Creditors say Peninsula Town Center owner defaulted on $168.5 million loan
Properties will be auctioned Feb. 14
By Robert Brauchle, email@example.com | 757-247-2827
January 30, 2013
HAMPTON — The largest commercial development built within the city in the past 50 years has defaulted on a $168.5 million loan, according to a public notice announcing the upcoming auction of those properties.
HSBC, a New York-based international banking firm, has asked attorneys from law firm LeClairRyan to sell the properties to the highest bidder after the bank restructured the loan with the owner of Peninsula Town Center on three separate occasions.
The Feb. 14 auction will include 18 subdivided properties that make up nearly all of the Peninsula Town Center campus. The default comes just 22 months after a grand opening for the $270 million mixed-used development in Coliseum Central.
“We firmly believe — although we won’t know until the 14th — that the bank will be the high bidder for that property,” said Ben Williams, chairman of the Peninsula Town Center Community Development Authority. “The public and the tenants there likely won’t notice any changes to the center.”
At the time Peninsula Town Center was developed, Mall Properties Inc., of New York City, secured the $168.5 million HSBC loan for construction and a second $92.5 million bond from the community development authority created exclusively to oversee infrastructure improvements on the property.
Large tenants such as Macy’s, JCPenney, Barnes & Noble and Cinebistro anchor the more than 45-acre property. Smaller retail tenants are interspersed between them in the town square-style development. Apartments and office space are located on the upper floors of many of the buildings.
Mall Properties Inc. has copied the Peninsula Town Center concept at similar developments in Glendale, Wis.; Beavercreek, Ohio; and Kansas City, Mo.
The loan in default does not appear to includeTarget or the parking garage along Cunningham Drive.
Financial windfall for the city
Peninsula Town Center became a lucrative source of income for the city as soon as the ribbon was cut in 2010.
Within its first 12 months in operation, Peninsula Town Center generated taxable sales exceeding $134 million, according to the city Commissioner of the Revenue’s Office.
“They paid their taxes before the Dec. 5 due date this year,” Hampton Treasurer Bob Williams said. “I’m a little shocked at the possibility they may be in default.”
Since it opened to the public, Peninsula Town Center has generated:
•$759,600 in real estate taxes.
•$3.3 million in sales tax revenue.
•$4.4 million in excise taxes.
Sales tax and excise tax figures include the amount collected from the center’s March 2010 grand opening until the end of September, according to the city Commissioner of the Revenue’s Office.
“You never want to see a private foreclosure,” City Manager Mary Bunting said. “But the impact we look at as a city is whether or not people are shopping there and eating there, and those signs are very strong.”
Bunting said sales tax and meals tax revenues generated by Peninsula Town Center have continued to increase throughout the recession.
“It’s not necessarily a bad product,” she said. “What I’m hearing when I shop there is that the tenants are happy and they’re glad they moved there.”
Two loans, different results
Despite defaulting on its HSBC loan, Mall Properties remains current with its $92.5 million loan with the Peninsula Town Center Community Development Authority, said Vincent Mastracco Jr., an attorney representing the authority.
At the time the property was being developed, the city and owners of Peninsula Town Center agreed to create a community development authority to oversee the construction of the property’s infrastructure, parks and parking garage. The authority was created by the City Council in 2006, although it remains financially independent of the city.
The authority adds a special assessment, a 0.5 percent charge, on purchases made at its businesses at Peninsula Town Center to pay for those infrastructure improvements.
“All of the taxes (from the authority) have been paid,” Williams said. “Everything is current and paid in full.”
The infrastructure bonds have a 30-year repayment period.
Messages left with attorney Ray King at LeClairRyan’s Norfolk office were not returned Tuesday. King is among three attorneys from the firm representing HSBC. A message left at the office of Peninsula Town Center general manager Raymond Tripp was not returned.
Business owners had mixed reactions to the crowds being drawn to Peninsula Town Center.
“Personally, I think it’s the wrong center in the wrong town,” said Rick Lawrence, owner of Beach Treats. “It just doesn’t fit the demographics.”
Town Center traffic really took a dive in May, Lawrence said, and shop owners stopped receiving traffic reports from center management. Tenants have heard rumors of bankruptcy, he said, but most did not know about the upcoming ownership auction sale on Feb. 14.
“When you look at the variety of the turnover, nothing is sticking,” he said. “They (town center management) had a chance to make it something unique in Tidewater, and they blew it.”
Vincent’s Gourmet Italian Ice has found a steady stream of return customers that have helped keep the business around for almost three years, said Richard Bastian, the shop’s assistant manager.
“We find people coming back for our smoothies and our hot dogs,” he said. “We really try to provide a high quality of customer service — that’s important.”
Bastian said he’s confident the market for “feel good food” will keep people returning to the store no matter what time of year.
“We’re always trying to provide what people what to eat,” he said.
Daily Press staff writer Nicole Paitsel contributed to this report.
Peninsula Town Center
Grand opening: March 2010
Gross leasable area: 1.1 million square feet
Total retail space: 874,319 square feet
Total office space: 115,892 square feet
Total residential units: 158
Source: Mall Properties Inc.
Where: Embassy Suites Hampton Roads, Hotel, Spa & Convention Center, 1700 Coliseum Drive, Hampton.
When: Noon on Thursday, Feb. 14.
What to bring: A $1 million deposit must be made by the high bidder at the time of the auction. Payment can be made in cash, cashier’s check, certified check or wire transfer. Personal checks will not be accepted.
Copyright © 2013, Newport News, Va., Daily Press
Watch out for racist comments if you do read the article on Daily Press’ website.
//edit, February 21//
I hate the yellow journalism the Daily Press did with this article. They sent their news photographer out to shoot a video of the town center on a Tuesday, I believe. OF COURSE the shopping center will be dead on a Tuesday morning! Also, the empty parking garage. I could be wrong, but I think people who live in the apartments at the town center park in the garage. It being a Tuesday, of course it will be empty because most people are at work.
Peninsula Town Center auctioned for $50 million
Owner defaulted on $168.5 million loan
By Robert Brauchle, firstname.lastname@example.org | 757-247-2827
February 15, 2013
HAMPTON — Peninsula Town Center is now in the hands of the bank that financed a bulk of the $270 million project after the New York City-based developer defaulted on a $168.5 million construction loan.
John Northington, of HSBC, was the lone bidder at an auction held Thursday for 18 subdivided parcels that make up nearly all of the commercial and residential project along Mercury Boulevard in Coliseum Central.
An attorney overseeing the auction accepted a high bid of $50 million for the project. Northington declined to comment about the property.
At the time Peninsula Town Center was developed, Mall Properties Inc. secured the $168.5 million HSBC loan for construction and a second $92.5 million bond from a community development authority created exclusively to oversee infrastructure improvements on the property.
Large tenants such as Macy’s, JcPenney, Barnes & Noble and Cinebistro anchor the more than 45-acre town square-style development. Apartments and office space are located on the upper floors of many of the buildings.
Shoppers are not expected to notice any change as they traverse Peninsula Town Center, authority officials have said.
“Our intent is to work with whoever owns it,” said Ben Williams III, chairman of the Peninsula Town Center Community Development Authority.
The auction included 18 subdivided properties that make up nearly all of the Peninsula Town Center campus, although it does not include Target, JcPenney, the streets, sidewalks, public areas and parking garage.
HSBC, a New York-based international banking firm, and a group of sub-lenders asked attorneys from law firm LeClairRyan to sell the properties to the highest bidder after the bank restructured the loan with the owner of Peninsula Town Center on three occasions.
Ray King, the attorney overseeing the auction, said he was told to get the highest dollar value for the property. He rejected five lower bids before accepting $50 million.
It was unclear late Wednesday who will manage Peninsula Town Center now that the bank owns the property.
Williams has said the property owner is current on the authority’s $92.5 million loan used to pay for the infrastructure and parking garage.
Hampton Circuit Court records show financial problems at Peninsula Town Center existed even before the development’s March 2010 grand opening.
Numerous contractors filed mechanics liens with the court after Mall Properties failed to pay for a variety of services.
Environmental Specialists Inc., of Ashland, Va., installed heating and air conditioning systems on the property and billed Mall Properties $736,693. The company waited two months before filling a mechanic’s lien in February 2010. Court records show the property owner then waited until May to pay the contractor.
Leipertz Construction, of Midlothian, Va., performed general contracting services and filed a lien claiming the property owner had not paid $229,530 for work performed in April 2010. Mall Properties then paid the bill three weeks later, court records show.
Contractors hired to build Abuelos allegedly abandoned the project before completing it and failed to pay subcontractors for their work, according to court records.
MRG Construction Inc. billed the property owner for $896,093, almost $26,000 more than the original contract.
Mall Properties was forced to hire new contractors to finish the project, according to court documents. At least 10 other subcontractors filed mechanics liens totaling $180,000 claiming they had not been paid.
MRG has subsequently filed for Chapter 7 bankruptcy. Phone numbers listed for the Chesapeake company were disconnected Wednesday.
Those contractors’ claims were dropped by a Hampton Circuit Court judge after ruling the subcontractors should seek payment from MRG.
More than a dozen people attended the Wednesday afternoon auction even though only Northington signed up to bid.
Members of the community development authority and city’s Economic Development Department were present.
Jim Carr, an agent with Mid-Atlantic Commercial Real Estate, said he was curious about the auction’s outcome.
“I just came here to watch,” he said.