The Jackson city council moved one step closer to finalizing a deal with Transcontinental Realty to build a hotel for the convention center. The Clarion-Ledger reports:
"But Transcontinental Realty officials at a Monday meeting with City Council members announced they would cover the difference if there was a shortfall.
A previous arrangement called for an equal split between the city and developers.
Without elaborating, TCI Executive Vice President Al Crozier said the new arrangement was deemed best by the company's attorneys.
"That brings a little more relief to the taxpayers of the city," said Mayor Harvey Johnson Jr. of the risk shift.
City adviser Porter Bingham said the city can force bankruptcy proceedings against the hotel's developers should the hotel fail or not make payments to the city.
However, ultimately if the project fails the city would be responsible for repaying the bonds." http://www.clarionledger.com/article/20111213/NEWS/112130337/Hotel-risk-may-ease-city?odyssey=tab|topnews|text|Home">Article
TCI released its third quarter results last month. TCI's share price this morning is $1.73 and market cap is $14.56 million. Its highest price in the last six months was $3.79 in August. The company lost $1 million in the third quarter and $54 million this year. The company lost $40 million for the first three quarters of 2010. TCI is nearly 100% leveraged as it reports assets of $1.1 billion and liabilities of $1.0 billion. Third quarter SEC 10-Q filing (Look at pages 11-13 and notice how many times you see the phrase "property transferred to lender".). The company lost $76 million in 2010 and $82 million in 2009. It has turned a profit only three times in the last ten years and the largest profit was $2.0 million. Earlier post about TCI financial condition
Editorial comment: That was the news, now for the opinion section of this post. The city found itself in a tough situation: a company in bad shaped owned most of the land needed for a convention center hotel. Frank Melton chained Jackson to the corpse when he funneled HUD money to TCI to purchase the land in 2008. One of the city's main goals in this exercise is to get title to the land away from TCI, even if it means giving them a ten year lease. The deal the city first approved in September was a very bad deal as apparently no one in the Johnson administration had performed due diligence on TCI. Several sources informed this correspondent JJ' exposure of the company's legal problems and true financial condition went off like a bomb at City Hall. JRA and the city called a meeting with TCI two days after my first post and lets just say the meeting was not pleasant.
What is interesting is the city says it can force the company into bankruptcy if it does not meet certain terms. If this TCI's history shows anything, it is is that it all too often files bankruptcy after it defaults on payments. If any bankruptcies are filed, I predict TCI will beat Jackson to the courthouse in filing a bankruptcy petition. If this deal blows up however, it will not be the city but the bondholders who suffer. TCI has set up subsidiary companies, defaulted on loans, and then filed bankruptcy, effectively tying up the lender for quite some time in bankruptcy court several times in the last few years. I understand the city is in a bad position thanks to Frank Melton. It is the intention of this website not to kill this deal put to put all the facts out there for everyone to read. This deal might be a dog with fleas, the question is are there ticks as well.
Tuesday, December 13, 2011
Looks like we are going to get a hotel
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6 comments:
When the land was transferred by the Melton administration which firms or individuals were paid by the city for advice? Are any of them still being paid for advice at this point?
test.
Just because Melton screwed up and did a bad deal doesnt mean that the current administration (listening Q??) should continue a bad deal and making it worse.
Melton sold/transfered land - wasting grant $$s and no telling what else - to a bunch of crooks.
Now, our fine city wants to issue bonds to buy the land back. OK. can live with that.
But also - we are going to issue bonds to build a hotel - in essence, providing the financing to a company whose very reputation has proven to be anything but creditworthy.
The Mayor tells us it is now a 'sweetened deal', that if there is a shortfall in paying off the debt, the company will be responsible. BUT, what is the result when the company deos what it has done in multiple cases already - dafaults and puts the deal into bankruptcy?
Does the City want to be in the hotel management business? What happens if TCI, with its impecable reputation, walks away? Who then makes up the difference, Mr. Mayor (and Councilmen)?
Sure, the Convention Center needs a hotel. Not really - what the real answer is that we didn't need the convention center. The City didn't have the infrastructure to support it, specifically a quality hotel in the area, so now - to keep the $100million thrown into the Center, we have to throw another $100million into a hotel.
IF the city is going to go ahead with this boondoggle, at least take the time to get a quality developer - one who doesn't have a track record like TCI's. Understand the problem with the timetable for the GOZONE bonds, but it would be much better to take the time to get a responsible developer and lose the benefits of the GOZONE. Maybe that way us City citizens wont get stuck with the debt.
According to Hampie's paper today, the current proposer hasn't had a profitable year in the last three or four with millions in the hold last year.
If they also manufacture weather sirens, we need to jump at this thing.
paper nothing, just read their 10-k's.
Isn't the Jackson City Council always bleating about how much city property is off the tax rolls because it is owned by the state? So why would they purchase this land, taking it off the tax rolls, then lease it back to a private developer? They lose all the property taxes on this land, right? While the developer makes the profit?
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