Park Place Owner to Cede Controlling Interest

After a prolonged battle with its lenders, the owners of the landmark Park Place office complex in Irvine said Thursday they have agreed to give up controlling interest in the property.

In turn, the lenders have agreed to waive about half of the owners’ $198 million in debt.

Owner Winthrop California Investors, which was in danger of losing the 1.8-million-square-foot property in a foreclosure sale, will retain a stake in the complex. Its affiliate, Winthrop Management, will continue to manage and lease the buildings.

The restructuring improves Winthrop’s chances of persuading the complex’s largest tenant, engineering giant Fluor Corp., to renew its headquarters lease, which expires in stages, beginning in 1998.

“We hope to be able to keep Fluor,” said Jeffrey D. Furber, Winthrop Management’s president.

Fluor has been talking with other local landlords about buying or leasing space. Fluor executives declined to comment on Winthrop’s agreement.

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Industry observers say the agreement will give Winthrop the stability and cash necessary to negotiate more effectively with Fluor.

“It gives them a much greater ability to make the kind of deal necessary to keep [Fluor] in the project,” said Barry Saywitz, president of the Saywitz Co., a Santa Ana real estate firm.

Furber said that the restructuring will be completed whether or not Fluor decides to renew its lease. Fluor said it no longer needs all of the space that it leases.

If Fluor decides to leave the building, which is 97% occupied, it would be a financial blow to the owners. Even with Fluor as a tenant, Winthrop California posted losses of $4.7 million in the third quarter ended Sept. 30, compared with $5 million in losses the previous year.

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Winthrop’s problems started in April when it missed a $201.8 million balloon payment on the property. A notice of default was filed at the Orange County recorder’s office July 11. At that time, Winthrop said it was unable to refinance the debt and that the value of the property had fallen below the $198 million outstanding balance on the loan.

Since that time, Winthrop has been trying to reach some kind of agreement with its lenders to prevent a foreclosure. Winthrop is an affiliate of Boston-based Winthrop Financial Associates.

The lenders committee consists of five groups, including Oak Tree Capital Management of Los Angeles, which has the largest stake, and Contrarian Capital Management of Connecticut. The original lender, Newport Beach-based Pacific Mutual Realty Finance Inc., still holds a small stake.

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Under the new deal, Winthrop will file a Chapter 11 bankruptcy reorganization petition in the next 60 days along with a reorganization plan already approved by creditors. A new partnership is expected to emerge quickly from the bankruptcy proceedings.

If the group decides to sell the property, lenders would receive 90% of the first $100 million and 25% of any remaining proceeds.

The due date on the remaining debt would be extended five years to 2001, Furber said. “I think clearly the lending group has a lot of confidence in the market and believes it is improving,” Furber said.

The pending reorganization involves only the office complex, not the surrounding 90 acres occupied partially by the Park Place retail center. The land is owned by a separate partnership of Winthrop and Texas developer Trammell Crow Co.