The long-running Channelside Bay Plaza saga is on the verge of a stunning and quick resolution.
The warring parties in the troubled Channelside auction reached a surprise settlement on Sunday night, just hours before a bankruptcy judge was set to accept or reject Tampa Bay Lightning owner Jeff Vinik's bid for the downtown Tampa mall.
In federal court, attorneys filed a proposed "global settlement of pending litigation" late Sunday night that would hand control of Channelside to Vinik.
U.S. Bankruptcy Judge Christopher Sontchi still has to approve the settlement, however.
Vinik's new company, CBP Development LLC, will still pay $7.1 million to buy the Channelside building.
But under the terms of the settlement, the Tampa Port Authority also will pay an additional $1.9 million to buy the loan on the property.
Channelside is a distressed asset of the Irish Bank Resolution Corp., whose assets are being liquidated in bankruptcy court. The IBRC would receive $9 million total for Channelside.
It was not revealed, however, what compensation Liberty Channelside LLC will receive to drop its opposition to the Channelside auction. But typically in such cases, monetary compensation is often a part of a settlement.
Vinik won the July 2 auction for Channelside, but that result was opposed by Liberty investors Santosh Govindaraju and Punit Shah. The bay area real estate investors have spent the past year in bankruptcy court fighting for control of the downtown Tampa complex.
Liberty challenged Vinik's bid and the auction rules in court, arguing that the Tampa Port Authority and Channelside's owner, the IBRC, conspired to rig the auction so that Vinik would prevail.
Under the settlement, Liberty would withdraw its legal challenge to the auction, on which the judge was scheduled to rule Monday, and dismiss its lawsuit against the port and IBRC.
The fact that the parties settled with just hours to go may be an indication of just how uncertain both sides were about whether or not they would prevail in the latest court skirmish.
That's because, after listening to two days of testimony and argument last week, the bankruptcy judge didn't sound pleased with any of the parties in the Channelside lawsuit.
The judge questioned the auction rules used by the liquidators of the IBRC, which is trying to sell Channelside. The judge also questioned the actions of the Tampa Port Authority, which owns the land under Channelside and believes it can veto any sale. The port was a competing bidder in the auction, but Liberty accused the port of abetting Vinik's bid.
Liberty also came under the judge's scrutiny, however. Liberty attended the July 2 auction in New York but did not bid. Instead, Liberty came to court with a $10 million offer for Channelside. The judge wondered if Liberty was engaging in legal "gamesmanship."
But the judge also seemed to signal that he might order a new auction, which would have been a win for Liberty but a loss for Vinik, the IBRC and the port.
The judge was scheduled to rule at 12:30 p.m. Monday. If he dismissed the auction, that would restart the whole process. If Vinik still wanted Channelside, he would have had to bid again, and perhaps bid more, under new auction rules imposed by the judge.
There's no love lost between Liberty, the port and the IBRC, which has made a settlement between them unlikely. But Liberty's investors appears to have a different dynamic with Vinik.
The investors, Govindaraju and Shah, are admirers of Vinik and also businessmen. Maintaining a good relationship with him could potentially lead to future business dealings with the Lightning owner.
Vinik has extensive holdings in downtown Tampa and is poised to reshape the Channel District. Liberty has also been active in downtown. Govindaraju and Shah recently opened the Aloft Downtown Tampa boutique hotel in the old Mercantile Bank building.
The proposed settlement prohibits any of the parties from commenting on the potential agreement to settle Channelside's ownership.
"No parties … shall make any statements to the media," the settlement read.
Contact Jamal Thalji at (813) 226-3404 or [email protected] Follow @jthalji.