ST. PETERSBURG — Hoping to avoid drawn-out foreclosure proceedings, BayWalk owner Fred Bullard said Friday he is negotiating a deal to simply surrender the deed to the downtown entertainment complex and walk away.
Under the proposal, a bank would take control of the retail and restaurant portion of BayWalk and appoint a trustee to run the complex until a suitable buyer is found.
The stores would remain open.
"We are prepared to lose our equity," said Bullard, a partner in the original development who took over full control from the Sembler Co. in September. "We can jerk them around forever if we want, but there's no benefit for us doing that. It doesn't help the tenants, it doesn't help the city of St. Petersburg. As a result, we're ready to get going so whoever ends up being responsible for (BayWalk) can move forward."
Bullard said he hopes to have a settlement before a scheduled Jan. 13 foreclosure hearing.
Originally cast as a catalyst to downtown redevelopment when it opened in November 2000, BayWalk now finds its future in jeopardy over serious financial problems. The idea that a disinterested bank could take control of BayWalk — if only for a period of time — may only exacerbate worries.
Last month, Bullard admitted to defaulting on BayWalk's $14.5-million mortgage after negotiations to refinance the loan broke down. Bullard said he had an agreement in principle to invest millions of dollars upgrading the property in exchange for more favorable loan terms. But lenders instead called the loan due.
It's unclear how much money Bullard stands to lose by relinquishing the property. A review of public records suggest Bullard has paid off about $1-million on the original $15.5-million mortgage.
Bullard's portion of BayWalk includes the retail and restaurant space next to the 20-screen Muvico theater. The city owns the parking garage and retail space between First and Second avenues north. The theater is owned by another company.
Left to be decided is whether lenders could collect any penalties from Bullard for failing to repay the mortgage. Bullard believes that is unlikely.
The technical owner of BayWalk, STP Redevelopment, has no other assets and was created solely to own BayWalk.
Any agreement might also be complicated by the number of lenders that may have a say in the BayWalk mortgage.
While the mortgage in question was written in 2002 by Salomon Brothers, it was assigned to Wachovia Bank in 2003. Recently, the loan was transferred to Wells Fargo. Now, Bullard said, it appears a group of investors, CWCapital Asset Management, is in charge of the loan on Well Fargo's behalf.
CWCapital did not return a call seeking comment. According to its Web site, CW Capital holds more $178-billion in multifamily and commercial real estate mortgages in 14,500 properties.
What they might choose to do with the property is unknown. Speculation centered around two options: Reinvesting in the property to inflate its value — like flipping a house; or quickly unloading the property to raise cash.
"The people that hold the mortgage aren't traditional bankers," said Greg Sembler, whose company originally developed BayWalk as part of a city redevelopment program. "These are Wall Street guys. It's simpler for them to foreclose and figure out what they got. They'll do whatever they need to do enhance the property and get it off their books as soon as they can."