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Irish bank that owns Channelside Bay Plaza ready to abandon it

The Irish Bank Resolution Corp. says the failed and deteriorating Channelside complex is no longer worth its time and trouble.

SKIP O’ROURKE | Times

The Irish Bank Resolution Corp. says the failed and deteriorating Channelside complex is no longer worth its time and trouble.

TAMPA — A few days ago, the folks running the auction for Channelside Bay Plaza released 1,027 pages explaining the complicated rules for selling the most complicated piece of real estate in Tampa Bay.

But tucked inside is an escape hatch for the Irish bank that has failed to unload downtown Tampa's beleaguered outdoor mall: If it isn't sold this time, then the Irish Bank Resolution Corp. asked a judge to let it walk away from Channelside once and for all.

"Given the mounting carry costs, the ongoing litigation, and the relatively small value of (Channelside) … " the bank's lawyers told the court, "the abandonment of (Channelside) is in the best interests of IBRC and its creditors."

The bank wants to abandon Channelside? Is that even possible?

It's possible, but would be highly unusual.

It's one thing for a borrower to abandon property that's in foreclosure or worth far less than the original loan. It's unheard of for a bank to try to walk away from millions of dollars worth of property that it already owns, experts told the Tampa Bay Times.

"I think it's highly unusual for anyone to walk away from a property if it's valuable," said Stetson University College of Law professor Theresa Pulley Radwan, a bankruptcy expert.

But for a bank to walk away? "I can't recall ever hearing that," she said.

The Irish bank's argument to the court is that if the July 2 auction fails to result in a sale, Channelside is no longer worth its time and effort. The IBRC, which took over Ireland's failed banks after the worldwide recession, said it has to get rid of nearly $34 billion worth of distressed assets around the world.

Channelside is just one of those assets, and the highest offer on record for downtown Tampa's failed mall is just $7 million.

"It's a flea speck in that giant bankruptcy," said Tampa economic opportunity administrator Bob McDonaugh.

Or as the bank's lawyers put it: "The time and effort expended … to dispose of (Channelside) is markedly disproportionate to the value" of everything else the bank has to sell off.

There's also a decent chance that the July 2 auction will fail to produce a viable buyer and that Channelside will get hung up in even more litigation.

What would happen if the bank somehow abandoned Channelside?

There are ways municipal governments can take control of abandoned properties. But in this case, McDonaugh said only one government agency would get Channelside: the Tampa Port Authority.

That's because the port leased the land that Channelside was built on in 2001. The port has an "unsubordinated ground lease" that gives it certain powers over Channelside. The port would be first in line to take over the abandoned property.

"That's the only way it would happen," McDonaugh said. "The port is the only one who has rights to the property. If the bank walked away, the property would revert to the port."

That would be especially fortuitous for the port, which covets Channelside and is a bidder in the upcoming auction. The port's governing board wants to select the developer who will be given the chance to turn Channelside around.

But a scenario where the Tampa Port Authority could grab Channelside without spending millions seems too good to be true.

The bank can't abandon Channelside unless the judge allows it. And the bankruptcy court's mission is to get the most money out of the IBRC's distressed assets. In February, the judge dismissed the port's $5.75 million offer for Channelside because it wasn't good enough.

Such a scenario — where the bank abandoned Channelside to the port — would likely be challenged by the port's rival for Channelside, a group of bay area real estate investors known as Liberty Channelside LLC.

That's why Radwan said the maneuver seems more like saber rattling from the bank. Think of it as more of a warning shot to bidders to make serious offers.

"My gut is that they don't actually expect to abandon it," she said. "They have put this in just in case, maybe as a way to entice higher bids."

Jamal Thalji can be reached at thalji@tampabay.com or (813) 226-3404. Follow him on Twitter @jthalji.

Channelside plaza's list

of needed repairs long

There's another tidbit tucked inside the voluminous Channelside court record: a laundry list of everything that's wrong at Channelside Bay Plaza.

Channelside's physical condition has deteriorated while its fate has been tied up in years of litigation. The next owner will be expected to spend millions of dollars to not just repair the dilapidated complex, but to also completely remake Channelside and its lineup of offerings.

In preparation for the July 2 auction, the IBRC hired Parsons Brinckerhoff Inc., an infrastructure consultant, to inspect Channelside in May. Here's what the report said:

Channelside's roof and its heating, ventilation and air-conditioning system (or HVAC) may have to be replaced soon.

Damage from "water intrusion" was spotted all over the exterior and interior of the complex, a sign that the roof has reached the "end of its service life."

A new roof could cost up to $3.6 million. A new HVAC could cost up to $3 million. The report said that such systems typically last only 12 to 15 years. Channelside is 13 years old.

The report also raised concerns about Channelside's safety. The 190 HVAC rooftop components aren't anchored down in case of a hurricane; the roof's lightning protection system is in disarray; and the fire sprinkler system has corroded and deteriorated.

The report said that Channelside not only suffers from a "lack of needed maintenance" but that it was flawed from the start. "It appears that a number of the issues arise from improper design choices as well as inadequate material installation choices at the time of construction," the report said.

The most glaring example of poor design was the outside escalators, which don't work.

The escalators were intended for indoor use, the report said. They were damaged some time ago when the lower well was left underwater for "almost a week." Repairs could cost up to $160,000. The report didn't say why they haven't been fixed.

The total cost just to fix Channelside was estimated to be between $6.8 million and $8.1 million.

Remaking Channelside, though, would cost millions more.

Irish bank that owns Channelside Bay Plaza ready to abandon it 06/20/14 [Last modified: Friday, June 20, 2014 5:44pm]
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