The Clarion-Ledger finally raised some questions about the stability of Transcontinental Realty Investments (TCI) in today's issue. The city of Jackson is using TCI to develop a site by the convention center for a hotel. Jeff Ayres didn't pull any punches and immediately raised the teeny-weeny concept known as "risk":
"The city's desire to have a hotel near the Jackson Convention Complex has resulted in a likely union with a real estate company in financial turmoil.
Should the project collapse, Jackson potentially could be responsible for the hotel project's $96 million bill."
No problems. We don't have to worry about such a collapse. Why? Because The Patron Saint of Bond Pimping told us so:
"Theoretically, you could say that. In actuality, I don't think that will be the case," said Porter Bingham, an Atlanta financial adviser working with the city on the deal with Dallas-based Transcontinental Realty Investors Inc."
Mr. Ayres moved on to the financial problems at TCI:
"TCI's stock value has dropped sharply, and its net loss widened this year. The company lost $59.3 million through the first half of the year - $41.1 million in the second quarter.
Company spokeswoman Chris Childress, in an email to The Clarion-Ledger, says the quarterly figures include a $25 million impairment reserve write-down, a non-cash expense, and "depreciation and amortization, which do not use any of the company's cash."
TCI has not turned a profit since 2008. It lost $68.3 million last year and $80.7 million in 2009.
The poor earnings also have affected the company's stock price, which slipped from as much as $13.75 per share in July 2009 to $2.47 on Friday.
TCI lists total assets of almost $1.4 billion and debt of just over $1 billion."
Councilmen Quentin Whitwell and Kenneth Stokes asked what the city's liability would be if TCI indeed wend under. St. Porter said no problem:
"While the memorandum calls for TCI to have an "absolute, irrevocable and unconditional guarantee" to cover 50 percent of any debt service shortfalls, Whitwell worries the city still could be at risk for the entire $96 million if things go wrong.
Ward 3 Councilman Kenneth Stokes said he has similar concerns.
"If they don't have any assets, we're going to be fully responsible," he said.
But Bingham, the city's adviser, indicated the 50-50 risk split between the city and developers will be a cornerstone of any final agreement.
"TCI wouldn't be able to go into bankruptcy to avoid paying it" in a worst-case scenario, he said."
Really Mr. Bingham? HOW? Is there some clause in the agreements with TCI that protects the city in case of a bankruptcy filing by TCI? Are the six million dollars in reserve for debt service going to be set up in an escrow account or deposited with the city so creditors can't touch it? How exactly is the city protected? Mayor Harvey Johnson said:
"TCI officials and Jackson Mayor Harvey Johnson Jr. say they feel safeguards are in place to prevent the city from becoming entirely responsible for any losses."
Um, what safeguards? That is all I'm asking. How is the city protected from assuming 100% liability if TCI goes under. Article
We are waiting for an answer.
Note: WLBT story last night on the deal.
27 comments:
I'm still shocked that this is not front page news across the media. I know some are going to step it up, but NO ONE is talking about this huge misstep.
C'mon, even a foolish Kangaroo like me knows, you don't hire practically bankrupt people to manage your money. It makes no sense. None.
Doesn't the developer have to be bonded?
" Stokes said....."
Municipalities across America have been sucked into the giant sinkhole of liability and loss by developers who went under while being bonded.
"But", you might ask, "Don't Harvey, Frank and Chokwe have good vibes, and, aren't good vibes just as important as any other factor when you leap aboard the venture train?"
The deal is so reckless that Harvey Johnson looks like a desperate beggar.
If Kenneth Stokes has issues with it it has got to be painfully obvious it is a bad deal!
"Other municipalities have simply made bad investments. Harrison, NJ, built a $200 million sports arena that has not brought in the amount of money the city was expecting. Similarly, Salem, NJ, built a large office building downtown with the intention of leasing office space. But construction delays caused lease payment delays and money has been taken from the debt fund numerous times."
Note that it is more than just pension or health care costs that are at the bottom of the problem. It is also horrible decisions made regarding special projects that have contributed to the city's downfall.
Maybe the Jackson officials should read this...........
Those 'leading' the City of Jacktown are of the same opinion as Obama, "Who shivs a git, it ain't MY money!"
Maybe if we invested PERS money in this project instead of City of Jackson money, people would actually care and look at the deal.
Mississippi Business Journal has good article on this today. http://msbusiness.com/businessblog/2011/10/01/hotel-deal-seen-as-lifeline-for-jackson-convention-complex/
All of Heywood Sanders' predictions about the Convention Center have come true. It was a massive snowjob with unrealizable expectations from the outset and now the proof is in the pudding.
Congrats to all of the civic leaders who exhorted Jacksonians to vote in favor of buying a white elephant. Too bad you can't come clean with an apology now.
When you check out of a hotel in J town, you pay 9% tax. When you check out of a hotel anywhere else in the south, in any city the size of J town or larger you pay a LOT more. Like usually 15 to 17%.
THAT is one way they finance all the things we dream about.
Asking Porter Bingham to comment on risk only confirms that one doesn't need to take a test or secure a license or possess common sense in order to be a journalist.
Who ever built that SLEEP INN over there on Gallatin wasted their money (well, maybe not if it can hang on until JSU gets an on campus stadium). There' NEVER anybody at that SLEEP INN.
10:55. Why does this not surprise me. There is a reason we are last in everything.
There is a reason we are last in everything.
Who is "we"? Put up or shut up.
No doubt the Quentin Whitwell rehabilitation tour is underway over in Fondren.
Whitwell is clueless about what is happening in his ward.
There is an interesting history.
The Real Estate Update
By Michael Dowd (TMF Yorick)
June 26, 1997
The Best Little Poor-House in Texas
(Corporate Kleptomania, or Some Habits Are Hard To Break)
By Jerome E. Scott (MF Foitdog)
With Michael Dowd (TMF Yorick) and William G. Campbell (WGCAMP)
By 1973, at age 36, Gene Phillips filed a $30 million bankruptcy -- the largest real estate Chapter 11 in recorded South Carolina history. By 1980, Phillips had recovered, taken over the company of a former creditor, and met a talented and resourceful deal-lawyer/wheeler-dealer named William Friedman. The two found a weakness in the financial structure of an Atlanta-based REIT. Manipulating a forgotten pool of outstanding warrants, they took control of a former affiliate of Citizens & Southern Bank, now known as Southmark. As time went on Phillips’s companies bought a company Lear Jet which was later replaced with a DC-9, and generally they flew about as high over Texas as a financier can.
The next collapse was even more spectacular. Southmark bought San Jacinto Savings & Loan, which the regulators finally took over. Drexel Burnham ponied up with $915 million in two tranches of last-ditch financing. With that money, Phillips’s Southmark Corporation made investments that reportedly scared even Michael Milken. Finally, in 1987 Southmark wrote off over $1 billion in one month and the centerpiece to a $9 billion pile of assets headed into another bankruptcy court.
Before that collapse, Southmark had taken over control of a number of partnerships originally syndicated by Robert McNeill, and in 1987 the principals of the wounded Southmark succeeded in rolling up four of those partnerships. They ultimately contributed most of the assets of the newly formed, AMEX-traded National Realty.
The tale then leads to an eight-year court battle in Judge Jenkin’s court with allegations of huge fees and conflicts of interest being hurled by investors’ counsel, and rejected by those representing Phillips and his associated entities. The story involves three other publicly traded REITs controlled by Phillips’ associates, as well. The other REITs are CONTINENTAL MTG. & EQUITY TRUST (Nasdaq: CMETS), TRANSCONTINENTAL REALTY INVESTORS (NYSE: TCI), and INCOME OPPORTUNITY TRUST (AMEX: IOT)
There is Whitwell in the Ledge this morning reconfirming that he didn't know jack shit about TCI or the deal before voting in favor of the MOU.
Do you need Jeff Weill's phone number Quentin?
I believe that TCI has been slow to pay its local contractors to the point that Terracon has had to file suit for payment
I get the idea that the city could be on the hook for the whole bill, but in that case wouldn't the city also have the right to cancel the lease and retain full ownership of the hotel? It seems like the benefit would offset the cost (assuming that the deal makes sense in the first place).
Now down to $2.02 per share according to WSJ online.
October 4, 2011 8:19 AM wrote:
"There is Whitwell in the Ledge this morning reconfirming that he didn't know jack shit about TCI or the deal before voting in favor of the MOU."
Agree with your sentiment. Hard to see how QW could have looked more ineffectual politically in that article than that 'Help Me Help You' routine. Stupid.
The previous excerpts from The Best Little Poor-House in Texas (Corporate Kleptomania, or Some Habits Are Hard To Break) are from an extensive report. The report has been reposted various places.
http://www.fool.com/Industry/RealEstate/RealEstateWeekly.htm
The SEC filings make for interesting reading. The SEC describes Form 8-K:
" Form 8-K is a very broad form used to notify investors of any material event that is important to shareholders or the United States Securities and Exchange Commission."
This one is dated June 14, 2000.
http://google.brand.edgar-online.com/EFX_dll/EDGARpro.dll?FetchFilingHTML1?ID=648109&SessionID=_YGJHFAQq_a1tz7
ITEM 5. OTHER EVENTS.
On June 14, 2000, the United States Attorney for the Southern District of New York charged 120 defendants with securities fraud and related charges. Included in the indictment were Gene Phillips and A. Cal Rossi of Basic Capital Management, Inc. ("BCM"). BCM is an advisor to and majority shareholder of the Company. Mr. Phillips and Mr. Rossi have each pled not guilty to all charges. The indictment and the press release issued in connection with the indictment are included as exhibits to this Form 8-K.
The indictment and the Press Release of United States Attorney for the Southern District of New York dated June 14, 2000 are included in the 8-k filing.
The press release begins
MARY JO WHITE, the United States Attorney for the Southern District of New York and BARRY W. MAWN, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation ("FBI"), joined by RICHARD WALKER, Director of Enforcement of the United States Securities and Exchange Commission ("SEC"), and MARY L. SHAPIRO, the President of NASD Regulation, announced today that 120 defendants, including members and associates of the five Organized Crime Families of La Cosa Nostra in the New York City area, have been charged with securities fraud and related crimes. Sixteen Indictments and seven criminal Complaints unsealed today in
Manhattan federal court allege fraud in connection with the publicly traded securities of 19 companies and the private placement of securities of 16 other companies.
Included among the defendants are 10 alleged members and associates of organized crime; a former New York Police Department detective; 57 licensed and unlicensed stock brokers; three recruiters of corrupt brokers; 12 stock promoters; 30 officers, directors or other "insiders" of the companies issuing the securities involved in the frauds; two accountants, an attorney; an investment adviser; and a hedge fund manager. According to the charges 21 broker-dealers or other financial adviser firms were either involved in the frauds, or employed stock brokers or other persons who were involved in the fraud. The various schemes resulted in total losses of more than approximately $50 million, and many tens of millions more would have resulted had the schemes been completed.
Additional information:
http://www.bizjournals.com/dallas/stories/2002/02/11/daily29.html
Dallas Business Journal
Date: Wednesday, February 13, 2002, 6:03pm CST
A federal jury in New York City on Wednesday acquitted Dallas real estate developer Gene Phillips and his former associate, Anthony "Cal" Rossi, on all counts, including federal racketeering and wire fraud charges.
After a three-month trial, the jury returned not-guilty verdicts for Phillips and Rossi on all seven charges. Charges included racketeering, wire fraud, union pension fund fraud and payment of illegal kickbacks, according to court documents.
Phillips and Rossi were tried in the case along with four other defendants, two of whom were found guilty.
But, the important question is can any of you explain why Jim Hood is shaving the bark off a piece of firewood with a hatchet and two pound hammer?
God you are goofy 5:28. GOOFY.
How does this play out?
Did this vote cement the deal with TCI?
Can we recall it in any way?
If not and the hotel goes up and does not work and Jackson is on the hook does that mean Harvey (or mayor chuckwe lumbhowveveryouspellit) will run it?
Maybe Jackson citizens can sue Q and company and put the City in involuntary bankruptcy and someone sane can administer the place.
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