Sale or foreclosure?
Destination unknown: Houston Pavilions goes into receivership
Initially those spaces filled slowly in the economic downturn, but around this time last year, things began looking up: The company reported that 82 percent of the 560,000 square foot space was leased, NRG/Reliant Energy moved in nearly 1,500 employees and Books-A-Million decided to stay (for apparently less than the already absurdly low $3,000 rent for the 23,000 square foot retail space).
The Chronicle warns that the space could be headed for sale or foreclosure.
Houston Pavilions co-developers William Denton and Geoff Jones received incentives for the project from both the City of Houston and Harris County, totaling $14.3 million. In May, the City advanced the remaining $3.3 million as a loan and with a provision that the developers make the streets and sidewalks more attractive and appealing to potential renters. This, despite the venture's failure to meet a bench mark that required 70 percent of the retail space to be leased.
That incentive pales in comparison to the outstanding construction debt from the $180 million dollar project. As the Houston Chronicle is reporting,
J. Cary Gray, the developer's attorney, said a construction loan on the property had matured a couple years ago but was extended. He said negotiations between the developer and lender, including details of the receivership, are amicable. The developer has not filed for bankruptcy.
"The bank and the owner are continuing to explore sales and refinancing strategies together," said Gray, adding that a national investment group is an interested buyer.
According to a letter from U.S. Bank filed with the court, the loan is in default. That amount includes $111.6 million in principal and several million more in unpaid interest."
The Chronicle reports that the space could be headed for sale or foreclosure. In the meantime, Transwestern vice president Mark Fowler has been named receiver to handle the finances, leasing and rentals.
Is it time to chalk Houston Pavilions up to a failed experiment and re-fit all of that empty retail for office space? Or will a Downtown Management District plan breathe life into downtown?