TAMPA — It will take more than a big, fat check to win Channelside Bay Plaza in today's auction.
The winning bidder will also have to prove it has the best shot of succeeding as Channelside's new owner.
In bankruptcy law, the concept is called "adequate assurance of future performance." It will play a key role in determining who will control Channelside.
The auction will start at 10 a.m. at a New York law firm. Three parties will bid against one another: Tampa Bay Lightning owner Jeff Vinik's group CBP Development LLC, which unveiled its grand plans for Channelside on Monday; Liberty Channelside LLC investors Santosh Govindaraju and Punit Shah, who tried to buy it last year and have since been in litigation; and the Tampa Port Authority, which wants to choose the complex's savior.
The first part of the auction will focus on bid price. Vinik's CBP Development turned in the highest starting bid, $7.1 million. That's $100,000 more than Liberty's $7 million bid. The Tampa Port Authority's bid is $5.75 million, but it can spend up to $15 million if necessary.
The second part of the auction is more complex. Channelside is an asset of the Irish Bank Resolution Corp., which is being liquidated. The bank's liquidators and the firm running the auction, DJM Real Estate, must determine what bidder has the best chance of "adequate assurance of future performance" — in short, who has the means and the money to fix Channelside.
That's because whoever wins the auction also inherits the contracts regulating the property. A contract with the Tampa Port Authority, which owns the land under Channelside, calls for its owner to run a "first-class retail and restaurant facility."
"It's designed to assure that the person coming into the contract has a good chance of actually being able to fulfill the contract," said Stetson University College of Law professor Theresa Pulley Radwan.
After the auctioneers have picked the winner, a bankruptcy judge will have to approve the result at a July 15 hearing.
A real-world example of how complicated a bankruptcy auction can be is the recent battle in Baltimore for control of 1st Mariner Bank. At first, National Penn won the auction with a bid of $13.7 million, according to the Baltimore Sun, though that offer was $150,000 less than what RKJS Bank bid. But 1st Mariner's auctioneer chose the low bidder, according to the Sun, because it believed National Penn was more likely to get approval from regulators. RKJS challenged the auction in court and eventually won control of 1st Mariner by raising its bid to $18.7 million, striking deals with creditors and getting regulatory approval.
Liberty has signaled it is willing to challenge the Channelside auction in court.
But the Vinik group enters with a big advantage: After unveiling its "Channelside Live" plans Monday, the Tampa Port Authority voted to start negotiating a lease with Vinik's CBP Development. The port believes it has veto power over any sale of Channelside, and according to the auction rules, getting the port's approval would be a big plus for the eventual winner.
And if the port wins the auction, it can sign a development deal for Channelside with anyone it wishes, including Vinik.
Times researcher John Martin contributed to this report.