Wednesday, March 25, 2009

Foreclosure not the end for Elm Place

A lender who has scheduled foreclosure of downtown Dallas' Elm Place skyscraper can seize only a portion of the 52-story office tower.

When the former First National Bank tower opened, it was Dallas' biggest skyscraper and the tallest building west of the Mississippi. Foreclosure of the 45-year-old property at 1401 Elm St. would only include about 40 percent of the building, Guerrino Savio of New York, who represents the owners, said Monday.

The property – originally the First National Bank tower – and other real estate are scheduled for foreclosure April 7. The buildings' owners owe more than $22 million, according to foreclosure filings.

But only the lower levels of Elm Place can be seized because the debt is not for the tower portion of the building, said Savio, who is president of the 1401 Elm Street Condominium Association.

Even if the foreclosure goes through, the owners plan to continue leasing the upper floors of the building, which are 25 to 30 percent rented, he said.

The investment partnerships that own the building chose to let the lower floors go into foreclosure after Bank of America – which rents almost 450,000 square feet of space for back office uses – decided to move out, Savio said.

"We basically had to give up," he said. "We knew the moment the bank would not renew the lease that without Bank of America as a tenant, we would not be in a position to refinance the property."

He said the lender has started withholding payments from the lease on the Bank of America space.

"Therefore we were left with no funds to operate the property," Savio said. "We don't see the rent – it goes directly to the lender."

The loan in default was made by Bank of America but was sold into a pool of mortgage-backed securities owned by multiple investors, he said.

Savio said tenants in the building's tower portion shouldn't be affected if the lower floors are foreclosed on.

While a large amount of office space there is vacant, Elm Place still has loyal followers.

John Taylor's family insurance business is on the 34th floor.

"I've been here since the building was built," said Taylor, with Roy L. Taylor & Sons. "I'm the last surviving original tenant."

He's been in downtown Dallas since 1948.

"I started out in the old Republic Bank Building [now the Davis Building] and then moved to the old First National Bank building that was torn down.

"Then we were in the Adolphus Tower before we came here in 1964."

When the First National Bank tower opened, it was Dallas' biggest skyscraper and the tallest building west of the Mississippi.

The dark-gray glass and white-marble building – whose architects were George Dahl and Thomas Stanley – is still one of the biggest on Dallas' skyline.

"A lot of big Dallas companies used to be in this building," Taylor said. "The Murchisons used to be on 23 and the Hunts were above them.

"There are still some lawyers in the building, but the bank is about gone."

By STEVE BROWN Real Estate Reporter