In a little over three weeks, investors hoping to take over Channelside Bay Plaza will have yet another chance to bid against one another and maybe take over the long-struggling retail property.
However, unlike past unsuccessful auctions, this new process has something else going for it: A federal judge is ultimately in charge. Date: Wednesday, July 2, according to lawyers involved in the case.
The firm DJM Real Estate has already put out a “teaser” brochure for the auction, describing Channelside as a “Strategically important site in the heart of Tampa's growing Channel District.”
The auction atmosphere likely won't be as tense as auctions at Sotheby's or as colorful as the reality TV show “Storage Wars.” In fact, the location is an attorney's office conference room in New York City. Yet the process holds the best chance in years for helping decide who will actually operate the mall — maybe triggering a resurgence in the area that's hoped for by so many powerful people in Tampa.
Perhaps matching the complex, star-crossed fate of Channelside in recent years, the highest price offered may not win the auction, and some investors are still arguing in court that they had a pre-existing deal that should trump the whole process.
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Originally built as a tourist attraction and gateway to the city for millions of cruise passengers, Channelside has been through more than four years of bankruptcy filings and lawsuits and contentious public and private meetings between investors, politicians and port officials.
Far from independent, Channelside is technically owned by the Tampa Port Authority, which leased the complex to an operator, which in turned abandoned the site and the bank that held the mortgage on the building also went bankrupt.
At one point in April 2010, a series of local notables submitted bids to take over the site, including Tampa Bay Lightning owner Jeff Vinik with area investor Bill Edwards and others. Over time, they bowed out and a new pair of bidders emerged in January 2013, Santosh Govindaraju of Convergent Capital and Punit Shah of Liberty Group.
For a time, Shah and Govindaraju had an agreement with the bank that holds the mortgage on the mall, Anglo Irish Bank. However, they ran into a political firestorm as their behind-the-scenes negotiations with the port turned acrimonious. The port in turn made its own move to take over the site directly.
Govindaraju and Shah in December 2013 sought help from a federal bankruptcy court in Delaware that was handling the multibillion-dollar bankruptcy of Anglo Irish.
This year, the bankruptcy judge essentially said the bank didn't do a good enough job with the first auction, and so he told all those involved to go back and start over.
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And so DJM put up for auction the lease on the shopping complex, or the mortgage on the site, or both, and the first round of bids were due June 2. (An offering brochure is still live at www.channelside-sale.com.)
The July 2 bidding will be held at the New York office of the prominent law firm Skadden, Arps, Slate, Meagher & Flom, and if bidding concludes that day, the firm will likely forward the results to the court that day. About two weeks will then pass. The court has set a July 15 hearing on both the auction results and will likely hear arguments by attorneys involved in the case for both Liberty/Channelside and Port Tampa, said Van C. Durrer, who represents Anglo Irish.
Price alone won't rule the day, as bankruptcy courts consider both the highest offers but also the best use, meaning the court will also consider which parties have a credible plan to follow through with rehabilitating the complex, as bankruptcy courts generally favor a productive investor reviving a struggling property.
The port owns the land underneath Channelside, but leases the above-ground property to the now-bankrupt tenant. Hence the complexity.
One big difference between the first auction and this current one is this: The court will have more direct control over Channelside's fate because it may also decide this month on whether Port Tampa Bay still retains a so-called “veto” over the transfer of one tenant to another. ❖ ❖ ❖
Officially, representatives with the Port Tampa Bay declined to say if the port is jumping into the bidding itself. Several port commissioners want the port to take direct control of a property that holds a key place in the future of the Channel District and Tampa's overall downtown.
Thursday, Tampa Mayor Bob Buckhorn declined to say if he favored the port making its own auction bid. Buckhorn sits on the port board, yet said he would follow the port's legal advice to stay mum on the matter while in litigation.
Other investors who had expressed interest in the past are bowing out of this round.
Benjamin Mallah Sr., president and CEO of Equity Management Partners Inc., had appeared at past port meetings to express interest in Channelside, but not this time.
“We exhausted a lot of time and effort on a deal,” Mallah said. “Unfortunately, we could not have any kind of discussion with the port as to their cooperation with a new purchaser … I'm sure they had their reason for not talking, with people filing lawsuits. It's just way too risky.”
Another one-time bidder was a group led by Ken Jones, who was with Communications Equity Associates, and is now president of Third Lake Capital. Jones also served as president of the host committee for the 2012 Republican National Convention in Tampa.
“I think Channelside is an important asset psychologically for redevelopment of that area of Tampa,” Jones said. He's not part of the bidding in this go around, but he remains optimistic. “I hope whoever ends up owning Channelside does something spectacular with it and that spurs development in that area of town.”