Dallas Trophy Tower Heads to Foreclosure

One of Downtown Dallas’ marquee redeveloped towers is heading to the lender.

The National, a 52-story mixed-use skyscraper carved out of the former First National Bank Tower, will be foreclosed on and taken over by Starwood Capital Group next month, owner Shawn Todd of Todd Interests told the Dallas Morning News. Starwood is expected to file the foreclosure Friday, ending Todd Interests’ run at the property.

Todd said his firm owes roughly $230 million on the building and won’t contest the action. The decision, he said, comes down to math that no longer works: elevated interest rates, soft downtown values and apartment occupancy that has slipped below 80 percent.

“With our debt balance, the interest rate environment and property values downtown, we don’t see a path to us recouping our remaining equity,” Todd told the publication, adding that negotiations with Starwood were cordial. “In 35 years, our firm has never lost money — this is the first year that it’s happened.”

Dallas-based Todd Interests and partners poured about $460 million into transforming the long-vacant, 1.5 million-square-foot tower at 1401 Elm Street. Opened in 1965 and shuttered in 2010 as office demand collapsed, the building sat empty for a decade before becoming one of the largest urban restoration projects in the country and the biggest in Dallas history.

The redevelopment converted the mid-century office monolith into a blend of apartments, hotel rooms, offices and retail, backed by heavy public incentives. Todd once billed the financing as the largest historic tax credit deal in Texas, anchored by roughly $100 million in historic credits and $50 million in city tax increment financing.

Todd told the outlet that more than $150 million has already been repaid to tax credit investors, including Stonehenge Capital and AHP, Warren Buffett’s tax-credit arm. The project was refinanced with Starwood three years ago, a deal that allowed Todd and major investor Moriah Real Estate to recoup about 90 percent of their investment. Much of that capital was plowed back into the building in hopes a rebound would follow.

It didn’t. “The values aren’t there,” Todd said. “The loan is due, and we’re not going to continue to pay.”

The foreclosure comes shortly after Todd Interests sold its stake in the nearby East Quarter redevelopment to J.P. Morgan Asset Management.— Eric Weilbacher