Monday, February 22, 2010

Dallas Logistics Hub developers file for bankruptcy protection

The development companies building the 6,000-acre Dallas Logistics Hub in southern Dallas County have sought Chapter 11 bankruptcy protection to reorganize their debts, saying the severe recession stalled their ambitious plans.

Blog: Southern Dallas
But Richard Allen, the project's main backer, vowed to steer it through bankruptcy and fulfill his vision of turning it into a thriving freight transportation center.

"The fundamentals of the park are still there," Allen said, citing the area's railroads, highways and available labor force. "We're very committed to the project."

The Dallas Logistics Hub occupies center stage in a broader inland port project, which local leaders have billed as southern Dallas County's most promising engine for economic development.

The inland port is designed to handle a flood of trade between Asia and the United States, receiving trainloads of containers from California ports and distributing them by road, rail and air to customers nationwide. Allen has said it would generate tens of thousands of jobs.

FILE 2007/Staff photo
Richard Allen announced the Dallas Logistics Hub to great fanfare in April 2007. But the recession has delayed its promise of creating thousands of jobs.
But the severe recession slammed consumer spending, knocked down trade volume – and torpedoed the local real estate market.

Leasing of Dallas-area industrial space went from a net gain of 5.2 million square feet in 2008 to a net loss of 1.8 million in 2009, according to Cushman & Wakefield.

"When you're not doing deals or selling land or leasing buildings, it's tough to generate cash flow," said Allen, who said his investment in the project is about $85 million.

Too little cash flow

The bankruptcy filing was made by DLH Master Land Holding LLC and Allen Capital Partners LLC, both led by Allen. It does not include organizations of the Allen Group, Allen's holding company, or the group's other entities in Kansas or California.

According to the bankruptcy filing, the Dallas Logistics Hub has about $170 million in debt backed by collateral, plus another $8 million in unsecured debt. But it has cash flow of only about $5 million a year.

Allen said that creditors have been "very cooperative" and that he would work with them to extend the maturities of the project's debt. The process could take about six months, he said.

One major creditor, Lincoln, Neb.-based TierOne Bank, said it was reviewing the bankruptcy filing before deciding what steps to take. Executives at other major creditors, including BBVA Compass and American Bank of Texas, did not return calls seeking comment.

The bankruptcy filing also said Allen had held talks with Dallas city leaders and a Chinese company about the Asian firm's potential purchase of more than 1,000 acres in the logistics park. Court documents identify the company as China Supply and Logistics.

At a recent Dallas Morning News roundtable, Mayor Tom Leppert alluded to a possible deal involving Chinese investors that he did not identify. "An investor from China may soon make a direct investment in real estate here," he said. Such a sale would help the logistics park pay for continuing costs, reduce debt, fund about a year of operating expenses and pay off debtor-in-possession financing, which is being provided by Allen family investors. Allen may also seek outside equity investment.

What it means

Public officials in Dallas County disagreed about what the bankruptcy means for the inland port's future.

County Commissioner Maurine Dickey said it would hurt the local economy. She said investors were spooked by a 2008 controversy involving Allen's project.

Allen had complained privately to local officials that he felt he was the victim of an attempted shakedown by politicians, including county Commissioner John Wiley Price, who has expressed concerns about Allen's commitment to hiring minority-led firms.

Allen has told others that he believed that when he declined to hire three consultants, Price and others tried to harm his development with delays and other impediments. Price has denied intentional harm.

Allen said Tuesday that the controversy did not contribute to the bankruptcy filing.

Price said the Allen Group did not live up to the hype and promises. He said the bankruptcy would have no impact on the inland port because other developers are bringing in more business.

Dallas Morning News

No comments:

Post a Comment