High rise owners and Bank reach deal
Journal Record
Brianna Bailey
March 5, 2012

OKLAHOMA CITY – The owners of downtown’s troubled First National Center have reached an agreement with lender Capmark Bank that – if approved by a U.S. Bankruptcy Court judge – would allow them to maintain control of the historic property in exchange for a $12 million settlement, according to court documents.
The settlement would release First National’s California-based owners from all claims Capmark might have on the property and resolve a nearly two-year legal battle over the 33-story art deco tower and two attached buildings.

The proposed settlement was filed with the court last week after a settlement conference between the two parties in February, according to court records.

“The settlement conference was successful and the parties were able to reach a global resolution of their disputes,” First National’s owners said in a motion asking the court to approve the settlement.

The $12 million settlement would release First National’s owners from a $21.4 million secured claim mortgage holder Capmark Bank has on the property. First National also has agreed to enter into a new contract to renovate elevators in the building with ThyssenKrupp Elevator Corp. worth up to $100,000 as part of the settlement, according to court documents.

The settlement contains a provision that the property will be placed in receivership should First National’s owners fail to pay Capmark in a timely manner or follow through with the other terms of the agreement.

First National Center has lingered in Chapter 11 bankruptcy since October 2010 while tenants at the retail and office center have complained of ongoing maintenance problems and spotty elevator service in the high-rise tower.

First National’s largest tenant, Devon Energy Corp., was not part of the settlement negotiations, and continues to battle with its landlord over ongoing issues with elevator maintenance and more than $600,000 it claims First National owes the company for restoring bathrooms in the building. The company filed a motion in U.S. Bankruptcy Court last week asking the court to order First National to fix the elevators in the building and repay the $606,000 Devon spent on restroom improvements within 30 days or reject its lease.

The company is getting ready to begin moving employees into its new 50-story corporate headquarters downtown and has yet to receive a clear answer from First National’s owners about the status of its lease at the building, said Tim Hartley, a spokesman for Devon.

“Is Devon trying to get out of this lease?” Hartley said. “The answer is no.”

Attempts to reach a representative for property management firm Milbank Real Estate, or First National’s Los Angeles-based attorney, David Neale, were unsuccessful Monday.

The partnerships First National Building I and First National Building II, both associated with Los Angeles-based Milbank Real Estate, bought the First National Center in 2006 for $21 million.

The First National owners filed for Chapter 11 after Capmark Bank attempted to foreclose on the property and appoint a receiver to take over operations at the downtown center.

So, the owners have to pay $12 million and clear the mortgage or the building goes into receivership.

Either way it looks like this situation will finally move off dead center.

What is Milbank's financial status as a whole? Does the company have any cash to move over to do any portion of the intended renovations? Or are they trying to sell, and if they are, can they find a buyer who is interested in taking this project on?

Virtually all their other properties are bankrupt so I can't imagine how they are going to come up with $12 million. Basically, CapMark is saying we'll write off the full $21 million if you pay us $12 up front.

I just don't see how that is going to happen and probably the best thing is it won't happen, the bank will finally gain control and ultimately a new owner can be found.

Settlement reached in First National Center bankruptcy (http://newsok.com/settlement-reached-in-first-national-center-bankruptcy/article/3655250)

BY STEVE LACKMEYER slackmeyer@opubco.com
Published: March 7, 2012

A two-year foreclosure and bankruptcy battle between owners of First National Center and their lenders may be coming to an end with a joint settlement filing that would allow claims in the case to be dismissed for $12 million.

It says the two parties reached the settlement agreement. Why would they settle and accept the terms if they can't pay it? To answer my own question, it sounds like they've made a lot of agreements they haven't kept. I suppose the key is this: "The settlement contains a provision that the property will be placed in receivership should First National’s owners fail to pay Capmark in a timely manner or follow through with the other terms of the agreement."

This is a crown jewel downtown and we can all agree something needs to happen. That building deserves so much more than the last few owners have provided.

The potential with the right owner, with deep pockets, is off the map.

What/Who is inside this building? This is my least favorite skyscrapper in Oklahoma City and Oklahoma wbecause of its deteriorating outside apperance. I hardley ever see lights on at night, and I am just wondering how occupied is this building *concerned face expression*

This is my least favorite skyscrapper in Oklahoma City and Oklahoma wbecause of its deteriorating outside apperance.

I still think it's the best downtown. It has so much character even in its present state.

What/Who is inside this building? This is my least favorite skyscrapper in Oklahoma City and Oklahoma wbecause of its deteriorating outside apperance. I hardley ever see lights on at night, and I am just wondering how occupied is this building *concerned face expression*

I know Devon is(was) an occupant but besides that I honestly have no clue; I'm 99.9% sure Pete knows. I like FNC a lot but I would appreciate it even more if they would remodel it, which probably won't happen for a long time.

I still think it's the best downtown. It has so much character even in its present state.

Agreed, but like I said in my previous post, I do wish they would update it without losing its character.

Agreed, but like I said in my previous post, I do wish they would update it without losing its character.

But how would they do it, I have seen a picture back in the summer when I first joined this site, the top of the tower looks like its crumbling and molding

But how would they do it, I have seen a picture back in the summer when I first joined this site, the top of the tower looks like its crumbling and molding

That's why I'm not a remodeler, because I have no idea. LOL I know what you mean about the top though, that's the worst part, IMO.

But how would they do it, I have seen a picture back in the summer when I first joined this site, the top of the tower looks like its crumbling and molding

The appearance of the tower has seen better days but I doubt it's molding at the top. LOL

What/Who is inside this building? This is my least favorite skyscrapper in Oklahoma City and Oklahoma wbecause of its deteriorating outside apperance. I hardley ever see lights on at night, and I am just wondering how occupied is this building *concerned face expression*

Th tax commission, office of state lands (CLO), and a smattering of state government and law offices are in the building. Otherwise its about 60% empty (and that number will increase once Devon leaves).

It would take a ton of money, but I would love to see FNC turned into a residential/hotel mixed use project. At this point, it is probably not viable as an office building.

As I've pointed out on another thread, the lack of parking really hurts the prospects of this building.

Once Devon leaves, it will be largely empty and yet all the parking downtown is already full; going to get worse with a rapidly expanding SandRidge and Continental.

The proposed parking garages are all on the perimeter of downtown, so that won't help.

I've said it before and I'll say it again... If I win the lottery, I'm buying FNC and it's ON! Top 3 floors will be my personal living space and playground... the rest I will split into some mix of residential/hotel/commercial... maybe some sort of retail on the lower floors even if it's just a restaurant, drug store, small grocery store for supporting the residents....

Nothing like dreaming! :)

As I've pointed out on another thread, the lack of parking really hurts the prospects of this building.

Once Devon leaves, it will be largely empty and yet all the parking downtown is already full; going to get worse with a rapidly expanding SandRidge and Continental.

The proposed parking garages are all on the perimeter of downtown, so that won't help.

You're right, Pete. While the building was on it's decline, the splitting off of the Main Street Parking Garage from the 1st National properties (early 90's I think?) really was the start of the demise, leading to today's problems.

I recall some talk in the late 90's by the owners at the time, about the possibility of converting the middle building on Park Avenue, into a parking garage to service the remaining 1st Ntl properties - tower and east building. The idea was to leave to current facade intact, as well as the ground floor retail space, and install a parking garage in the rest of the building, perhaps even adding more floors. It could happen - just takes money. Lots of money.

I don't think the property will be viable without a parking solution. Hope that's not the case...

This is a crown jewel downtown and we can all agree something needs to happen. That building deserves so much more than the last few owners have provided.

I wonder if the city could take it under eminent domain.

I wonder if the city could take it under eminent domain.

Only if they plan to turn it into a park or some similar public use.

I wonder if the city could take it under eminent domain.

You want the government to seize private property?

Actually, the laws recently changed on this and the government can exercise eminent domain even if they plan to turn the property over to private developers.

I doubt that it would happen with FNC but it is an option.

I think private enterprise will play its role here.

Th tax commission, office of state lands (CLO), and a smattering of state government and law offices are in the building. Otherwise its about 60% empty (and that number will increase once Devon leaves).

It would take a ton of money, but I would love to see FNC turned into a residential/hotel mixed use project. At this point, it is probably not viable as an office building.

I've been saying that for years. Gut the place and start over. For office space, it's done....it's been done. But as we've seen with other failed projects, you have to stop assuming that every residential structure should be upscale. The market is maxed out.

The place COULD be office space again, IF it's gutted and brought up to current code. But those floors have so little space per floor, it's hard to squeeze something in there. When you gut, you've got the clean slate to do whatever you want...and even only rebuild the floors as you go. Nothing says you have to gut the whole thing at once. But if you look at one of the floors that has been mostly gutted, you can see the major difference to the old floors. We're not talking removing any historic elements, simply removing outdated wiring (that didnt plan for things like computers), removing the crumbling glued-on ceiling tiles. At least you can keep the old incandescent fixtures now with the flourescent replacement bulbs. But is always comes down to money.

We've seen private investor after private investor come in and fail and put the building further behind. I really feel like the only way the place is going to be saved, is by having the city do something about it like they did with the Skirvin. If nothing else, let the city be the buying force to get out the crappy "investors" and once the place is back on its feet, let someone else buy the city out (without losing money!).

An update by Steve. It's a temporary resolution but certainly not a solution.

http://newsok.com/bankruptcy-battle-may-be-over-for-oklahoma-citys-first-national-center-owner-but-challenges-remain/article/3657149

Steve's last paragraph points to the main issue. He overpaid and he's not going to be able to recover that. That's the only reason CityPlace hasn't fallen under the same horrible distaster FNC has.

First National has tremendous potential, but it's going to take a Skirvin-like restoration to fix it up. I have no faith in the current owner. He's had this building for several years and has done nothing with it, not to mention the problems he has had in other cities. If it were up to me, I'd wait until the end of the foreclosure proceedings (I don't think he's going to live up to the $12 million settlement), then buy it for much less. Use Eminent Domain if we have to.

the other key is what pete pointed out ... devon employees didn't need parking ... who ever wants to move into their vacated space will ...

Wow! The FNC story has a long ways to go before it is over.

I don't see how this guy is going to come up with the $12 million, as he hasn't even been able to pay basic bills.

Moreover, why the heck would he WANT to put up $12 mil for a property that probably isn't worth that much and is soon to be mostly empty?


If some miracle happens and he's actually able to emerge from this mess, then what? He's got a horrific reputation as a landlord for starters, so who the heck is going to rent any of that empty space, let alone a big chunk of it?

And where are these new tenants going to park anyway?

Can someone please post the full article?

First National Center owners seek dismissal of Chapter 11 bankruptcy (http://journalrecord.com/2012/04/11/first-national-center-owners-seek-dismissal-of-chapter-11-real-estate/)
By Brianna Bailey
Oklahoma City reporter - Contact 405-278-2847
Posted: 07:10 PM Wednesday, April 11, 2012
OKLAHOMA CITY – The owners of downtown’s First National Center are asking the court to dismiss their Chapter 11 bankruptcy as they struggle to find a lender willing to finance a $12 million settlement with Capmark Bank that would allow them to keep the 33-story art deco tower.

Here it is, Pete:

First National Center owners seek dismissal of Chapter 11 bankruptcy
by Brianna Bailey
Published: April 11th, 2012

OKLAHOMA CITY – The owners of downtown’s First National Center are asking the court to dismiss their Chapter 11 bankruptcy as they struggle to find a lender willing to finance a $12 million settlement with Capmark Bank that would allow them to keep the 33-story art deco tower.
Under the terms of their settlement with Capmark, First National’s owners have until May 27 to give the bank $12 million in cash to release them from a mortgage on the property. If the money doesn’t materialize, First National will be placed in receivership.

First National’s owners already have put up a $1 million deposit as part of their settlement with Capmark, but don’t have the rest of the money on hand and have been unable to find a willing lender, according to court documents.

In a motion filed April 5, First National’s Los Angeles-based owners said banks have been reluctant to lend them the money to finance the deal while the historic downtown property lingers in bankruptcy.

“Each of the potential lenders that the debtors have approached has indicated that it cannot provide the debtors with takeout financing unless and until the debtors have dismissed their Chapter 11 bankruptcy cases and the property is out of bankruptcy,” First National’s owners said in the court filing.

First National’s owners also said in court documents that it has been a challenge to find new tenants while the building has been in bankruptcy.

“The debtors believe that prospective new tenants are extremely uneasy about moving into a property which appears to be on the brink of foreclosure and which may change ownership or management at any given moment,” First National’s owners said in the court filing. “The debtors believe that the dismissal of their bankruptcy cases will alleviate these types of concerns by prospective new tenants and help the debtors attract new tenants to the property, which would increase the debtors’ rent revenue and ultimately improve the debtors’ ability to pay their outstanding debts.”

In their court filing, First National’s owners said they believe Capmark Bank plans to fight their request to have the Chapter 11 bankruptcy dismissed.

However, Rob Robertson, an attorney representing Capmark, said the bank hasn’t made up its mind yet whether or not it will oppose First National’s motion to dismiss the bankruptcy.

“Initially we were not in favor of it, but once they filed the motion, it caused Capmark to reconsider its options,” Robertson said. “A decision hasn’t been made yet.”

The partnerships First National Building I and First National Building II, both associated with Los Angeles-based Milbank Real Estate, bought the First National Center in 2006 for $21 million.

Both entities filed for Chapter 11 in October 2010 after Capmark Bank attempted to foreclose on the property and appoint a receiver to take over operations at the downtown center.

First National’s owners are confident that they can exit bankruptcy and resume renovations on the building, Milbank Real Estate CEO Aaron Yashouafar said in a written statement.

“The ownership is pleased that it has been able to resolve its differences with the lender and that in fact an amicable resolution was reached,” he wrote. “With the issues resolved with the lender, the ownership of First National Center is prepared to come out of bankruptcy and continue its effort toward renovating and upgrading this historical icon of Oklahoma City.”

I'm not buying this, but I frankly don't know. I imagine that other companies in bankruptcy (American Airlines' parent AMR Corp. comes to mind) are able to arrange for financing contingent upon their discharge from bankruptcy. So why can't Milbank attempt to do the same?

I suspect that either that they truly can't find anyone willing to lend them money under any circumstances, or they're still playing games with the court and creditors.

I'm sure Capmark would rather have $12 million than this building back, so there are having a hard time deciding if it's worth the risk of not contesting this release from bankruptcy.

However, the current owners have yet to deliver on multiple promises and commitments and if Capmark doesn't think the building is worth $12 million then other lenders aren't likely to take it as collateral either, especially given the track record of the people that would be borrowing the money.

I suspect this is yet another ruse to delay and stall, which seems to be Milbank's m.o.


Frankly, I think OKC would be better served by Capmark taking back control and then taking our chances with a new owner who at the very least will have much less up-front investment and thus a better chance of making this project work.

I'm sure Capmark would rather have $12 million than this building back, so there are having a hard time deciding if it's worth the risk of not contesting this release from bankruptcy.

However, the current owners have yet to deliver on multiple promises and commitments and if Capmark doesn't think the building is worth $12 million then other lenders aren't likely to take it as collateral either, especially given the track record of the people that would be borrowing the money.

I suspect this is yet another ruse to delay and stall, which seems to be Milbank's m.o.


Frankly, I think OKC would be better served by Capmark taking back control and then taking our chances with a new owner who at the very least will have much less up-front investment and thus a better chance of making this project work.

i hope Capmark takes control and milbank misses the may deadline ....

then a local developer buys the building for 10-12 mil .. and turns the property around

Bye bye, Aaron Yashouafar. My guess is the bank is already negotiating with a company who will take it off their hands.

i hope Capmark takes control and milbank misses the may deadline ....

then a local developer buys the building for 10-12 mil .. and turns the property around

Is First Nat'l worth 10-12 mil to a local developer?

Is First Nat'l worth 10-12 mil to a local developer?

i would think so .. the residential possibilities (considering 4 of the 6 city place 1 mil + condo's have sold) and the sq ft of the building ...

plus just tearing down the city place addition .. would have a great piece of develop-able land that would be worth a bunch

Is First Nat'l worth 10-12 mil to a local developer?

IIFC, FNC is 1 million square feet, so at $10-$12 per square foot, absolutely.

I also believe that Devon has liens filed against the property for money that was supposed to be paid back when Devon turned thousands of square feet into Class A space. Portions do not need to even be renovated; just get them proper elevator service!

With the amount of money being invested in that area, private and public, I can't imagine "the powers that be" are going to let this fiasco continue over a few million bucks.

I'm not sure the FNC would sell for more than $10 million if it came back on the market.

As has been discussed, parking is a very serious problem; not only was the attached garage sold off separately a long time ago, even with the proposed city garages none would be in close proximity. Regardless of use -- but especially for residential -- this is a big, big problem.

It's certainly no coincidence that this is the last big property in the CBD that is still adrift. No one has been able to figure out how to make it work.


The best hope is the bank takes it back and sells to someone in love with the historical features and who can buy it cheap -- maybe closer to $5 million.

Remember, City Place is still almost half vacant and is considered to be a much nicer building. The have the same parking issue as well.

As has been discussed, parking is a very serious problem; not only was the attached garage sold off separately a long time ago, even with the proposed city garages none would be in close proximity. Regardless of use -- but especially for residential -- this is a big, big problem.

It's certainly no coincidence that this is the last big property in the CBD that is still adrift. No one has been able to figure out how to make it work.

Will the streetcar make it more viable?

Will the streetcar make it more viable?

I would hope so but if I was the one considering buying/redeveloping I'm not sure it would make me feel much better.

I would think that building -- even with the aid of a streetcar system -- would have a very tough time competing with other properties, no matter if the use was office, residential or even hotel. Valet parking could be used for the latter but even then, where the heck are they going to shuttle the cars to?

Will the streetcar make it more viable?

Excellent point KilgoreTrout. Throw in future regional rail to Norman/Edmond/Tinker and rapid rail to Tulsa and there is some serious non-auto mobility.

i agree with Pete. I park in the MainStreet garage connected to FNC and I was told that they cannot accommodate any medium to small groups of monthly parking passes. They are pretty much full!

The only viable solution is to turn the connecting "newer" structures into a parking facility.
As discussed on here previously, you can keep the 1st floor level retail, just turn the upper levels (that are not even occupied) into a parking facility. This will NOT be cheap though..

And I believe the nicest space (thanks to improvements by or for Devon) is in the new section, so that would have to be sacrificed in favor of parking.

But as they say, a rising tide lifts all boats. With the rest of downtown filling up and great development all around, FNC will ultimately benefit if it can find it's way into the hands of the right owner/developer.

Steve's latest update.

http://newsok.com/first-national-owners-seek-to-end-bankruptcy/article/3667043

Interesting:


An appraisal by J.W. Hoyt & Associates for Yashouafar values the property at $16.5 million. Capmark, meanwhile, provided two separate appraisals by Cushman & Wakefield and CBRE reflecting values of $8.4 million and $8.5 million.

Read more: http://newsok.com/first-national-owners-seek-to-end-bankruptcy/article/3667043#ixzz1sIvPWj4m

The fact that the current owners have an appraisal for double Capmarks dual appraisals is a huge red flag to me.

The fact that the current owners have an appraisal for double Capmarks dual appraisals is a huge red flag to me.

With flashing lights and a siren.

Interesting that the current owners are willing to pay $12 million to keep this property.

I doubt they'll be able to come up with it and that it ends up selling for well less than $10 million.


I know this is a stretch the local developers with the best track record for renovation is the Midtown Renaissance group. If they could get it for the right price perhaps they would be tempted.

Is it possible to expand the MainStreet garage? What about other garages around the city? Perhaps the strain on the MainStreet garage could be eased by increased capacity elsewhere.

That Main Street garage is now privately owned.

The City is looking at adding parking structures around the perimeter of downtown but none would be very close to FNC.


If they purchase price is low enough, the owners could replace some of those non-historical buildings in the middle and east sections with a parking structure. I know this has been evaluated in the past.

Interesting that the current owners are willing to pay $12 million to keep this property.
I know this is a stretch the local developers with the best track record for renovation is the Midtown Renaissance group. If they could get it for the right price perhaps they would be tempted.

My first reaction to this: "but it isn't mid town". The building just seems out of scope for Midtown Renaissance in location and size.

What about the guy(s?) that did The Classen Luxury Apartments? Drawing a blank on who that was, but I remember a good reputation and The Classen shows excellent results.

That's the Gardner Tanenbaum group.

BTW, the bankruptcy isn't the only lending hurdle for Yashouafar.

Remember he is still under indictment for allegedly defrauding a condo HOA group in Las Vegas.

BTW, the bankruptcy isn't the only lending hurdle for Yashouafar.

Remember he is still under indictment for allegedly defrauding a condo HOA group in Las Vegas.

yep .. i don't see anyway he gets the 12 mil

Not to mention he's defaulted on just about every other loan he's been given and is in serious debt.

AND the property is getting ready to lose it's main tenant in Devon.


Who is going to loan $12 million to this guy for this property in it's current state??

That Main Street garage is now privately owned.

The City is looking at adding parking structures around the perimeter of downtown but none would be very close to FNC.


If they purchase price is low enough, the owners could replace some of those non-historical buildings in the middle and east sections with a parking structure. I know this has been evaluated in the past.

They could always buy the Main Street garage, or make some sort of joint financing agreement where the new First National owner agrees to guarantee X number of rental spaces for Y number of years. As long as its physically possible to add floors to the Main Street garage I don't see a problem.

They could always buy the Main Street garage, or make some sort of joint financing agreement where the new First National owner agrees to guarantee X number of rental spaces for Y number of years. As long as its physically possible to add floors to the Main Street garage I don't see a problem.

i doubt it is possible to add floors