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Park Place Owners Default on $204-Million Loan

Real estate: Winthrop California Partners has been unable to refinance its mortgage on the Irvine property, which faces possible loss of major tenant Fluor Corp.


IRVINE — The owners of the landmark Park Place office complex have defaulted on their $204-million mortgage and could become the latest casualties of Orange County's long stagnant commercial real estate market.

Winthrop California Partners, which owns the 1.8-million-square-foot complex--headquarters of international construction and engineering giant Fluor Corp.--missed a balloon payment of $201.8 million in April, according to court documents. A default notice was filed at the Orange County recorder's office on July 11.

Winthrop's chief operating officer, Rick McCready, said Thursday that the investment group is actively negotiating with its lenders and hopes to work out a deal "in the near future which assures our continued ownership of the property."

A spokeswoman for Pacific Mutual Realty Finance Inc., which provided funding for Winthrop's 1985 purchase of the sprawling, fortress-like complex, confirmed that the two companies are in negotiations to avoid foreclosure proceedings.

If Newport Beach-based Pacific Mutual were to foreclose, a court-ordered sale of the Park Place complex could occur as early as November.

In a recent filing with the Securities and Exchange Commission, Winthrop California--an affiliate of Boston-based Winthrop Financial Associates--said it simply did not have the financial resources to make the payment and has been unsuccessful in finding additional lenders to extend it credit.

One problem Winthrop faces is that Park Place's key tenant, Fluor, has announced that it no longer needs all of the space it leases and is negotiating with several other Orange County property owners, as well as with Winthrop. Fluor's Park Place leases expire in 1998 and 1999.

Without Fluor or a quick replacement to keep up occupancy, the complex would not generate sufficient revenue to support payments on a big new loan. That uncertainty makes it difficult for Winthrop to find new financing. The complex is now 97% occupied.

Office development in the county has been at a near standstill since the late 1980s and rents have fallen as landlords try to keep their properties filled. But a nascent economic recovery has some analysts thinking that the office market could firm up and begin a recovery of its own by late next year. As a result, companies like Fluor are anxious to negotiate new leases before rents start rising.

Fluor now occupies 800,000 square feet at Park Place but says it needs only about 600,000 square feet. The company built the office complex as its world headquarters in 1977, selling it to an investment group led by Winthrop and Texas developer Trammell Crow Co. in 1985.

The Winthrop California default involves only the loan on the office complex and doesn't affect the 16 acres surrounding the facility. The Park Place retail and entertainment center was built recently on part of that surrounding area, which is owned by a separate Trammell Crow-Winthrop partnership.

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