Wachovia Bank has begun foreclosure proceedings on one of Premier Properties USA Inc.'s most prized developments, a giant
Ohio lifestyle center anchored by Target and J.C. Penney.
The Charlotte, N.C.-based bank also is foreclosing on a vacant former Wal-Mart store in front of Premier's Metropolis mall in Plainfield.
The bank says in an Ohio court filing that Indianapolis-based Premier has defaulted on an $80 million loan it used to develop the 635,000-square-foot Bridgewater Falls shopping center in 2006. A receivership hearing is scheduled for April 1. Another filing, in Hendricks County, claims Premier owes the bank $10.1 million on a loan that used the former Wal-Mart store along U.S. 40 as collateral.
For months, creditors have been circling the privately held company, as Premier falls behind on bills for basic upkeep of its properties and faces liens from unpaid contractors. The mess has clouded the outlook for Venu, a $750 million project the company has proposed near East 86th Street and Keystone Avenue.
The 300-employee company had developed a reputation for daring--pulling off outsized deals with little margin for error--but the strategy appears to have left it more exposed to credit-market turmoil.
Premier founder and CEO Christopher P. White said in an e-mail to IBJ that the company is working through its tough times, but resolution won't come quickly.
"Unfortunately due to the capital markets in the nation today, our equity provider has had to modify the way it does business and it is just taking much longer than expected, as is everything in the marketplace," said White, 50. "Once all is completed, all will be paid in full and we return to normal operations."
Several people who have done business with White--including Mark Schweibold, the CEO of Brownsburg-based Premier Jet Aviation Inc.--have tired of his promises and are heading to court. In a court filing, Schweibold says White repeatedly refused to pay back $2.6 million he owes.
Court documents show White authorized the sale of two airplanes, a Boeing 737 and a Gulfstream IV, to help cover his mounting debts. And he promised repeatedly in e-mails that payment was just a day or two away. But the funds never materialized, pushing Schweibold to desperation.
"I have accepted most of what you have told me about your business situation as fact and worthy of my sacrifices for your rescue," Schweibold wrote in an e-mail on Oct. 20, 2007. "Nevertheless, I am weakening Chris and am tested to my limits literally every hour."
A few months later, White still was asking for more time.
"We closed on monies last week that I planned to borrow this week and pay you until next week when we close on more funds," White wrote on Dec. 13. "However the bank has been watching the account to ensure that the funds go as directed. So I don't have any float or flexibility that I usually do."
The stream of e-mails also reveals what appears to be dissension in Premier's ranks. In one message to Schweibold, Premier executive Tim Palma described an interaction with White: "I exchanged numerous e-mails with him last night essentially saying he needs to step up and honor his obligation as this one has more dire consequences of any other vendor. Maybe something sunk in. Not sure."
Schweibold filed suit on Feb. 8. About a week later, he won a temporary restraining order against Premier and White, though the reasons aren't clear because the order was later dropped and sealed. The Hendricks County court agreed this month to transfer the case to Marion County.
Before filing the suit, Schweibold sent White a note saying he still considers him a friend but needed to get "a place in line if something catastrophic happens with your business."
Premier's Bridgewater Falls property sprawls over 66 acres in an affluent suburb of Cincinnati. Big-name retailers such as Best Buy, Dick's Sporting Goods and Old Navy have taken every anchor position.
"It's good real estate positioned in a great growth market," said Greg Meyer, a retailer broker with Cincinnati-based Anchor Associates.
Yet on Jan. 16, Wachovia informed Premier that it was in default on its loan for Bridgewater and demanded immediate payment of $81.8 million, a debt that was growing by more than $26,000 per day because of interest. The move came after at least three extension agreements.
Wachovia began its foreclosure proceedings on Feb. 28 in Butler County, Ohio. Documents in the case show the project's cost for both land and construction was about $88 million--a figure covered by Wachovia's loan and a mezzanine loan of about $8 million from Atlanta-based Dominion Capital Management. The budget shows no borrower's equity.
A loan document shows that White personally guaranteed repayment of $12 million of the loan, plus interest. He also promised that his net worth during the loan would not fall below $80 million and his liquidity would be at least $4 million.
The mall likely is worth much more than the loan amount, and Premier already has realized some of the value by selling pads to some of the anchor tenants.
At one point, Bridgewater Falls appraised for about $100 million, according to a 2006 e-mail from David Zoba, a former president of Premier. The note appears in court filings related to a dispute over Zoba's departure from Premier for a job with Columbus, Ohio-based Steiner and Associates.
Wachovia also granted several extensions on the Hendricks County loan, but moved to foreclose on the former Wal-Mart property on Feb. 8. The earliest due-date on the loan had been June 1, 2007.
More trouble ahead?
White and Premier have had their share of trouble over the last year: Contractors have filed more than $3.5 million in liens against Premier's retail properties in Plainfield; the state of Indiana is trying to recover $375,000 in sales taxes on one of White's airplanes; and the contractor who renovated his mansion on Lake Clearwater is suing him to recover more than $600,000 in unpaid bills.
Court records in Premier Jet's case against Premier Properties indicate more trouble could be ahead for the embattled developer.
A memo in the filing lists a litany of debts that must be paid to continue operation, including $59,000 on an American Express account. And another series of e-mails details missed loan payments owed to General Electric Capital Corp.
The missed payment sent the account into default, a fate White seemed willing to accept.
"I am going to let GE default us today," he said in a Valentine's Day message to Schweibold. "I have only enough to hold them off and that scares me paying all I have."