A second residential project in North Carolina led by Flaherty & Collins Properties has landed executives of the Indianapolis-based
development firm back in bankruptcy court.
Flaherty & Collins’ Brier Creek FC LLC filed for Chapter 11 bankruptcy reorganization in Indianapolis on Tuesday, listing both liabilities and assets of between $10 million and $50 million. It's the second Flahery & Collins project in North Carolina to experience bankruptcy in the past six months.
Flaherty & Collins is the developer of The Exchange at Brier Creek Apartments, a mixed-used project in Raleigh, N.C., featuring a 274-unit complex, movie theater and fitness center. Brier Creek is the owner of the complex.
The Brier Creek complex was finished in 2008 and has an occupancy rate of 93 percent, according to court documents.
A spokesman for Flaherty & Collins blamed Brier Creek FC’s financial troubles on an outside management company it used before turning those responsibilities over to its Flaherty & Collins Management division.
“They failed to get it leased,” Mark Conover said Thursday morning. “At the same time, what happened with the economy, the rents didn’t rise like they should have because of the job situation in Raleigh, and we missed a couple of [debt] payments.”
Brier Creek FC has no employees but pays workers provided by Flaherty & Collins Management Inc. to operate and manage the complex. In its bankruptcy filing, Brier Creek is asking to use collateral it has with its bank, First Horizon Home Loans in Irving, Texas, to pay the employees. Payroll expenses total about $46,000 a month.
First Horizon loaned Brier Creek FC $24.8 million to develop the apartment project, according to court documents.
“If debtor is not permitted to use its cash collateral to operate its business and maintain the property securing the Indebtedness, the debtor will have to cease operations,” Wendy Brewer, the attorney for Brier Creek FC, wrote in a court filing.
In exchange for the collateral, Brier Creek FC said it will provide replacement liens to First Horizon and will make monthly payments to the bank equal to the current interest amount of $36,100 month.
Brier Creek filed for bankruptcy reorganization to keep its lender from selling the loan to what Conover referred to as a “hostile group.”
The largest unsecured creditors listed on the bankruptcy filing, Indianapolis-based LC Investors LLC and Flaherty & Collins Development, are owed $3 million and $1.2 million, respectively.
A hearing on Brier Creek FC’s motion to use bank collateral to pay employees is set for 1:30 p.m. Friday.
The filing marks the second time a company operated by Flaherty & Collins’ owners has sought bankruptcy protection in the past six months.
In November, Charlotte FC LLC filed for Chapter 7 bankruptcy liquidation, listing liabilities of $53 million and assets of just $197,492. Charlotte FC had planned to build 48 floors on top of a retail portion of a mixed-use development called EpiCentre.
The unfinished, 53-story condo tower in Charlotte, N.C., with a price tag topping $200 million, would have been the tallest residential building in the Carolinas.
David Flaherty and Jerry Collins founded their business in 1993. Flaherty & Collins manages more than 12,000 apartment units in 10 states. It also has developed nearly two dozen projects, including the $37 million Cosmopolitan on the Canal along the Central Canal downtown.