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Weary of waiting for the operators of Houston's posh Huntingdon condominiums to market the unfinished floor space in the tower, the Federal Deposit Insurance Corporation is moving to take control of the troubled building's future.
The tower, home to a flock of mostly geriatric Houston movers and shakers -- including Mayor Bob Lanier, oil man Michel Halbouty and former Houston Post publisher Oveta Culp Hobby -- has absorbed more than $5 million in federal subsidies to the Huntingdon Development Corporation since it was purchased by First Madison Guaranty, which is controlled by Revlon chief Ronald Perelman. The subsidies came because a federal plan guaranteed that purchasers of properties formerly controlled by failed savings and loans -- properties such as the Huntingdon, which was originally financed by Gibraltar Savings, an S&L that went belly-up in the mid-'80s -- would be shielded from any operating losses incurred by the "troubled assets."
FDIC spokesman David Barr confirms that his agency has exercised an option to purchase the loan note on the unfinished condo space back from Madison. The $15.5 million transaction closed last week, but the note will officially be transferred within days.
This action comes several months after FDIC officials quashed a nearly completed agreement to purchase the condo space for $16 million that Madison had arranged with Maxxam Properties' Charles Hurwitz. Maxxam was so confident they had a done deal that company president Jim Noteware notified Huntingdon residents of the impending takeover. That provoked a protest from some in the Huntingdon and, more important, brought national publicity that focused on Hurwitz's role in the failure of Houston's United Savings and the fact that he and other officials of the failed S&L remain under investigation by the FDIC. In the wake of Hurwitz's rejected offer, several local groups reportedly submitted bids for the property. Among them was a $16.5 million offer from a consortium that included Rockets center Hakeem Olajuwon and Vancouver-based developer Ajmal Khan.
The government's role in subsidizing maintenance of the tower has long troubled some of the residents, who several years ago protested to former FDIC head William Seidman that the arrangement gave the Huntingdon management no incentive to sell its portion of the building -- that is, the half of the Huntingdon that remains undeveloped "shell" space -- in a down market. The residents ultimately launched an initiative to purchase the space themselves, but that never came to fruition.
Since the Huntingdon situation has been festering for six years, what prompted the FDIC to move now? According to Barr, "the assistance agreement with First Madison was coming to an end, and we at the FDIC were not completely [satisfied] with the marketing effort this asset got. So under the terms of the agreement, we just decided to take back the asset and try to sell it on our own."
Since Hurwitz and Madison Guaranty's Perelman have cooperated on ventures before, others interested in buying the condo space have feared Maxxam had the inside track. One reason the Olajuwon-Khan group decided to go public with its bid was to force the FDIC to scrutinize just how impartial the Huntingdon Development Corporation was when entertaining offers. The strategy appears to have worked.
Barr says the Hurwitz deal fell through "because the FDIC board felt that the marketing effort was not wide enough. As we say here, 'a wide enough net was not cast.' The board was not pleased with the marketing attempts." Since the Hurwitz bid was made, Barr says, "the market has changed. New players may now be willing to step into the buying game."
Barr declined to say whether one of those ''new players" is the NBA's most valuable one, Olajuwon. The FDIC, he says, will structure a new round of bids once control of the Huntingdon's unfinished space is transferred.
"After the Hurwitz [deal] fell through, we couldn't sell to anyone else regardless of who they were because there was no marketing of the asset," says Barr. "Getting publicity because a deal fell through is not getting a marketing effort. You're not getting people in New York City or Los Angeles or Chicago, even up in Dallas, who are interested in the property."
"This is a unique asset," adds Barr, noting the obvious. "You're not selling true condo units. We're selling a note, the mortgage on the condo. If you want to buy a unit, you buy raw space and [then have to] build it out."
If you're interested, here's how late River Oaks banker Jimmy Lyons, the founder of the Huntingdon, pitched the property: "Welcomed by cordial attendants, residents and guests enter the Huntingdon to experience an environment in the style of European luxury and sophistication. In the true sense of old world grandeur, the lobby is encompassed by 20-foot walls of antique burled walnut from the original interiors of the Lloyd's of London annex building. Waterford chandeliers, 18th-century Aubusson tapestries and French provincial and English countryside style antiques embellish the reception areas throughout the first floor."
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