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Cram down talk.

Cram Down Talk

The TCBY Tower has resurfaced in business news of late, what with Capitol Avenue Development Co. delinquent on its $65 million loan with Teachers Retirement System of Texas.

What has gone unanswered is why the limited partnership is in arrears.

The simple answer is Capitol Avenue doesn't have the cash flow to stay current, but insiders tell us the ownership group is holding back payments as a leveraging tool to negotiate a better deal on its note with the pension fund.

The package initially stood at 10 percent interest with a 45 percent cut of any profits -- which have been non-existent to date.

The pension fund has already given Capitol Avenue more flexibility in which rental rates will be acceptable. With a continued drop in the prime lending rate a reduction, to say 9 percent, might not be too far out of line.

The annual savings to the limited partnership would certainly be sizable and provide welcome relief.

There has been some beefing on the streets that while limited partners had to make cash calls in 1990, property manager and developer, John Flake, is still getting paid approximately $100,000 per quarter to manage the building.

Some limited partners are wondering whether Flake needs to feel a little of the pain, too.

Flake was out of town and couldn't confirm the number, but we checked it with two separate sources who said it was "reasonably" accurate.

Also, an appraisal of TCBY's value could be underway soon commissioned by the Teachers Retirement System. If things ever get sticky enough to move toward foreclosure, they'll want to know what the building is worth.
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Title Annotation:Capitol Avenue Development Co. delinquent on loan with Teahcers Retirement System of Texas
Publication:Arkansas Business
Date:May 6, 1991
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