Presented by The Dallas Morning News

Just before the walls were set to rise on a project that’s seen years of delay, contract snags have suspended construction of the $165 million Music Factory.

The city and its development partner, the Ark Group, have spent weeks debating last-minute paperwork changes for the 18-acre concert hall, theater and dining complex.

What had been Irving’s ritziest construction zone, with a late-night groundbreaking party and months of earthwork rustling the Las Colinas lakeshore, went still last month. That’s when the city, Ark and its lenders began to sort through a cluster of hangups from budget overruns to concerns that an earthquake might level the complex.

And yet both City Hall and Ark sound hopeful that the long-awaited project will soon get back on track.

“We’ve got so much momentum, I’m hoping we can get everything ironed out and keep going,” said council member Brad LaMorgese, who originally voted against the project.

Subsidies

That split vote in 2013 — to give Ark more than $80 million in subsidies and let it run the Music Factory for a century — capped years of failure to transform the stagnant end of an office park into an entertainment mecca.

Where Irving’s first development partner — Las Colinas Group — got caught in scandal, fell short on cash and ended up suing the city, Ark touted a list of successful entertainment projects, deep pockets and ties to wealthy investors.

And after the council approved its share of funding, Ark started hiring architects, laying down pipes and lining up trendy tenants for the city-owned center — including a Gloria’s restaurant and an Alamo Drafthouse theater.

“We’ve spent over $10 million,” said company president Noah Lazes. “That’s Ark’s money. Not lender money.”

Everything seemed to be going full speed. Even Mayor Beth Van Duyne, who had led opposition to the project, said she was helping recruit tenants.

But then, a hitch. Before Ark’s investors would lend it more than $100 million to finish construction, Lazes said, they asked for tweaks to contracts that the council approved more than a year ago.

The requests were expected, Lazes said. “It’s customary underwriting.”

And a clause in Ark’s decades-long lease on the site allows it to be modified to protect lenders — so long as the changes are OK with the city.

“No one is asking to reduce the budget or project scope,” Lazes said. “No one is asking the city for a nickel of additional money. It’s about legal jargon.”

Legal jargon and extreme catastrophes.

One issue, Lazes said, is compensating lenders if a natural disaster wipes out the Music Factory.

“It’s not a tornado anyone is worried about,” Lazes said. “You all got earthquakes suddenly, and the lenders are now concerned about this.

“To me it’s completely far-fetched this could ever happen,” he said. So was the possibility that the state might condemn the city-owned venue. Yet his investors wanted guarantees.

‘Value engineering’

Lawyers have been meeting since at least April to work out the changes, though council members have learned little about their progress in closed-door briefings.

Deputy City Manager Mike Morrison said in a statement only that “the Ark Group is working with lenders to finalize construction financing.”

“There’s not a monster sense of urgency,” Lazes said. “The city has no heartburn.”

In fact, he said a bigger issue holding up construction had nearly been solved.

Rising concrete, steel and labor costs in the Dallas market had threatened to drive construction about $20 million over budget. So construction plans had to come down to earth.

The site design didn’t change. And Lazes promised that patrons taking in a concert or grabbing a drink at the Music Factory won’t notice nearly 300 cost-cutting areas — like a patio with only two sheets of water proofing, instead of three.

Like the lease adjustments, those “value engineering” changes are under review by the city.

Lazes said he expected all issues to be resolved and cranes to rise over Las Colinas within the next month or so.

And then, a long-forsaken patch of dirt will finally start to change the horizon.

“When it resumes you will see monster 65-foot piers go in,” Lazes said. “It could have been smoother … but that’s what developers deal with.”

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