The auction of The Colonnade, home to one of Baltimore's fanciest luxury hotels and the Polo Grill restaurant, was halted at the last minute yesterday after three creditors sought to force the partnership that owns the upscale development into bankruptcy.
The involuntary bankruptcy petition, filed in federal court in Baltimore, was a surprise move on the part of the creditors, who claimed they were owed a total of nearly $4 million.
The step came just hours before the property was to be auctioned off because of the partnership's default on a $22 million construction loan to the Marine Midland Realty Credit Corp., which is based in Buffalo, N.Y.
Yesterday's auction was to have included nine of the 119 condominiums that are part of the West University Parkway development. The bankruptcy petition was not expected to affect the businesses operating inside The Colonnade.
The Chapter 7 bankruptcy petition is but the latest of many troubles that have beset The Colonnade, which was developed by Richard and Howard Rymland, along with their father, Murray, beginning in 1987.
The project is owned by The Colonnade Limited Partnership, which includes Richard and Howard Rymland.
Problems for The Colonnade were related to the developers' inability to replace short-term construction loans with long-term mortgages after the real estate crash began in 1989.
The developers apparently misjudged the market for luxury condominiums in the Guilford section of Baltimore, forcing them to cut offering prices by more than one-third in 1991 and to resort to an auction of their own, also in 1991, to try to sell 45 condominiums. Only 23 sold, and those sold far below their original prices.
Officials for The Colonnade did not return phone calls yesterday.
The three creditors who forced the Colonnade Limited Partnership into bankruptcy proceedings yesterday were: Tiber Construction Co., a Washington-based builder that was the chief contractor on The Colonnade project and claims it was owed $3.9 million; the Leonard A. Kraus Co. Inc. of Baltimore, which did drywall work on the building and claims it is owed $19,600; and Allen N. Walpert & Son Inc. of Baltimore, which performed electrical work and claims it is owed $14,992.
Representatives of the three creditors, whose debts are all unsecured, according to the petition, said they moved to force the partnership into bankruptcy believing it would give them a better chance of collecting the money they are owed.
The three creditors are also attempting to place liens on the property.
"Our purpose is simply to collect on the money owed," said Stephen J. Johnson, a Washington attorney for Tiber Construction.
Gerald Zengel, president of Tiber Construction, said, "This is the latest step in a long, complex and difficult story."
The construction contract between The Colonnade and Tiber called for mandatory arbitration if a dispute arose over payment. After more than a year of arbitration hearings, Tiber was awarded its $3.9 million claim, he said.
"It was incumbent on us to cause The Colonnade to honor the award. And I guess, for all practical purposes, that precludes auctioning off the property," Mr. Zengel said.
Alan Grochal, a bankruptcy lawyer in Baltimore who is not involved in The Colonnade dispute, said it was not uncommon for a foreclosure sale to be stopped by a bankruptcy petition -- though typically it is the debtor who files the petition.
"Obviously, the creditors have nothing to lose by this," said Mr. Grochal, a partner at Tydings & Rosenberg.
"No one is going to get a great price at a foreclosure sale and the creditors' only hope is to keep the property away from the bank's foreclosure," he said.