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Behind the Curtain of Irving, Texas' Latest Litigious Battle Over its Entertainment Destination

Newly Opened $200 Million Toyota Music Factory is Center Stage to Lawsuit By Taxpayers Group Against Project Developer, Ark Group
June 7, 2018
It's been about a week since Texas icon and entertainer Billy Bob Barnett closed Big Beat Dallas, a handful of bars and restaurants located within the brand new Toyota Music Factory entertainment district in Irving, TX, but the allegations behind the closure have just begun.

In a lawsuit filed Wednesday, a newly formed group of taxpaying residents in Irving, named Irving Taxpayers Matter, has filed a petition to a Dallas County court in hopes of staying the city from paying out $44 million in tax increment financing funds for the construction of the $200 million Music Factory in Irving.

In the filing, Irving Taxpayers Matter claims North Carolina-based Ark Group, developer of the Music Factory, defrauded city taxpayers by installing substandard toilets, sinks, counters and other fixtures to obtain a much-needed certificate of occupancy to meet deadlines tied to the economic incentives for the project. It also claims the promised plaza and parking garage weren't built as originally proposed.

"The lawsuit was filed to stop the wrongful payment of millions of dollars of tax increment financing money earmarked by the City of Irving to the developer of the Music Factory," said Larry Friedman, an attorney with Dallas-based Friedman & Feiger LLP, who represents Irving Taxpayers Matter led by Chris Allen and Barnett.

Even though the plaintiff in Wednesday's filing is the entity known as Irving Taxpayers Matter, Friedman said he's also representing Barnett in his complaints against Ark Group. Barnett is not named in the filing, but Friedman said both clients' interests are aligned.

"These problems not only affect Billy Bob's businesses, but other tenants as well," Friedman told CoStar News. "The point of this development was to build a great entertainment venue, and the allegations from the taxpayer’s group are that businesses can't flourish there.

"Irving tax payers have subsidized the project and given millions of dollars to a project that doesn't work," he added.

The taxpayer's group became an entity on May 29 through the Texas Comptroller's Office. That is the day Barnett, through social media, announced the closure of Big Beat Dallas, which was open for eight weeks.

Not everyone shares the views of the taxpayer's group about the entertainment destination, which sits adjacent to the Irving Convention Center and the soon-to-be built convention center hotel. Other community leaders see it as the project they've been waiting a decade for a developer to deliver.

The Live Nation-anchored Pavilion at the Toyota Music Factory coupled with the walkable restaurants, bars and other amenities has made for a thriving environment, said Beth Bowman, president and CEO of the Irving-Las Colinas Chamber of Commerce and Irving Economic Development Partnership.

"There's a vibrant environment occurring at the Music Factory," Bowman told CoStar News. "Development projects always start and end very differently with retail tenants coming and going throughout the life of a development, but, as a chamber, we want to make sure this amenity continues to thrive and is an asset that aids to the success of the Irving-Las Colinas story."

Bowman, who had lunch at the Music Factory Wednesday, said the Music Factory development delivers the entertainment destination residents have wanted for the last decade ever since the Dallas Cowboys imploded Texas Stadium following the completion of AT&T Stadium.

From the 14 restaurants, to the Live Nation convertible concert venue that can accommodate up to 8,000 fans, to the convention center hotel opening later this year, Bowman said she is personally pleased by the progress of the long-awaited mixed-use development.

On a Wednesday afternoon work session, Jeff Litchfield, the chief financial officer for the city, outlined the $44 million of tax increment financing funds and the punch list items needed to ensure the project was on schedule with the development group. In the meeting, Litchfield told the city staff Ark Group had met and exceeded their financial commitment to the project.

In a statement, Irving officials said it was unable to comment on the litigation, but also said construction was still underway at Toyota Music Factory and the city is looking forward to its completion.

"The entertainment venue is open for business; the restaurants are crowded and the Pavilion continues to attract music lovers from across North Texas," said Susan Rose, Irving city spokeswoman, in a statement. "The city is fully committed to the success of this highly popular and exciting project."

Meanwhile, Ark Group President Noah Lazes said the now-finished Toyota Music Factory plaza looks almost identical to a rendering drawn up by architecture firm Gensler four years ago, and denies "the far-fetched allegations by Billy Bob Barnett's group."

Lazes, who said the plaza design and all the work were approved by the City of Irving, said it is unfortunate Billy Bob Barnett's business plan did not work out, as hoped, but the Music Factory is open and operating as usual.

Barnett's role as a tenant of the Music Factory is a bit unusual. The City of Irving had originally partnered with Barnett to become the developer of the region's next big entertainment destination on the nearly 17-acre tract adjacent to the convention center.

The public-private partnership included plans for Barnett to build a $252 million entertainment complex - a proposal much like the Music Factory - on the city-owned tract earmarked for entertainment. But the deal fell apart after years of proposals and plans without the beginnings of construction.

In 2012, Barnett, through development entity Las Colinas Group LP, sued the city for breach of contract with the help of Friedman in a suit that was later dismissed after the two parties agreed to a settlement involving Ark Group taking over the long-stalled project. In the settlement, Ark Group purchased Las Colinas Group's interest in the project.

With that history, Dallas appellate lawyer Chad Ruback said it makes for some unusual facts in an ongoing legal saga with an uncharted future.

"Litigation complicates everything, and what you have here is a messy situation on top of a messy situation," said Ruback, referencing the litigation that was resolved only five years ago.

Ruback, who doesn't have any ties to the lawsuit, told CoStar News this legal action will be interesting to follow, but it's too early to foreshadow how this litigation will impact the Music Factory.

"We don't know the city's response or what will come out in discovery," he added. "The motivations will become clearer in the upcoming weeks and months."

Candace Carlisle, Dallas-Fort Worth Reporter  CoStar Group   
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