Like a bolt of lightning, an idea came to my mind the other day about the best possible way to explain the whole legal quagmire with Channelside Bay Plaza and all the investors and lawyers fighting over the mostly empty complex.
Think of it this way.
Say Tampa has a very nice shopping mall. Call it Mall of Dreams. The mall leases space to tenants — stores — like Abercrombie, The Gap and The Disney Store.
Say one of the stores (let’s call it ABC Jeans) really hits hard times and stops paying rent, stops cleaning the floors and stops taking out the garbage. Customers stop showing up and the store goes totally south.
Also, say ABC Jeans stops paying the loan to an outside bank that it used to open the store, and it files for bankruptcy. Unfortunately, so does the bank that gave it the loan. Big mess, right?
Well, the Mall of Dreams would be in a position to kick out ABC Jeans, right? The store defaulted on the lease.
Now, here’s the twist.
Say another company comes along, like a hotel operator, call it Vacation Inn, and says “Hey, I like that space that ABC Jeans had. I went ahead and made a deal with the bank to take over ABC Jeans’ lease and build a hotel there.”
“Whoa, whoa, whoa,” Mall of Dreams might say. “We have veto power over who comes into our mall. It says so right here on the lease, and besides, we own the place. Not you.”
Say negotiations get heated and some people even start making threats. Then, say Mall of Dreams says, “Forget about all this mess. We’ll just buy out the bank’s interest to make them whole, and then we’ll pick a new store to go in there.”
That might infuriate Vacation Inn, because, after all, it feels like it has great plans.
Meanwhile, the old ABC Jeans space keeps falling apart. Sound familiar?
Congratulations. You now understand Channelside.
Port Tampa Bay owns a ton of land around the area and leases spaces to phosphate distributors, steel processors and cruise ship companies, among others.
One if its high-profile tenants went bankrupt — the Channelside operator — and that operator’s bank went bankrupt, too — Anglo Irish Bank. Meanwhile, the investment team of Liberty Group and Convergent Capital made a deal last year with Anglo Irish to take over the lease for Channelside and become the new mall operator.
“Whoa, whoa, whoa,” the port basically said. “We have plans for Channelside and they don’t necessarily include you.”
“Oh, yeah!” the Liberty/Convergent team basically said. “You were total jerks to us. We deserve compensation and the whole Channelside property, too!”
Everybody lawyers up, and we’re off to court to sort everything out.
The key question becomes this: Could a bankruptcy court override the original Channelside lease and force the port to accept Liberty/Convergent? Here’s one answer. The bankruptcy court has ordered two things:
1) An auction for the Channelside lease and mortgage and whole shebang on July 2.
2) A hearing, likely on July 15, at which the judge might decide who really wins the auction, plus who wins that angry Port-Liberty fight, and everything else.
Since the bidding (Step 1) happens before the fight ruling (Step 2), do you think there might be some tension at auction? After all, both sides might simultaneously bid on the property without knowing for sure if they’ll have the right to take it over in the first place.
Of course, the loser might appeal, but, eeesh!
Now, if everyone would just go to Channelside for pizza and bowling, that wouldn’t hurt the place either.