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Regions Center Owners Say Management Stayed Mum on Purchase OfferLock Icon

3 min read

The owners of the 30-story Regions Center alleged they lost out on millions of dollars by not taking an offer to buy the downtown Little Rock building in the summer of 2014.

Now they are blaming their management company for missing out on the $46.5 million offer from JS Partners LLC of Nebraska, according to the owners’ lawsuit filed Aug. 1 in bankruptcy court in Delaware.

Thirty-two LLCs, with a legal name that includes NNN 400 Capitol Center, have an ownership interest in the building. The owners are suing FGG, which does business as the First Guardian Group of San Jose, California, and SVN International Corp. of Boston, which is known as Sperry Van Ness. The lawsuit said SVN and FGG represents itself as Sperry Van Ness First Guardian Group. Allegations against them include breach of written contract, breach of fiduciary duty, negligence and constructive fraud.

After the offer came in, an agent for FGG and SVN told some of the owners in an email that they should proceed with caution.

But the owners said in the lawsuit that FGG and SVN didn’t contact the buyer or its broker or do any due diligence regarding the offer.

Only after JSP’s offer expired did FGG and SVN organize a conference call, during which they recommended the owners not take the offer.

The owners said FGG and SVN didn’t want the owners to sell the 547,000-SF building because it would mean lost revenue streams for them. For example, FGG was receiving a monthly asset management fee of 1 percent of the property’s monthly gross revenue.

The owners allege that the defendants failed to consider that the lease for Arkansas Blue Cross & Blue Shield was going to expire on June 30, 2016. “If that tenant did not renew its lease, the value of the building and its rents would plummet,” the lawsuit said.

Which is exactly what happened, the lawsuit said.

The owners couldn’t pay off the loan and were forced “to refinance it at less than favorable terms,” the lawsuit said.

In December, the owners ended up filing for Chapter 11 bankruptcy reorganization. The last offer it received to buy the building was $34 million — $12.5 million less than JSP’s offer.

The owners are seeking at least $10 million in damages.

A person who answered the phone at FGG said she didn’t know about the lawsuit, and said the company wouldn’t comment if it did.

Neither FGG nor SVN had filed a response to the lawsuit as of Thursday.

Regions Center also has a new financier.

Wells Fargo Bank, trustee for a pool of investors with the confoundingly complicated legal name of the Registered Holders of COMM 2006-C8 Commercial Mortgage Pass-Through Certificates, sold the loan to an entity called Little Rock – 400 West Capitol Trust in New York.

The Little Rock trust is now the named plaintiff in a foreclosure lawsuit against the building’s owners that was filed in November.

The lawsuit alleged the owners defaulted on the $32 million loan used to buy the property in 2006. As of November, according to the lawsuit, the defendants owed $29.6 million. That lawsuit is on hold as the owners work their way through Chapter 11 bankruptcy.

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