U.S. bankruptcy judge Robert Gordon on Tuesday denied a bid for more time sought by Westport developer Patrick Turner, who has been trying for almost a decade to turn a blank swath of Baltimore's western waterfront into a vibrant, mixed-use community.
Citigroup Global Markets Realty Corp., which made a $30 million loan to Turner's group that was due in 2010, holds “all the cards,” said Gordon, criticizing Turner's team for not providing a more detailed explanation of how they propose to move forward and why such a plan would merit an extension.
“You’re supposed to file a detailed motion … and that’s not what I get. I find that very very frustrating and I’m not inclined to bend over backwards for a debtor that doesn’t do what they promised they were going to do,” he said.
Turner’s next move is not clear. The Citigroup loan is secured by two Turner affiliates that each own portions of the Westport property, located along Kloman Street between the Light Rail tracks and the Middle Branch.
Only one of the two affiliates is in bankruptcy, now a Chapter 11 reorganization in Baltimore’s federal bankruptcy court. A foreclosure auction of properties held by the other entity is scheduled for Friday.
Attorneys for Citigroup declined to say after the ruling whether the auction will go forward. Turner, who was present but did not testify, said he intends to continue trying to negotiate.
“We're going to keep moving along with this thing,” he said. “Never play all your cards.”
Turner started assembling properties in Westport in 2004 for a proposed $1.4 billion development that included thousands of homes, two hotels and a skycraper, but the recession made financing scarce and he couldn’t move forward. In 2010, when the loan matured, Turner’s partnership could not pay.
Citigroup agreed to hold off on foreclosure if Turner’s team found someone to buy the promissory note, but a deadline expired in 2012. That year, Citigroup moved to foreclose and, in January 2013, the bank agreed to sell the note for $7.5 million to three Nevada businessmen, who had formed a company called Warhorse-Baltimore Real Estate LLC.
The deal never closed. In February 2013, one of Turner’s land-holding companies was forced into bankruptcy, halting the foreclosure auction.
In court Tuesday, Turner’s attorneys said they wanted more time to file a reorganization plan for the bankrupt land-holding entity because Turner has a new investor to purchase the note.
They identified the new backer as Atlanta-based Stein Investment Group, a real estate private equity firm with a portfolio of East Coast properties.
Stein started discussions with Turner’s group late last year, connected through a “mutual friend,” said Jason Linscott, a principal at the firm, in a phone interview after the hearing.
In January, Stein offered to pay Citigroup $7.5 million for the note in a proposal that included a $500,000 deposit and a 20-day “study period,” attorneys for Turner’s team said.
Citigroup, which must agree to a deal, said Tuesday the $7.5 million offer is not high enough. In November, the bank persuaded a Nevada judge to dismiss a separate bankruptcy filed by Warhorse-Baltimore last year, easing a sale of the note to new buyers.
“Citibank's perspective of this loan and what it expects out of this loan has changed. ... We believe this property is worth a lot more than that,” Citigroup attorney Nathan Schwed said. “Our client has made very clear to the debtor that they will not accept that amount of money. ... The supposed plan they've come to the court with has no legs.”
Turner attorney Kenneth Frank said the developer’s group is willing to negotiate over the price. He said allowing Citigroup to foreclose on the land will set back development, because agreements connected to the project, such as city approval of $160 million of tax increment financing bonds to pay for infrastructure, are not attached to the land.
“Those agreements will vanish,” he said.
Linscott said after the hearing that Stein is still working on a deal. As currently envisioned, the firm would be the primary financial backer of the Westport waterfront development, beyond the potential cost of buying the note, he said. He declined to say the sum of possible investment, noting that a deal has yet to go through.
“We believe in the viability of the project,” Linscott said. “We like complicated deals and this one is definitely up that alley.”
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