TAMPA — The latest effort to save Channelside Bay Plaza is at a standstill.
After two weeks of nonstop negotiations, Liberty Channelside LLC came to an impasse on Wednesday with the Tampa Port Authority over its proposed purchase of the failing downtown waterfront entertainment and retail complex.
The Tampa Port Authority staff wants Liberty Channelside and its principals, real estate investor Santosh Govindaraju and hotel developer Punit Shah, to pay $8 million in escrow up front before allowing the port's governing board to vote on the deal. The Tampa Port Authority owns the land Channelside was built on, so the board must approve any sale of the lease.
But Liberty has offered to put only $2 million in escrow. Neither side appeared ready to back down on Wednesday.
Both the port and the ownership group would sign off on using the money, but it would all be used by the prospective new owners to pay for their proposed improvements to Channelside.
The port wants Liberty to show it is financially committed to revitalizing Channelside, and not just buying and repainting it. But that's not the only issue frustrating the port. Officials said the Liberty group's plans for the complex, like its funding, are still too amorphous.
"They talked about a lot of things but they were not very specific," said Charles Klug, port counsel. "The key word is commitment. The frustration we've had is that these (ideas) sound good, but getting the commitment is the problem. We've really been trying to work with them but the financial commitment has been the most difficult issue."
Govindaraju and Shah did not respond to calls or emails requesting comment.
Klug denied that the escrow request was a provision designed to eliminate the Liberty group and allow Tampa Bay Lightning owner Jeff Vinik to get back into the Channelside race. Vinik was the frontrunner to buy the complex last year then pulled back over a legal dispute. There's no doubt that the port board still views him, and his Channelside plans, very favorably.
The port said there are several reasons why it needs Liberty Channelside to pay such a large financial guarantee up front. For one, the port wants proof of financial commitment in exchange for all of the rights that Liberty Channelside is asking the port to surrender.
The port said Liberty wants it to give up its right to declare the lease in default if the new owner fails to "operate, repair and maintain" the complex in a "first class" manner — terms the port believes past operators repeatedly violated.
Liberty also wants the Tampa Port Authority to give up its 2010 lawsuit — still slowly winding its way through the courts — to evict the Irish bank that currently owns the center so that the port can take it over. The port said its ability to enforce the lease — and the legal threat that it could cut out the bank — are its only means of protecting its interest in Channelside.
"If they want us to waive that, then they have to show they have the financial commitment," Klug said. "If we waive all the defaults, it's basically saying that it's a leap of faith, that we trust them to do what they say they'll do.
"But if we give up our rights then we have no control. It just continues the death spiral."
The escrow would also give the port financial assurance that the Liberty group will actually spend the millions it has pledged to put toward upgrading and revamping Channelside. Liberty has proposed spending anywhere from $13 million to $22 million to bring in new restaurants, new shops, add office space and build a boutique hotel on top of the building.
But it's not just Liberty that's saying no. Klug said the port has, for now, rejected Liberty's request to have the port help pay for new pedestrian skybridges to the parking garage.
The original escrow proposal was for $10 million. Liberty Channelside countered with $2 million. The port said it came down to $8 million on Wednesday, but Liberty's answer was no.
The escrow account would also serve one more purpose: It would prove that Liberty Channelside has the money to carry out its vision.
Govindaraju is the CEO and portfolio manager of Convergent Capital Partners LLC, a real estate private equity firm. Shah is the president and COO of Liberty Group, a hotel developer. Together their Tampa Bay companies have handled hundreds of millions worth of assets.
But Liberty Channelside itself is a new venture incorporated in February. It has "nominal funding," according to the port. Govindaraju and Shah both showed the port financial accounts to prove they have the funding, Klug said, but none of those assets belonged to Liberty itself.
Because of the stalemate, the Channelside deal was not placed on the agenda for the next board meeting on Tuesday. If the deal survives the next few weeks, it likely won't go before the board until June at the earliest.
But the two sides seem far apart. The port will not budge from its escrow demand, and Liberty doesn't seem willing to put more skin in the game.
"There's a lack of financial commitment," Klug said, "to do the things they say they're going to do."
Jamal Thalji can be reached at [email protected] or (813) 226-3404.