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Bankruptcy dismissed in Westport development suit

A federal bankruptcy court judge dismissed a Chapter 11 case related to developer Patrick Turner's ambitious waterfront development in South Baltimore, clearing the way for a foreclosure on the property.

Judge Robert A. Gordon said he saw no evidence that Turner's Inner Harbor West LLC would be able to reorganize its finances and satisfy creditors. The decision would allow the current note holder to foreclose on the 43 acres in Westport, as the original note holder first attempted to do in February 2013.

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"The debtor has forfeited its right to continue in this case through its own inaction and its own inability to reorganize. That's the bottom line," Gordon said. "I'm sure if the debtor could come up with a plan that makes sense, a plan that works, it would be put on the table. But it's not on the table, and the deadline for putting it on the table passed a long time ago."

Inner Harbor West LLC entered bankruptcy in 2013, after two creditors filed an involuntary Chapter 7 petition just before a scheduled foreclosure auction of Westport land.

The property had been used to secure a $30 million loan made in 2007 by Citigroup Global Markets Realty Corp. to help finance the development. Plans outlined in 2006 envisioned homes, stores, hotels, a high-rise and a park rising on the currently empty parcels. The loan came due in 2010.

Turner's team had been trying to find a buyer to purchase the note, but in late 2012, Citigroup began the foreclosure proceedings that were halted by the bankruptcy filing, the start of a case filled with last-minute legal moves, behind-the-scenes negotiations and attorney battles.

This summer, Citi transferred ownership of the note to Westport Property Investments, an unidentified group represented by the law firm Ballard Spahr. The principals behind the group have not been identified.

Attorneys for Inner Harbor West had argued that Ballard Spahr's involvement represented a conflict of interest, since the law firm worked on $160 million bond deal approved by the City Council and then-Mayor Sheila Dixon to pay for utility work, including roads, sewer and water lines, at the site.

Gordon said bankruptcy court was not the proper venue to resolve those claims, although he said, "I have to wonder why Ballard Spahr would not simply decline representation. … There was certainly enough on the surface to make a plausible allegation."

But Gordon said the dispute had no bearing on the bankruptcy.

"After mulling this over, I can't let the potential tail wag the dog — 'dog' a very appropriate word … for this Chapter 11 case — especially since there is no significant allegation made that the alleged conflict has any real impact at all on the debtor's ability to reorganize," Gordon said.

Gordon also raised questions about the role in the bankruptcy of Towson developer Thomas B. Fore and Tiderock Holdings, which represented more than $2 million of the roughly $2.3 million in unsecured claims. Gordon suggested that Fore was an investor in the project, rather than a creditor, and questioned if the firm representing Inner Harbor West was actually who was doing the legal work. However, he said, he was not going to tackle that situation in a Chapter 11.

Attorneys for Inner Harbor West declined to comment after the ruling. Turner could not be reached for comment.

Matthew Summers of Ballard Spahr, who was representing Westport Property Investments, declined to comment on the identity of his client or plans for the property.

"We're very pleased with the ruling," he said.

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