Keep Auburn Lovely questions reliability of downtown hotel developer
Susan Hunnicutt, public relations officer for the grassroots organization Keep Auburn Lovely, spoke before the Auburn City Council on Tuesday night. Hunnicutt urged the council to reconsider the redevelopment of the Municipal Parking Deck because of the record of the real estate developer given the project.
On Jan. 5 the Auburn City Council approved a term-sheet agreement with Birmingham-based real estate developer Blackwater Resources to build a new 700-space parking garage, a 30,000-square-foot urban grocery and a 90–130-room boutique hotel.
Hunnicutt questioned Blackwater Resources' reliability.
"Five years ago they had a real string of bankruptcy projects, all of which were shopping center developments throughout the Southeast," Hunnicutt said.
According to Blackwater's website, Chairman Alex Baker founded Blackwater Resources from a previous company, AIG Baker Shopping Center Properties, along with several other former executives from the company.
Blackwater was built from what was left of AIG Baker after several bankruptcy filings in 2009 and 2010 following the Great Recession and the collapse of its equity partner and backer, the American International Group Inc., or AIG.
After over a year of untangling, Baker separated his company from AIG in spring 2010, according to an AL.com article.
But that was not before AIG Baker nearly lost two shopping centers in the Birmingham area to foreclosure: the Patton Creek shopping center — which was later sold by AIG Baker to a Miami-based real estate developer — and the Vestavia Hills City Center shopping center, which was put into bankruptcy protection in 2010 to prevent foreclosure.
The Chapter 11 bankruptcy was filed after the principal holder of the debt, Huntsville's Propst Properties, attempted to foreclose on the property, according to the article.
Chapter 11 bankruptcy often forces debt holders to renegotiate and restructure the debt of the filer, according to the article.
"If he's going to run out on his employees and his lenders, he might have no qualms about running out on the City of Auburn," Hunnicutt said.
The predecessor to Blackwater Resources lost one of its largest properties, The Wharf in Orange Beach, Alabama, after defaulting on a loan with JP Morgan Chase Bank, according to public records.
"Once that land is gone, they can sell it to any New York or out-of-state real estate development trust," Hunnicutt said. "Those guys, they're not going to care about what's going on in Auburn. They'll put anything they want to as long as it makes money for their line-item on their investment spreadsheet."
Blackwater Resources President John Abernathy refused to comment.
The public-private partnership brokered by city officials would have the developer pay a $10-per-month rent for the land on which the parking deck will sit. The land under the grocery and hotel would be deeded to the developer, along with several conditions.
Over the 60-year lease, the city would collect only $600 in rent.
The low rent was intended to incentivize the private developer into footing the bill for the multimillion dollar parking garage, according to Economic Development Director Phillip Dunlap and City Manager Charles Duggan.
Blackwater Resources, instead of the city, will finance the new parking garage, pay all maintenance fees and ensure the deck is inspected biannually — saving the city more than $10 million.
"We're not having to build a deck and put that in the general fund," Dunlap said at the City Council meeting on Jan. 26. "We're probably saving $800,000–$900,000 a year in debt service to build this deck. It frees us up to be able to achieve a longer term strategy for parking."
Two other real estate developers returned a proposal for the property after the city issued a request for proposals to nine Alabama-based developers.
The next step for the project will be the approval of a development agreement by the City Council. The agreement was initially intended to be on the City Council's agenda as early as April, but Duggan said he anticipated it would be further in the future. He did not give a date.