By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
When real estate developer Anthony Natale announced plans last year to rehabilitate 15 decrepit 1960s apartment buildings along Gaston and Live Oak avenues, he vowed that the ambitious, $22 million publicly backed project would cement old East Dallas' reputation as a residential destination spot for young professionals.
Six months ago, the project looked like a bust when the general contractor Natale hired to complete the work ran out of cash and abruptly walked off the job, leaving behind a gallery of unfinished structures that stood vacant and buried by a mountain of code violations.
Although the work stoppage has spawned a pair of lawsuits, including one filed by city officials in August in an attempt to force Natale to bring the buildings into compliance with city codes, Natale is again promising that the project will succeed.
"The city knows that we have our intentions to move forward and complete these buildings," Natale says. "We've turned that whole situation around, and we've got the project back on track again. I think it's going to be a very successful project at the end of the day."
Earlier this month, city officials postponed their attempt to obtain a civil injunction against Natale and GLO Holdings Ltd., the partnership controlling the project. Had the city succeeded, it could have forced Natale to bring the properties into compliance or pay a $1,000 per-day penalty for each code violation.
Instead, the city opted to monitor the project's progress under a new, voluntary schedule that Natale presented in September, says Robert Doggett, the assistant city attorney handling the case.
"The plan is to get the properties in a safe condition then rehab them over a course of [several] months," Doggett says. "Basically, this gives us something to monitor them with."
Under the new schedule, Natale says he expects the entire project to be completed by the end of July, some six months behind schedule.
Although 10 of the 15 buildings are still beset with more than 170 alleged code violations--everything from the presence of broken glass and nails to structural problems involving rotting wood and poor plumbing--several buildings have been completed while work has resumed on others.
From here out, Natale says the buildings will be completed and ready for lease at a rate of about one every 45 days. Although the booming Dallas market for new apartment buildings is beginning to slow, Natale says he's still confident there will be a high demand for his apartments, which will rent at an average of $750 a month, once they're all complete.
"In this last couple of months, the flurry of leasing has just proven that that level of rent is needed," says Natale. The rents are aimed at young professionals who won't pay or can't afford the $1,000 per month and higher rents being charged elsewhere in Old East Dallas, Oak Lawn, and Uptown.
At the September meeting, Doggett says Natale's explanation for why the contractor walked off the job, as well as the revised construction schedule he presented, was convincing enough to persuade him not to force the issue in court, where an adverse ruling could have hindered the city's future efforts to monitor the project.
"We got a pony show. The problem is, they're going to present a pony show at court. You don't go to court and lose," Doggett says. "I don't want people to think the city is backing off. We just want to play our cards right. We're trying to resolve this with them, and we'd like to do so amicably if we could."
Natale's problems began last spring when he had a falling out with his general contractor, a construction company called Specialty Management Group Inc., which is doing business as CCG. In May, CCG sued GLO Holdings and Natale's real estate company, Grenadier Residential Inc., claiming that the company fell behind in its payments and, later, stopped paying for the construction work altogether.
At the time, however, CCG had problems of its own. In August, CCG and its parent company, a Houston-based industrial outsourcing giant called American Eco Corp., filed for Chapter 11 bankruptcy. In its bankruptcy petition, American Eco listed $233 million in assets against $196 million in liabilities.
In response to CCG's suit, Natale's lawyers denied the allegations that they breached their contract with CCG. In turn, they claimed that American Eco, in its efforts to avoid bankruptcy, "swept a substantial portion of the funds paid from [GLO] into [its] own bank accounts" thereby forcing CCG into bankruptcy, according to court documents filed in Dallas County.
Wesly Maness, an attorney representing CCG, declined to comment on the case, which will remain inactive until the company's bankruptcy petition is resolved. Natale also declined to discuss the case in any detail, though he denies the allegations that he breached his contract with CCG and maintains that CCG's financial problems are internal.
"We weren't the reason why [CCG] went bankrupt. Their parent company was having trouble. They didn't have enough cash flow. There were some liens that were hitting the project, at which point we couldn't pay them," Natale says. "We've undergone a lot of challenges. This is not an easy project. We're not here trying to screw anybody. That was never our intent."
In the summer of 1999, HUD agreed to insure a $22 million loan Natale received from private lenders to pay for the redevelopment. Although no tax dollars have been spent on the project, they could be if the project fails and HUD is forced to foreclose, says HUD spokesman Scott Hudman.
"If, for whatever reason, the deal goes south during construction, the federal government would end up owning [the buildings] and paying for them," Hudman says.
For now, Hudman says the agency's best option is to work with Natale and hope the construction problems that have delayed the project are over.
"In terms of the deal, it's in everybody's best interest to be as flexible as the law allows," Hudman says. "It's in nobody's best interest to let this thing go south."
Like Hudman, Doggett says it is also in the city's best interest to give Natale more time to follow through on his promises. Natale swears the city has nothing to worry about.
"I feel very positive about the rebirth of our project. This is a very important project to us. We've sunk four years of our lives into it," says Natale. "We're a developer who cares."