Quote:
Originally Posted by elewis7
I'm sure we can at least buy it for $1 and flip it for $2.
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I have been doing a bit of research in this area because my time in this arena is dated to 1985 through 1997 and factors have changed greatly since then. But, the principles of the deal have not.
Two events are going on here in this short article:
The first is that a judge is going to make decision on the revenues generated by the parking facilities. When the CTC was sent into receivership, the tangible assets of CTC were broken apart - Marriott, Parking, the Mall, and the individual anchor stores, which includes Brickstreet were all split off into separate pieces. I question the wisdom of that move as it has made an over lapping hodge-podge of areas of responsibility and support in what was once an integrated unit. It is like a doctor removing your arms, legs and head before curing your cold. Weird.
In any case, CBRE which is the current legal authority over CTC has not been transferring revenues earned from parking activities to the parking holder. The parking holder is just a management company working under contract to the receiver, but the facility sits on land owned by CURA, which has not been paid for years and is now owed - by my estimate - some 15 million dollars. The news article report a $100 million dollar debt and I am unsure if that also includes the ~$15 million owed to CURA or not. I am tempted to say it does not.
The judge will rule - I believe - that CBRE must hand over those revenues to the parking manager where upon they will begin to funnel into CURA, which has been owed them since 2001 and counting.
Each party will have until January 11th to submit documents supporting their stance for the judge to review, but I believe all of the deal and decision has already been made and this is just the "going through the last motion" bit required by transparency laws.
This leads into the Court House Auction on January 24th.
Everything I have heard to date had indicated the move out of receivership was going to be a slower process and not start until March of 2019. But, because this has moved up so suddenly one has to wonder why.
Precedence in such matters indicates there is at least one buyer and because of the alacrity of the move, I believe only one buyer.
The buying process: What Happens?
This is an ownership matter, not an operational one, so retail and commercial activities will continue without interruption. Stores will remain open, employees and customers will come and go and the lights stay on. New contracts will come to a halt as the legal authority shifts but all of that, that needed to be done has recently been signed. The parking and security services have all had new contracts issued, signed and approved very recently. I am sure many other such agreements between various vendors and service providers have taken place as well.
The property is going to have an appraised value. This value has an ebb and flow to it based on the economic cycle of the city, county and MSTA. The recent completion of the CC-CC, imminent Marriott remodel and the even more imminent new construction of the KM Hotel at the Sears site all push up the appraised value of CTC. But, just because there is an appraised value of a property does not mean that is its market value, where market value is determined by a willing buyer.
There is also the debt to consider that is either ~$100 million or ~$115 million depending on all of the details. In any case, the CTC has been valued as high as $190 million but that eroded as retailers moved out and the mall dropped from 4 to 2 anchors. Exactly what the 'market value' is unknown to me and I am not even certain those that have the best chance of knowing could actually write a number on a dotted line. Values are fickle.
So Where Does This Leave US?
We have a mall, broken into many parts, but consisting of two relevant pieces, the mall itself and the parking garages. The Mall owns the land under the anchors which they have not been charging for but the anchors themselves are owned by their respective corporations. The Marriott does not own its property but leases it from a holding company that also has the hotel in one file folder and its dedicated parking garage in another - stupid stuff here folks. Even more weird the parking service company for the Mall manages the parking garages at Marriott but does not own them or have any other say in how they run. As weird as that is, Embassy Suites has no parking at all and leases access from the parking company but pays the money to CBRE via the Mall - this is the part that is being decided upon by a judge after 11th. I honestly think someone really stupid made all these decisions and probably still has a high paying job in this mess. I think it all goes back to the Mayor's office and Forest City, but then I have no respect for either. Just sayin.
While the property has a fickle market value, it does have a fixed hard value - the debt. Obviously the tangible assets have a huge value but for now lets assume that the building and everything concrete has a value of $1 dollar. This lets us focus on the 800-pound gorilla - the debt.
CBRE is presently on the hook for the total debt, including that owed to the parking company and CURA. There may be others that I am unaware of but lets ball park the whole thing to $120 million just to make sure all the debts are combined. No company, no profit minded company wants to take a loss and CBRE is no different. The lenders that owed money want their money. The community wants to retain CTC and the city desperately needs the CTC to be a vibrant heart after taking a deep plunge on CC-CC.
So we had a timeline that was pedestrian and lengthy, no one was getting what they wanted and it was assumed CTC would slowly make enough profit to survive and pay pennies back here and there waiting for an uptick in economic activity. Many of those lenders could also go under, writing off their owed debt, CURA could have just walked away, but that is a chunk of change and Ron Butlin, Head of CURA is no an idiot, more so I think he is a good, honest man with a dream to make the city better. he is not walking away. The other debt holders are party to umbrellas and they will not be going any where either.
So what changed?
I believe CURA has forced the issue. Demanded their money from the parking services and that service said we do not have it, we can't get it from CBRE. CBRE says we do not have a contract with the parking services and we can't give them the money. I think this is a cop out. CBRE is a global empire and has been to this rodeo many times, they can do what they want and know how to do it. They just don't want too.
So what happens?
I think CBRE, realizes they are going to have to take a hit at least for the money owed to CURA. So, they have come up with an end run and are going to flank the situation that they have created. They are fast track flanking their original slow plan in other words. Competing with themselves in a sense.
Remember when I said lets assume the mall has $1 dollar value but is $120 million in debt? Well, the mall is not worth just $1 dollar. But if we add together the debt and the mall's - I am picking a number - $150 million market value, that throws out into the $250 million to $300 million asset value range. CTC is not worth that and that has been the problem all along.
But, now the judge is riding in and CBRE is going to have to part with some money and still have nothing to show for that write off. Worse all future monies generated this way will all go to the parking services and CURA - as they should. CBRE is going to lose a lot.
So what do they do?
They hold an impromptu auction on the fly so that no one else can get bids in order and they sell themselves CTC for the value of the debt only, which CTC is well worth. Essentially CBRE will still be the debt holder only now they have leveraged that debt on the market value of a mall with no debt on. Their books will go from bleeding red to having some $30 to $50 million dollars in equity. It is just paperwork changing hands but in that mix, the city of Charleston which asked the tax payers to put up the original $100 million dollar bond to build the mall, will now get ZIP for it because Forest City took it with them when they left town.
CBRE will be the new owner of a mall in good standing, running a profit and one which has some equity to collateral some much needed improvements. Further, I think CBRE will sell the mall and the parking garages as one unit to itself, stopping the transfer of money to CURA without first going through their hands for a fee - probably a new contract in the offering there.
It is possible that CBRE is not the buyer, in which case we have an undisclosed third party riding in a cloud of secrecy. Not unheard of but certainly different and not something you expect in Charleston WV.
SO, while all of this will look good on the surface and the people that deal with money as a business will all walk away happy, the tax payer has taken a hair cut, but the people that got burned moved out of Charleston a long time ago and will not know about it.
The Mall can now enter into many new contracts, start many new projects and get a much needed 30-50 million make over. It is a good thin, but it is also a shady thing. Very corrupt, but also, more common than most of us wish to think. The Mayor's office will crow about it when Mayor Goodwin had absolutely zilch to do with it and I bet does not know it is even happening - probably doesn't care - yet. No political hay to be made from it until the people realize what has happened.
I apologize for rambling and I should probably go back and correct what I am sure are a plethora of mistakes but I have had the flu and pneumonia of late and I am just too tired to care right now.
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