DALLAS--Tenants in the International Apparel Mart appeared unfazed in the wake of foreclosure threat that hit the parent company, Dallas Market Center, last week. As reported, the Equitable Life Assurance Society of the U.S. and Dai-Ichi Mutual Life Insurance Co. threatened foreclosure in a dispute over payments on a $450 million loan issued on the complex in 1987 to the Trammell Crow family, which owns and operates the center. "It's going to be business as usual," asserted Jim Quist, a longtime tenant. "I don't think people are nervous. It's been a difficult period in the retail industry, so that has to reflect in what happens here." Bill Winsor, president and chief operating officer of the DMC, distributed a letter to exhibitors assuring, "This posting [for disclosure] is not an issue of survival for DMC. The DMC is a vibrant business, and this will not affect our day-to-day operations." "Whether the Crow family maintains an interest or whether it's Equitable, I don't think the tenants will see any difference," said Clyde Utt, a principal with the Virgina Utt showroom of better and bridge lines. "All of us are getting ready for market here, and most of us are concentrating on that." "I think it's no big deal," said Howard Wolf Jr., who owns a showroom of contemporary clothing. "The Crows aren't playing according to the rules of the deal that they made, so the people who made the mortgage are trying to put pressure on them. It's a bunch of posturing. We couldn't care less." "A lot of people would be happy if Equitable took it over because they think we'll be able to get rents that would make the sales reps able to survive," said one rep who asked to remain anonymous. "Without lower rents the place will not survive. A lot of people in this Mart are hurting." Foreclosure papers filed in Dallas County District Court show the dispute is over the amount of mortgage payments due for the last six months of 1993. According to the suit, the 1987 loan provided a recapitalization for the complex that enabled the Crow family to take $250 million out of the center. Shortly after the refinancing, the region's economy took a nose dive, and retail traffic and occupancy rates in the wholesale complex dropped off. Business plummeted so low in mid-1989 that tenants in the Apparel Mart banded together to insist on lower rents. The DMC granted a rent freeze that year. In early 1991, the Crow family defaulted on the loan by failing to make a $2.7 million interest payment and a $100,000 service fee, according to the suit. The mortgage was restructured in early 1992 to reduce payments. Under that agreement, the Crow family promised to pay specific amounts of net operating profits from the DMC for each six-month period through 1995. In the second half of 1993, the DMC's net operating profits fell below the specified $12.94 million amount by $5.9 million, according to the suit. That triggered a $4.4 million interest payment that was due March 31, which the Crow family hasn't paid, the filing stated. The Crow family maintained that Equitable's consent to rent reductions and other tenant concessions at the DMC in 1992 affected its obligation to pay the $4.4 million in interest, according to the filing. The cost reductions were made after the tenant association at the International Apparel Mart threatened to move out of the building if overhead wasn't reduced. "The debate is: Should the lenders have acknowledged the adjustments of those rentals and adjusted payment for the loan?" said one source familiar with the dispute. "Apparently, there was no negotiation over the DMC's profitability when the rents were adjusted." "We've been negotiating this matter with the lenders for some time and we believe it can and will be resolved quietly through continued negotiating," asserted Jim Wise, a spokesman for the Crow family and an officer in Trammel Crow Interests. He soft-pedaled the posting for foreclosure as a common tactic in negotiations among borrowers and lenders that often doesn't result in foreclosure. The DMC has always been profitable, and profits have risen "dramatically" in the last year, Wise added. He declined to elaborate on the controversy. "We have been negotiating for almost a year on these points, and we're still open to negotiations, but we are taking this action to protect our investment and to bring this to some sort of conclusion--either a negotiated settlement or a foreclosure sale," said Jonathan Miller, senior vice president of Equitable Real Estate in New York. He refused to comment further.
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