A federal bankruptcy judge overseeing the auction of Channelside Bay Plaza said he has serious concerns about how a July 2 auction of the property was run — enough concerns that he’ll take a few days to think, and issue a ruling Monday.
Until then, all sides of the Channelside case may have something to worry about, as the judge said he had issues with the behavior of Port Tampa Bay officials and issues with bank officials trying to sell off Channelside. He also had issues with Liberty Group/Convergent Capital officials who came in with a new $10 million bid for Channelside after the auction ended.
“I have some concerns about how the process was run,” federal bankruptcy Judge Christopher Sontchi said late Thursday after a day of testimony in Delaware. He also had concerns whether Liberty’s whole approach was “gamesmanship” and if their bid “may be D.O.A.” at the port here in Tampa.
The judge’s action Thursday puts on hold results of a July 2 auction where both Port Tampa Bay and Tampa Bay Lightning owner Jeff Vinik thought they prevailed and won control of the long-struggling retail and shopping complex on the waterfront downtown. Though Channelside’s fate has been marked with numerous fits and starts over the last several years, the court’s next move may prove pivotal.
Besides redeveloping Channelside itself, representatives for Vinik this summer started talking of their plans to connect and renovate the much wider neighborhood into an entertainment, shopping, living district stretching from the Florida Aquarium through the Riverwalk.
Vinik already plans a major hotel at the corner of South Florida Avenue and Old Water Street.
At the July 2 auction, Vinik’s representatives bid $7.1 million to acquire the lease on Channelside, and they offered a $10 million line of credit for immediate maintenance fixes to the site.
Vinik has had an inside track going forward, as Port Tampa Bay owns the land underneath Channelside and the port’s governing board last month unanimously approved Vinik’s plans to remake the area.
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The judge’s move came after two full days of testimony this week in the long and tangled legal case of just who will own and control the Channelside Bay Plaza shopping center downtown.
So far, the key question has been whether Port Tampa Bay colluded with Tampa Bay Lightning owner Jeff Vinik to position Vinik as the pre-ordained winner of an auction for control of the property.
That’s the contention of Santosh Govindaraju, chief executive of Convergent Capital, who saw his hopes to take over Channelside spurned by the port last year.
There was a July 2 auction for the property, but Convergent did not place a bid. Instead Vinik prevailed with the only bid of $7.1 million for the lease on the property. On the witness stand, Govindaraju said he did not attend the July 2 auction, but said he was receiving text message updates and had “grave concern” about “what appears to be collusion between the other two parties,” the port and Vinik, because they did not bid against each other.
“It was obvious to us,” he said, “that they were prepared as wingmen for each other.”
“Horse-pucky,” said Van Durrer II, an attorney for the Irish Bank trying to auction off Channelside. Instead, he contended the bank made several accommodations to the Liberty/Convergent group leading up to the auction, but in the end they found Vinik’s bid superior, partly because the port favored it and there was less likelihood the whole thing would end up back in court.
After the July 2 auction closed, the Liberty/Convergent group told the court they’re willing to pay $10 million for Channelside, if they can have a “clean slate,” with no litigation against them, plus they’re willing to give the bank half of any damages they receive for suing the port for interference.
Several times, Judge Sontchi jumped into directly question witnesses.
“I see where you are coming in here with a lot of complaints about the process,” the judge told Govindaraju while he sat on the stand. But he also asked Govindaraju directly if “this is all gamesmanship or part of some litigation strategy.”
Much of Thursday other testimony focused on the so-called “Parson’s Report,” that tallied millions of dollars in maintenance problems with Channelside — a report that Govindaraju said was inserted just prior to the auction process to “chill” the interest of any bidders besides the port and Vinik.
“I may reopen the auction. I may require different procedures,” Sontchi said at one point to lawyers for Liberty/Convergent. “I may have you guys auction this in front of me. What I am not going to do — today — is sign you a sale order giving you the property.”
Liberty/Convergent attorney John Anthony closed up his arguments, pointing to their higher offer of $10 million.
“You get to do the right thing. You’re not a potted plant,” he said. “Money talks.”
In the end, the judge said he’d like time to think everything over, and though Channelside struggles with each passing day, “a few days is not going to make a big difference either way.”