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Battle with Tenn. landlord causes troubles for Jeff Greene company

Sunshine Energy bought this gas station in Johnson City, Tenn., a year ago. Now a landlord is trying to repossess this store and others.

JEFF KEELING | Special to the Times

Sunshine Energy bought this gas station in Johnson City, Tenn., a year ago. Now a landlord is trying to repossess this store and others.

Nancy Rose has managed a convenience store in Rogersville, Tenn., through booms and busts, so she was elated last fall when she heard that Jeff Greene, whom she knew only as a wealthy Floridian, had bought the bankrupt chain.

"We thought it was super. Somebody was going to invest money into the stores, get supplies, get us everything we need to run a business," she said, referring to Greene, whose Sunshine Energy LLC acquired the lease to her gas station and others in September 2009. "In the beginning, it seemed like that was going to happen. Then suddenly, nothing."

By February, Rose was having problems with vendors, who refused to deliver beer or soda unless they were paid cash. Her store and others occasionally ran out of gas because of supply problems. Payroll hours were cut. She put buckets around the store whenever it rained because a leak in the roof was not fixed.

"It started spiraling down, getting worse and worse," Rose said.

In June, the landlord repossessed and closed a dozen stores, including Rose's. Sunshine Energy responded by filing for bankruptcy protection for three subsidiaries that hold the disputed stores' leases, a move that stopped additional seizures. Now Rose is attending bankruptcy hearings, trying to find out when she and her seven employees might be able to get back to work.

In his campaign to be Florida's next senator, Greene stresses his business expertise and ability to create jobs. But in this Tennessee court case, Greene's company is being held accountable for late rent, unpaid taxes and poor maintenance. About 50 people are out of work as a result.

Greene says more people would be unemployed if he hadn't bought two companies that were in bankruptcy in 2009, creating Sunshine Energy. He said the acquisitions saved hundreds of jobs in nine states where his company took over a network of convenience stores and a gasoline supply business.

Greene, who faces Kendrick Meek in Tuesday's Democratic primary, blamed the issues on a disagreement with a landlord who owns about two dozen Sunshine stores. The battle triggered state court actions that allowed the landlord to seize 12 gas stations in June, resulting in the layoffs.

In an interview with the St. Petersburg Times, Greene said that he sold his interest in Sunshine Energy to unnamed investors in May and that his brother Gary now oversees day-to-day operations of the company.

"But I carry a note on the business that's substantial, worth tens of millions of dollars, so I still have a big interest in it," Greene said.

That interest is evident in a voice mail he left with the landlord's representative on June 7.

Calling the store seizures "very sleazy and fraudulent," Greene blamed the landlord, Management Properties Inc. of Johnson City, Tenn., for destroying the lives of employees put out of work by the closings.

"Obviously, you are trying to take our business from us," Greene said in the recording, a transcript of which has been filed with U.S. Bankruptcy Court in eastern Tennessee. "I have a feeling we're going to be in a multimillion-dollar lawsuit against one another for the next several years."

Greene said he made the call, which came just days before Sunshine Energy put the subsidiaries into bankruptcy, to protect his interests.

"I was making that phone call as a creditor, expressing my opinion that what they were doing was not right," he said, describing the landlord's property seizures as "ridiculous." "I'm a fighter and I'll fight this just like I'll fight as a senator for the people of Florida."

Problems mounted at convenience stores

Though he said he is now removed from the operation, Greene said this week that Sunshine Energy is a "remarkable success story."

"We took a company that was in bankruptcy and virtually shut down less than a year ago and turned it around so it's cash-flow positive," he said. "I've heard there's a new CEO who's doing an amazing job of getting the company on its feet. We just have to figure out how to solve the problem with these closed stores."

Greene, a Palm Beach billionaire, has built his wealth on real estate. But last year, as president of Sunshine Energy, he paid $11 million for most of the assets of Crescent Oil Co. of Independence, Kan., and $6.25 million for Appco (Appalachian Oil Co. Inc.) of Blountville, Tenn. Bret Berlin, a Greene employee and former chairman of the Miami-Dade Democratic Party, was put in charge of running Sunshine Energy. In a late December interview on Fox Business, he promised major changes.

"Our investor group is very bullish on this area of the economy," Berlin said of the company, which then had about 170 stores. "We're going to roll out a unique concept that serves local markets. You can expect great things from Sunshine Energy."

But testimony in the bankruptcy case indicates that Sunshine's convenience stores, at least in Tennessee and parts of Virginia, turned out to be challenging financially. During a court hearing in late June in Greeneville, Tenn., Sunshine Energy's executives testified that the company was late in making rent payments to landlords, had failed to pay 2009 property taxes and had a difficult time maintaining the stores.

"Sunshine experiences cash flow difficulties and has difficulty maintaining current cash flow balances sufficient to pay various expenses, including rents," said Roger J. Dade, general counsel for Sunshine Energy, during a June 23 hearing. "The rents are sent when the cash flow permits."

Bob Brown, Sunshine Energy's chief financial officer, said a dozen stores in a northeast Tennessee subsidiary lost more than $280,000 in the first four months of 2010 on revenues of $6.8 million.

"Their sales volume and margins aren't high enough to cover their costs," Brown said. "Only a handful of stores are profitable."

He said Sunshine Energy, based in Overland Park, Kansas, currently operates 112 stores with 620 employees.

In court, a representative of the landlord, who is trying to regain control over 28 Sunshine stores, submitted photos showing their condition. According to the judge, the pictures showed "severe roof leaks, nonworking rest rooms, buildings damaged by cars, rotting eaves with huge holes, broken windows replaced by plywood, inoperable heat pumps and growing mold."

Though the leases required Sunshine to keep and maintain the stores in "good repair," the judge said, "The evidence in this case was overwhelming that the premises were not maintained in good repair."

In an interview Tuesday, Greene said Sunshine Energy had four full-time maintenance people who kept the stores in good condition. "The landlord was pushing for outrageous maintenance," he said.

The landlord, who declined to be interviewed for this story, wrote to Sunshine Energy in December, noting "a pattern of late rents." Additional letters followed in January, February and March, warning of maintenance and other problems. In addition to delinquent rent, Sunshine had failed to pay 2009 property taxes of more than $162,000. On March 15, the landlord wrote Sunshine a letter declaring the leases terminated and requesting a response. He got none.

At the time, Greene controlled the company.

Sunshine executives acknowledged in court that they made no written or verbal response to Management Properties' letters.

"Now, in hindsight, I believe my thought process was flawed," said Dade, the general counsel. "It should have included a written response."

Sunshine executives said they were "totally shocked" when the 12 stores were seized by the landlord in early June, despite being notified about a state court hearing on the matter in May.

Their claims were reflected in Greene's voice mail to the landlord's representative after the seizures began.

"I found out about this last week. I immediately have tried to engage you and get this resolved," he said in the message. "Obviously, we're going to have no problem to … no, no, no choice now but to go into bankruptcy today, stop these evictions and then when in the bankruptcy court, we're going to obviously have to go after you for all of these damages."

This week Greene said he had been unaware of late rents or unpaid taxes at the stores.

"I never got any letters about this. I've only been in Overland Park (Sunshine Energy's headquarters) twice in my life," he said. "As soon as I found out about the problem, I instructed everyone to get everything paid and brought current. I'm a landlord and I know that the first thing you do is pay your rent."

Business dwindled as customers complained

Nancy Rose worked for Appco for 25 years and was managing the superstore in Rogersville when it was repossessed by the landlord in early June.

"We're all just kind of hanging in there, collecting unemployment and hoping for the best," Rose, 58, said. "There are no jobs out there."

For years, Appco was run by Jim MacLean, who built the chain and, according to Rose, did "a phenomenal business." In 2007, MacLean retained ownership of several stores, including Rose's, but sold the business to a new operator who lasted just two years before declaring bankruptcy. Though MacLean remained the landlord, Sunshine Energy became her boss last year.

Under MacLean's operation, Rose had received financial reports on her store and a bonus tied to its performance. "It would be nothing for that store to make $7,000-a-month profit after expenses," she said. "Most of the stores he had were in the same ballpark."

Under Sunshine Energy, Rose never saw the financials, but she could tell that business was dwindling. Customers complained when her new bosses got rid of popular 50-cent Little Debbie cakes and a bestselling coffee. When the station's sign broke and Rose was unable to post gas prices, people told her they didn't know whether her pumps were working. They groused when the deli hours were cut.

"It was such a struggle, going to work every day and seeing the business go down more and more," she said. "It was almost a relief for it to end."

Situation is 'absolutely bizarre,' Greene says

On Tuesday, U.S. Bankruptcy Judge Marcia P. Parsons denied Management Properties' motion to dismiss the bankruptcies of the three Sunshine subsidiaries. Earlier, however, she had ruled that the landlord could keep the dozen stores already seized; Sunshine is appealing that decision, and the stores remain closed.

The judge has approved Sunshine Energy's plan to get a $750,000 loan to help it reorganize from Aviation Plaza Partners LP, a company in which Greene is a partner. Though the energy company's chief financial officer testified in June that it was only "vaguely possible" Sunshine could repay the debt within six months, Greene said the money hasn't even been touched.

"It's not necessary because this is a successful company, with no need for cash at all," he said. "This is just one division where there's been a dispute with the landlord."

In court, Sunshine's executives pledged to use the additional financing to bring rents current, pay all 2009 taxes and put aside money for store repairs.

"We've offered to cure everything," Greene said of the offer made in June, after the store seizures began. "The landlord, who used to own the business, is now trying to steal back something that I, through my group, paid over $6 million for. He's closed stores, causing people to lose jobs. To me, it's absolutely bizarre."

Greene said he got into the fuel retailing and distribution business last year "as a chance to make some money at the same time I could save hundreds of jobs." But he has no plans to return to the venture.

"I'm planning on moving to Washington in January as the senator from Florida," Greene said.

Times researcher Caryn Baird contributed to this report. Kris Hundley can be reached at khundley@sptimes.com or (727)892-2996.

Greene's voice mail

Read a transcript of a voice mail Jeff Greene left with the landlord's representative at links.tampabay.com.

Battle with Tenn. landlord causes troubles for Jeff Greene company 08/20/10 [Last modified: Friday, August 20, 2010 11:34pm]
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