One of downtown Dallas’ most prominent redevelopment projects, The National, is set to go into foreclosure and be taken over by Starwood Capital Group next month. Shawn Todd, owner of Todd Interests, confirmed the development to the Dallas Morning News.
The National is a 52-story mixed-use building located at 1401 Elm Street. It was originally built as the First National Bank Tower in 1965 and remained vacant for a decade after closing in 2010. In recent years, it underwent a $460 million transformation led by Todd Interests and partners, becoming one of the largest urban restoration efforts in Dallas history.
Todd said his company owes about $230 million on the property and will not challenge the foreclosure. He cited several factors behind the decision: “With our debt balance, the interest rate environment and property values downtown, we don’t see a path to us recouping our remaining equity,” he told the publication. He added that negotiations with Starwood were cordial: “In 35 years, our firm has never lost money — this is the first year that it’s happened.”
The redevelopment turned the former office tower into apartments, hotel rooms, offices and retail space. The project received significant public incentives including about $100 million in historic tax credits and $50 million from city tax increment financing.
According to Todd, more than $150 million has already been repaid to tax credit investors such as Stonehenge Capital and AHP (Warren Buffett’s tax-credit arm). The building was refinanced with Starwood three years ago—a move that allowed Todd Interests and major investor Moriah Real Estate to recover around 90 percent of their investment at that time. Much of those funds were reinvested into The National in anticipation of an improvement in market conditions.
However, apartment occupancy has dropped below 80 percent and property values remain weak amid higher interest rates. “The values aren’t there,” Todd said. “The loan is due, and we’re not going to continue to pay.”
This foreclosure follows shortly after Todd Interests sold its stake in another nearby project—the East Quarter redevelopment—to J.P. Morgan Asset Management.
