The board of trustees of the real estate investment trust that owned some of Downtown’s most visible buildings has approved a liquidation plan to sell off its holdings in a $71 million deal.
Borderplex Realty Trust has not publicly announced the deal, but proxy documents obtained by El Paso Inc. show that shareholders voted to approve the sale last month.
Shareholders who invested in the Borderplex REIT for $10 a share when it was established in 2007 will receive up to $8.69 per share from the sale of the assets, according to the documents.
The REIT was founded by businessman William “Bill” Sanders as part of a plan to redevelop Downtown.
El Paso banker Henry Ellis, an early investor in the REIT, said in an email that one reason Borderplex Realty Trust was not more successful was that it was hard for everyone in the group to get on the same page.
“Borderplex could never put together a unified group with common goals,” Ellis said.
“There were too many very important individuals that did not sign off on the idea in the beginning. Those that started Borderplex isolated themselves for various reasons from the beginning. It really never had a chance.”
At the annual shareholders’ meeting Sept. 12, shareholders voted to approve the sale of properties to Franklin Mountain Investments, which is owned by El Paso billionaire Paul Foster. They include El Paso’s two tallest buildings – the Wells Fargo tower and One San Jacinto tower.
The liquidation plan was approved by 76.56% of the shareholders. There are 2.9 million shares in the REIT, according to the September 2019 proxy statement.
William Kell, chairman of Borderplex Realty Trust, and Foster were not available for comment. A spokeswoman for Franklin Mountain Investments said a statement from the company would be released in the coming weeks.
Franklin Mountain Investments’ offer wasn’t the only one received by the REIT, but the board stated that it was recommending the sale because it was confident in Franklin’s efforts to revive Downtown.
Foster is known for his historic restoration projects in Downtown El Paso, including the restoration of the Anson Mills Building. He is in the process of restoring the historic Plaza Hotel.
Shareholders will receive about $4.20 per share after the closing of the asset sale to Franklin Mountain Investments, which is purchasing the bulk of the REIT buildings.
Depending on the outcome of the sale of a REIT-owned apartment complex in Santa Fe, New Mexico, shareholders could get an additional $3.67 to $4.49 per share, bringing the total price per share up to between $7.87 and $8.69.
In a letter to shareholders, Kell stated that the total liquidity plan distributions, “plus the cumulative dividends paid by the company,” would be between $11.14 and $11.96 per share.
Two of the REIT properties, 500 N. Oregon and 401-403 S. El Paso, were sold to El Paso retail developer Mimco in April. Franklin Mountain Investments is purchasing 11 buildings and three land parcels in Downtown.
“There can be no assurance that each of the dispositions will close on the projected closing date or that the properties will sell for the projected sales prices,” the proxy statement warns.
The REIT received previous offers to buy some of its assets, the documents show.
A real estate company that is not named in the proxy statement approached it in 2015 with interest to buy a land parcel at Mesa and Mills, as well as One San Jacinto Plaza, formerly known as the Chase Bank building. Negotiations fell through after Chase Bank declined to renew its lease in the building.
In February, Mimco presented an offer to purchase the REIT’s Downtown retail properties, as well as two other Downtown properties and two land parcels. According to the proxy statement, the offer was less than 85% of the net asset value and was rejected by the board.
“In addition, the offer would have split assets that the board and management believed would have greater value if sold together,” the statement reads.
The REIT board states that it is confident in Franklin Mountain Investments carrying on its vision, “thus maximizing the probability that the original goals of our founders and legacy shareholders of revitalizing Downtown El Paso would be preserved.”
When the REIT was established in 2007 it quickly raised an initial $30 million. Since then, the REIT has faced several hurdles, including early opposition to the use of eminent domain and an economic downturn.
In 2013, the REIT offered shareholders an opportunity to cash out following a disagreement among investors over the direction the REIT should take. Some believed it should continue to invest in Downtown El Paso, its original focus, and others thought that it should go outside of El Paso to boost returns.
Some of those new investments outside of El Paso sparked a complex legal battle with New Mexico entrepreneur Daniel Burrell.
Borderplex was the target of a 2016 lawsuit by Burrell who accused it of fraud after he pulled out of his plans to buy $20 million in trust shares. The lawsuit was later dismissed.
Despite the setbacks, Borderplex is credited with maintaining some of the city’s most important buildings and filling them by recruited businesses to Downtown.
Those efforts brought hundreds of employees to the city center at a time when the city and investors were struggling to reinvent El Paso’s empty, aging Downtown.
Email El Paso Inc. reporter Sara Sanchez at firstname.lastname@example.org or call (915) 534-4422, ext. 105.