Nearly two years after its owners put the EpiCentre into Chapter 11 to avoid foreclosure, the uptown entertainment complex exited bankruptcy protection this morning.
The popular complex at College and Trade streets is now owned by an investor group, Blue Air 2010, which bought the project's troubled loan. The developers who conceived of the mixed-use project, Afshin Ghazi and George Cornelson III, are out of the EpiCentre and no longer have any connections or business with the project.
The project's movie theater, Mez restaurant and Kazba nightclub will remain open and operating as usual, according to the bankruptcy trustee that has been overseeing the project. The project's unsecured creditors are set to have their claims paid in full, a big improvement over the 10 cents on the dollar originally proposed.
"All the fighting paid off," said attorney Dennis O'Dea, who had fought on behalf of the unsecured creditors committee before the committee was disbanded late last year. "I'm so pleased."
While the project is out of Chapter 11, court battles are expected to continue.
The project's trustee, Elaine Rudisill, is continuing to look into how the EpiCentre spent its money and may seek to recover assets for the project. She had been investigating claims by Blue Air that the developers engaged in insider deals and fraudulently transferred money to avoid it being paid out to creditors. But as part of a settlement reached by the developers and Blue Air, the trustee will no longer investigate those claims. Instead, the trustee is looking into whether vendors and bills were properly paid.
One tenant, Epic Wings LLC, the owner of Wild Wings Cafe, objected to the reorganization plan Thursday because of a dispute over whether it overpaid for common area maintenance fees.
Blue Air's attorney, Brad Pearce, told the judge his client planned to evict the tenant.
"We don't intend to keep them as a tenant going forward," he said. "They're a bad tenant."
Epic Wings' attorney, Michael Shor, told the judge his client had been overcharged for years and that management failed to fix leaky windows.
"I assume a tenant that wants their leaky windows fixed is a bad tenant," Shor said. Perhaps we're not a bad tenant, he said, "but a tenant that doesn't want to see its investment thrown out the window..."
Disputes with other tenants, however, were resolved. The owners of Whisky River, BlackFinn, Howl at the Moon, Strike City, Suite and Vida Cantina had filed an objection to the reorganization over fears they could lose their leases. Their attorney told the court today that a deal had been made so his clients' leases would remain in place.
"... The leases are being assumed and (we) look forward to a continuing relationship," Will Esser said.
The EpiCentre sits on the site of the old convention center, which was abandoned for years. City officials have viewed it as an important part of uptown's redevelopment. That's especially true this year, with September's Democratic National Convention drawing tens of thousands of people to neighboring Time Warner Cable Arena.
The popular uptown entertainment complex has been mired in court battles since the original lender, Regions Bank, started foreclosure proceedings in July 2010 after the loan came due.
Shortly after, the two limited liability companies that own the 302,000-square-foot EpiCentre, Pacific Avenue and Pacific Avenue II, filed for bankruptcy protection, stalling the foreclosure. Regions later raised questions about how Ghazi and Cornelson spent the loan money and accused the men in court documents of self-dealing, which the men denied.
Blue Air, a group backed by Baupost Group, a Boston-based hedge fund, bought the note in November 2010. A year later, Blue Air sued the developers, accusing them of wrongfully diverting money from the troubled entertainment complex before filing for bankruptcy protection.
Blue Air claimed in court filings that the developers and others "manipulated and falsified" bookkeeping records and transferred assets to "various insider companies" before the project filed for Chapter 11. The lawsuit also claimed the debtors made "numerous false statements" in their pleadings and court filings.
Last month, the developers made a deal with Blue Air where they each paid $1.5 million, which will be used to pay creditors. They also gave up ownership in the EpiCentre and air rights to develop above the complex.
Blue Air principals, Doug Stephan, Paul Picarazzi and Geoffrey Curme, declined comment today.
After approving the reorganization plan this morning, U.S. Bankruptcy Court judge George Hodges thanked attorneys on both sides, saying they had done "a masterful job of putting Humpty Dumpty back together again."