TAMPA — The Tampa Port Authority's dream deal to buy Channelside Bay Plaza turned into a legal nightmare Tuesday.
U.S. Bankruptcy Judge Christopher Sontchi killed the port's agreement to purchase the most tormented piece of real estate in Tampa Bay for $5.75 million from the Irish bank that owns the mortgage on the foreclosed — and these days, seemingly accursed — outdoor mall.
The Irish Bank Resolution Corp. owns the mortgage on the building, but the port owns the land. For years neither could agree on who should buy Channelside. In September, the port decided to end the impasse by buying out the bank.
The port's deal was the only hope in the last year of resolving the complicated Channelside ownership structure that has sent businesses fleeing and kept customers away.
But by the time the port signed the deal, the special liquidators charged by the Irish government with selling off the IBRC's distressed assets had already sought bankruptcy protection for its American properties, and that includes Channelside.
Thus, the port's deal needed the blessing of a federal judge — which it did not get Tuesday.
Instead, the judge told the liquidators to get more money for Channelside than the $5.75 million offered by the port. His message, in short: Do better.
"I don't think the . . . representatives have done enough to market this aggressively," he said.
It just so happens that the judge recently met two bay area real estate investors who say they're ready to pay more for Channelside right now: Punit Shah and Santosh Govindaraju showed up at the judge's Delaware courtroom on Friday with a guaranteed check for $7 million.
That was what they agreed to pay to the Irish bank for Channelside last year. But their negotiations with the port fell apart as both sides traded accusations of harsh language, threats and negotiating in bad faith. So in May the port's governing board voted to kill Liberty's bid.
Then in December, Liberty sued in federal court to stop the port's purchase. They believe the port unfairly ended their deal so that the port could strike its own deal using Liberty's price.
Liberty also wanted Channelside put up for auction and monetary damages from the port. Those claims weren't settled Tuesday, but the investors celebrated one victory in particular: The judge determined that the Tampa Port Authority did treat them unfairly.
Back in May, while the Liberty deal was falling apart, the political website saintpetersblog.com quoted an anonymous source saying Govindaraju "accused (the port) of over-reaching and said that if they were in his country, they would cut off the liar's hands for such an offense."
Govindaraju apologized for dropping "f-bombs" during negotiations. But he insisted he was making a metaphor about overreaching in business, not threatening port officials.
He also testified last week that the way the remarks were phrased made them seem like a "cultural and religious" slur.
Govindaraju, who practices Hinduism, grew up in Carrollwood and graduated from Gaither High School and the University of Pennsylvania. He became a trader on Wall Street, then left to become the CEO of Convergent Capital Partners LLC of Tampa. He and Shah testified last week that those online remarks damaged their reputations and follow them to this day.
"In my experience this was Mickey Mouse stuff," Sontchi said of the remarks anonymously attributed to Govindaraju. The judge added: "Failure to consent (to the sale), at least based on some sort of ethnic or religious prejudice, is not in good faith."
The port's attorney, Jason Burnett, told the judge that ethnicity and faith had nothing to do with the port's decision to deny Liberty's attempt to buy Channelside.
"In no way were any religious or ethnic factors considered," Burnett said. "There were other economic factors. . . ."
But the judge didn't buy those economic factors, either.
"Based on the reasonable business standard . . . there was no legitimate business reason for the port not to consent to (the Liberty sale)," the judge said. "The allegations of foul language, etc., during the negotiations are not sufficient, in my mind, to withhold consent."
Shah and Govindaraju pumped their fists during the judge's conference call in the 28th floor offices of their attorneys. Then the lead lawyer, John Anthony, broke out bottles of champagne and handed out inscribed Montblanc pens.
"We appreciate the opportunity to share the truth," Shah said, "and to have it count as the truth in a court of law."
The problem with the ruling, however, is that it did nothing to resolve Channelside's fate, or give hope to the last remaining businesses hanging on there that it will be resolved anytime soon.
The judge chose not to rule on whether the port can cancel any deal the bank inks to sell Channelside. Thus the impasse that has divided the port and bank for years — the "original sin" of Channelside's woes — remains unsettled in a court of law.
So what happens next? Will the bank find a new buyer, a better offer, or both? Will the port offer to pay more for Channelside? Both sides could appeal the judge's ruling, but that would be a difficult path.
Instead, the bank and port could try to work out another Channelside deal — for the kind of money, perhaps, closer to the $7 million Liberty would have paid — that will satisfy the judge.
The IBRC does not comment on Channelside matters, and Tampa Port Authority officials did not return calls for comment on Tuesday. But the port did release this statement:
"The Bankruptcy Court in Delaware ruled today that the IBRC must engage in additional due diligence to move forward in regard to the settlement of the Channelside Bay Plaza. The Tampa Port Authority looks forward to continue to work with the special liquidators for the IBRC and the courts to find the best solution for Channelside and the Tampa Bay community."
There is, however, at least one buyer out there who still wants Channelside: Liberty's investors.
"We still want to buy it," Shah said.
Jamal Thalji can be reached at [email protected] or (813) 226-3404. Follow him on Twitter @jthalji.