Bank One Fallout
A D V E R T I S E M E N T
A D V E R T I S E M E N T
On the trail of the $80 million insurance settlement.
By DAN MALONE
The battle between the best-known tenant in Fort Worth’s most prominent eyesore and its former owner fills 33 volumes lining two gray metal shelves in a nondescript office on the 6th floor of the Tarrant County Justice Center.
Reata Restaurants vs. Loutex Fort Worth, as the lawsuit is known, details the ongoing dispute that arose from the March 28, 2000, tornado that transformed the shimmering Bank One tower into an abandoned architectural albatross. The case has generated its own tower of paper — most of it centering on Reata’s lease with Loutex. But the documents also offer an answer to the complicated question posed by nearly everyone who passes through downtown these days: Why wasn’t the tower fixed or torn down long ago?
One e-mail, for example, reveals that Bank One investors pursued what one called a “win-win’’ strategy to collect insurance payments exceeding what they expected to earn off the building, for a “walk-away’’ price for the 35-story tower in the heart of downtown.
While other commercial property owners poured their insurance payments into structures that have long since returned to life, the records show, Bank One investors — including a Dallas preacher, a Montreal developer, and a gargantuan Canadian pension fund — appear to have collected millions that could have been used for restoration or demolition.
Long before Loutex abandoned the building, the company had offended Fort Worth’s sensibilities by selling off the landmark sculpture that had adorned the tower’s plaza for years — Alexander Calder’s bright red, 40-foot tall Eagle. The sculpture, which sold for a reported $3.6 million, eventually found a new home at the Seattle Art Museum.
The building that some now call “Plank One’’ began life in 1974 as the home of Fort Worth National Bank, a local institution with roots stretching back more than a century. Fort Worth National’s business was eventually gobbled up by Bank One, which renamed the tower and began shopping for a restaurant to occupy what had been the Century Club on its top floor.
The owners of a little restaurant in Alpine, Texas, settled into the space in 1996. The killer view from the top of the tower coupled with the cooking of a hot new Texas chef, Grady Spears, made the restaurant — named for the ranch in the Edna Ferber classic and subsequent movie Giant — a Cowtown success.
In 1998, the tower was sold for about $35 million to a company identified in tax records as Loutex Fort Worth. The Reata lawsuit links that company to a complex web of holding companies, corporations, and partnerships stretching from Texas to Quebec. Loutex Fort Worth is in turn owned by the similarly named Loutex Portfolio. Records show that Portfolio is owned by two other entities — SITQ Holdings and Canderel Corp. Some records also indicate that a third company — CW Dalcan Investments — shares part of Canderel’s interest in Loutex. But who are SITQ, Canderel, and Dalcan?
SITQ Holdings, which records show has a 90 percent interest in Loutex, is an offshoot of Canada’s largest institutional investor and public pension fund manager, a company known as Caisse de depot et Placement du Quebec. Canderel — a truncation of Canadian Developers and Real Estate — is owned by a company that, in turn, is owned by Montreal real estate developer Jonathan Wener.
The third company with ties to Loutex, Dalcan, is a partnership between Wener and Ronald W. Cherry, a Dallas businessman. Cherry, Wener, Dallas, Canada — get it? (Mr. Cherry has identified himself as a one-time pastor at First Baptist Church in Dallas. A church spokesman said records show a “Ron Cherry’’ had been a member of the church in the 1970s but was not sure if he also was a pastor.)
Of all those companies with an interest in the Bank One building, only two, records show, have actual employees.
Bill Bogle, who represents the restaurant, questioned Wener under oath in a Dec. 11, 2001, deposition about the businesses layered between him and the Bank One tower.
Wener: “In all cases, I have used my holding companies or operating companies to invest.”
Bogle: “Even though there are shell companies?”
W: “I’m not sure what you mean by them being shell companies.”
B: “Take Canderel Corporation, for example. Isn’t that a shell company?”
W: “No. It has several investments.”
B: “It has no employees, does it?”
W. “That doesn’t make it a shell... Lenders often require us to have ‘bankruptcy remote companies.’ In fact, it’s an obligation in many of our financing.’’
B: “To set up a shell corporation?’’
W: “No, to set up a corporation that owns a single asset. It has assets. A shell corporation to me is devoid of assets.’’
Later in the deposition, Bogle returned to the subject.
B: “You just like to have a bunch of corporations?”
W: “I love them.’’
B: “Do you all by yourself have an annual meeting for each one every year?”
W: “I sign resolutions when required.”
The Bank One tower was among more than a dozen properties that Loutex or its affiliates owned in Texas and Louisiana. The investors, Wener testified, had bought it on the cheap with a goal of making a 20 percent return in five years. “We had bought these assets very inexpensively...’’ Wener told Bogle. “I think 34 or 36 (million dollars).’’ Wener later estimated their worth at about $60 million.
At the time of the tornado, the Bank One complex, which includes the tower and an adjacent structure housing a parking garage and additional office space, was valued on the tax rolls for close to the purchase price of about $35 million.
The storms of March 28 killed a handful of people, injured dozens more, and caused more than $450 million in damage. They destroyed 170 homes and badly damaged six large commercial buildings downtown. In the two years since, some of the damaged structures, like Calvary Cathedral, have been razed, while others, like the Cash America International building, have been reopened. Bank One, meanwhile, lingers as a bona fide shell of plywood and concrete.
Anyone dining in Reata that night would have had a harrowing view of the tornado fast approaching Bank One. Flying debris and powerful winds destroyed more than 80 percent of the windows. Interior walls were blown away. Files and furniture flew from the windows onto the streets below. In a few minutes just past rush hour, the storm rendered the building a wreck.
A decision to restore or raze the building has been hampered by wildly conflicting cost estimates, poor communication between the city and the building owners, and environmental concerns. Demolition proposals ranged from $3.5 million to several multiples of that. Repair estimates varied from a $50 to $137 million. Asbestos clean-up in the building contributed to difficulties in determining a firm cost. But so have the city and the owners. The Loutex owners claim they never got a clear answer from the city on what repairs would be required to meet current building code requirements. The city claims the owners never laid a repair plan on the table for approval.
The lawsuit claims that Loutex misled Reata into believing that Bank One would be rebuilt — a promise Loutex says it never made. But Reata, -saying it was acting on reassurances from Loutex, spent some $800,000 restoring its space and was able to reopen just six weeks after the tornado. (The restaurant was later forced to close temporarily and to leave when the building was sold.)
In the months after the storm, records show, Loutex was having difficulty settling its claim with its insurance companies. In that uncertain environment, Cherry outlined a plan for dealing with its insurers in a June 10, 2000, memo to SITQ and Wener. Loutex , he said, should “give the Ins. Co. the opportunity to offer us a ‘Walk-away’ price which exceeds our expected earnings on the property but still represents a savings to the Ins. Company (A win-win strategy.)’’
As negotiations with the insurance companies neared an end, Cherry outlined options to his associates in a July 10 e-mail:
Option 1: Settle with the insurance companies, terminate the leases, and demolish the building. “This option is in play already,’’ Cherry wrote.
Option 2: Don’t settle, terminate the leases, close the building, and sue the insurance company for “bad faith dealings’’ and replacement costs. “I am told such a lawsuit could reach proportions of as much as $600 MM [$600 million],’’ he wrote.
Option 3: Don’t settle, restore the tower on a fast track, and sue the insurance company. By obtaining waivers on city building codes, Cherry indicated the restoration might cost $45 to $50 million. “Our attorneys indicate that it is possible for us to seek the full $130 MM replacement value ... give the building to the insurance company and take the $130 MM.’’
In the end, Loutex agreed to an $80 million settlement from its insurance carriers — $20 million more than Wener estimated the building might be worth.
According to one analysis by plaintiffs in the lawsuit, $37 million of the settlement was used to repay a mortgage to SITQ. Emergency repairs cost $21 million. Another $11 million was set aside for contingencies. And the final $11 million went to Loutex.
The contingency fund — along with the $3.8 million Loutex sold the tower for — have since been frozen by the judge presiding over the Reata trial.
Beyond that, the math gets complicated and the trail faint. But it appears from the analysis that Cherry, Wener, or their companies were on the receiving end of at least $4 million. Neither Cherry nor Wener could be reached for comment on this story. Reata attorney Bogle declined comment.
Ed Huddleston, a lawyer representing several other Bank One tenants who are suing Loutex, said he believes the decision not to rebuild was based on “some sort of analysis that they [the owners] could make more money [with the insurance settlement] than repairing it and having that income stream.’’
Mark Enoch, a Dallas lawyer who represents Loutex and Cherry, said the owners invested hundred of thousands, if not millions, of dollars in the building after the “walk-away’’ memo was written. That investment, he says, is proof that the owners were dealing with Reata and other tenants in good faith during the months immediately following the tornado.
“Like anyone else, they were considering their options,’’ he said in a brief interview. “Why else would you spend additional money if you [were planning to walk away]?’’
There is, of course, nothing illegal in this. Investors taking financial risks are entitled to reap rewards. But the city was left with an unwanted landmark that has thus far defied solution.
A group headed by Ed Bass purchased the building last year for a dime on a dollar of its pre-tornado value, and announced a plan to promptly take it to the ground. But the new owners ran into problems of their own. Implosion insurance rates skyrocketed. Inspectors kept finding new asbestos deposits. And the city has required the plywood covering blown out windows to be replaced with fire-resistant material.
A spokesperson for the new owners said they would have no comment about what the lawyers in the Reata case have found. But Bass indicated in a recent press release that downtown may have to live with the Bank One shell for several more years.
“I hate the thought of looking at that ruined building for two or three more years,” Bass said, “but be assured that we are committed and determined in the long run to bring this unfortunate chapter in the history of Fort Worth’s downtown to a respectable close.”
The tower and the seeming inability of its owners or the city to rid themselves of it has become the butt of jokes and derision. One web site (www.durangotexas.com)devoted to Texas tackiness calls the plywood shell “a civic monument to a dark side of how things work in Texas’’ and poses a nagging question: “How many other cities would put up with this eyesore?’’
Like the fate of the tower, Reata’s lawsuit against Loutex is temporarily on hold. A state appellate court is considering whether Reata can go after Bank One’s Canadian owners in a Texas court.
The restaurant, however, is getting on with business in its new location — the refurbished Caravan of Dreams site. During a break from reopening preparations last week, Reata co-owner Mike Evans paused to reflect on the events of the past two years.
“The situation we’re in now could have been completely avoided,” he said. “When you’re in business, you have to consider the impact of your decision on others, not just on you. Clearly, in this situation, there was only one major concern and that was to walk away with the most money.”
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