which would run on the west side of the building.
If the development agreement is terminated, it’s going to have a profound effect in seeking financing.
Dallas attorney Charles Jordan
“If the development agreement is terminated, it’s going to have a profound effect in seeking financing,” said Charles Jordan, Cleopatra’s Dallas-based attorney who negotiated the agreement. “Even the consideration of termination will likely have a corrosive effect.”
David Vos, development project manager for the Alexander Co. based in Madison, Wisc., who only joined Cleopatra on the project last June, asked the board to instead amend the agreement, saying terminating it could derail the project. He said “hundreds” of professionals have been in the building the past several weeks, working on designs and determining costs and that construction was close.
“We are making very good progress,” Vos said. “If you want to see this project move forward,” amending the agreement “is the best path.”
Current project plans involve redeveloping the eight-story, 500,000-square-foot warehouse building into 260 loft-style apartments with a hotel on its east side. Previous plans were to renovate the building into 350 apartments. Plans for street-level restaurants remain.
The property has been vacant since the late 1970s. Cleopatra has owned the 1931 building since 1997.
If the current agreement is terminated, and a new agreement is reached with the TIF board, Cleopatra would be required to set aside at least 20 percent of the units for affordable housing, a change in city requirements since the agreement was reached in 2007.