(A correction has been made to this article. See end for details.)
The owners of the 30-story Regions Center in downtown Little Rock weren’t able to refinance a $32 million loan before it matured on Sept. 1.
That put the owners on the road to bankruptcy court.
The insight comes from Lori McGhee, a consultant for the buildings’ owners who is working for Moses Tucker Real Estate of Little Rock. She provided a statement last month in U.S. Bankruptcy Court in Delaware about the events that led to the Chapter 11 reorganization filing.
In the nine-page statement, McGhee said “improper actions” by a pool of investors prevented the owners from refinancing the loan that was used to buy the building in 2006. She didn’t provide details. Wells Fargo Bank is the trustee for the investors, which has the legal name: the Registered Holders of COMM 2006-C8 Commercial Mortgage Pass-Through Certificates.
McGhee said being unable to refinance triggered a default under the loan documents, and it led to the building losing a “significant new tenant.” It also diminished the value of the property and its “much needed cash flow for its operations.”
The property owners also had to dip into other operating funds to pay for tenant improvements, which also hurt the cash reserves.
After Wells Fargo filed a foreclosure lawsuit in Pulaski County Circuit Court in November against the 32 LLCs with ownership interests in the building, there was no choice but to go to bankruptcy court, McGhee said. Wells Fargo also wanted a receiver appointed.
Going to bankruptcy court allowed the owners to sidestep the “inherent cost and expense” of defending the foreclosure and receivership proceedings.
And it gave the owners “an opportunity to resolve their issues with [Wells Fargo] for the benefit of all” parties, McGhee said.
In the statement, she also asked that the utilities be kept on. She said the monthly utility bill for the 547,000-SF building is nearly $90,000. She said the owners expect to have enough cash to cover that expense.
When the owners filed for bankruptcy protection, they listed estimated debts of between $10 million and $50 million. A more detailed filing is expected later. The owners’ assets also are estimated at between $10 million and $50 million.
If McGhee’s name sounds familiar, it’s because we told you several weeks ago that she retired from Moses Tucker. In the filing, however, she said she has been “re-engaged” by Moses Tucker to help with the bankruptcy.
(Correction, Jan. 23, 2017: The original version of this story said Wells Fargo Bank was the lender. It is the trustee for a pool of investors.)