Friday, August 12, 2022 Aug 12, 2022
92° F Dallas, TX
Publications

EVERYBODY’S BUSINESS

By John Merwin |

Rumors are that the already red hot development of far North Dallas, along the Preston Road-Dallas North Tollway corridor, is about to get much hotter. Several projects are in the works, the most notable being a Galleria shopping complex, similar to the famous Houston Galleria, developed by Gerald Hines.

Although a spokesman for the Hines office in Houston will say little other than that a Dallas Galleria development is being considered, Dallas real estate sources indicate that the Galleria project might be announced soon, perhaps within a month or two.

The probable site is a 45-acre tract north-east of the Dallas North Tollway and LBJ Freeway. Like the Houston Galleria, which is anchored by Neiman-Marcus and the Houston Oaks Hotel, the Dallas Galleria is rumored to have some very prestigious tenants considering joining the project. Two of the most prestigious are Saks Fifth Avenue and Western International Hotels, which operates swank hotels such as the Plaza in New York, the St. Francis in San Francisco and the Houston Oaks in the Galleria. Also rumored to be negotiating is Sakowitz, a well-known Houston clothing store, which like Saks and Western International, hasn’t entered the Dallas market.

If rumors are correct and Hines does choose the LBJ-Tollway site, he has one tremendous advantage – the tract already has the proper zoning for a Galleria-type development. The tract was rezoned in 1966, long before Valley View Mall, which has generated considerable traffic congestion, was built. Three years ago the city approved zoning for Prestonwood Mall, a huge complex to be constructed at Dallas Parkway and Belt Line, which will further congest traffic in the area. If Hines came forward today asking for a zoning change, odds for a change might be much longer.

A few blocks away workers are busy remodeling the old Oz restaurant into a new restaurant-lounge-disco. Baron de Rothschild’s. Like Oz, Baron de Rothschild’s will be a private club ($25 lifetime membership) with fancy surroundings – old world crystal chandeliers, antique mirrors and velvet curtains. It is owned by A. Jack Ekhtiar, formerly part owner of Papillon restaurant. The new restaurant is scheduled to open in early October.

Nobody could be happier about the conversion of Oz into Baron de Rothschild’s than officers at Mercantile National Bank, which last year was stuck with an unpaid $ 1.3-million loan when Oz owner Ron Mon-esson declared bankruptcy. Mercantile officers aren’t saying whether the bank is taking any losses on the restaurant debacle, but privately some sources say that if all goes well at Baron de Rothschild’s the bank finally will be out of the restaurant business with a close call, but no serious losses.

Restaurants and shopping centers breed apartment complexes, so perhaps it is no surprise that the area’s next “apartment city” is about to spring out of the Preston Road-Spring Valley area. The most impressive deal in the works is a 135-acre tract being purchased by Murray Financial, which has a handful of developers waiting to begin building apartments. The Murray tract alone will have more than 3,300 units within a couple of years. Add to that building activity either planned or already underway on adjacent tracts and prospects are that 10,000 units will populate the immediate area within two or three years. That’s 2,000 more than the huge Village Apartments, east of Greenville and Lovers Lane.

Fort Worth’s Charles Tandy can probably be accused of lots of things, but lack of imagination isn’t one of them. Earlier this year when Tandy Corporation stock dive-bombed to $21 (from its yearly high of $43), Tandy merely grabbed the company’s checkbook and bought up 23 percent of the company’s outstanding stock, relieving the market’s selling pressure. Now he’s come up with another interesting move, this one designed to help stockholders of another Tandy company, Tandy Brands.

Unlike Tandy Corporation and Tandy-crafts, two Tandy companies which offer investors rapid growth, Tandy Brands has little growth potential. The company produces saddles and men’s belts, which are not fantastic growth products, unless there’s a population explosion in waists and horses.

Tandy has devised a plan to pay out all of Tandy Brands’ earnings each year to shareholders, which makes a very hefty annual return on a stock which otherwise would offer very little appeal. Apparently the Tandy plan is without precedent in corporate America and also with the IRS, which will probably find it interesting.

Each year the Tandy Brands board probably will declare a dividend equal to the company’s entire annual earnings. However, instead of paying the dividend in cash, the dividend will be paid in debentures. If, for instance, an investor owns 1,000 shares of Tandy Brands, this year he will receive $1,700 in nine percent debentures, payable in 15 years. That represents a 1977 return of 24 percent on a stock which he could have bought for seven dollars in late August, one day before the dividend announcement came out. Presumably next year the investor will receive more debentures based upon 1978 earnings, and so on through 1991.

Tandy’s logic is this: Had the Tandy Brands declared a very modest 40-cent annual cash dividend, for instance, the company would have to earn $1.1 million, then pay $500,000 in taxes to have $600,000 left over for cash dividends. With the debentures, the company will pay out only $225,000 in annual interest. Unlike dividends, interest payments are deductible before taxes, so there’s an important $200,000 tax savings feature.

How will Tandy Brands survive while paying out all of its earnings? This year it is “borrowing” 1977’s earnings – $2.5 million – from its shareholders and paying them nine percent interest. Last year Tandy Brands made 28 percent on stockholders equity. If Tandy Brands can repeat that 28 percent performance this year, it can earn $700,000 on the “borrowed” $2.5 million while paying out only $225,000 in annual interest. The difference, $475,000, belongs to the company. If Tandy Brands can do that with I977’s $2.5 million earnings during each of the next 15 years, the company will have plenty of cash, not to mention what it can earn off subsequent years’ earnings between now and 1992, when all of the debentures will be due.

One other note: In the short run there will not be a market for trading the debentures, although the company might purchase them privately. Within several years, however, there should be enough debentures out to register them for public trading.