TAMPA — To save Channelside Bay Plaza, the Tampa Port Authority may have to nuke it.
Legally nuke it, that is.
The Port Authority hoped a savvy, creative new operator — Tampa Bay Lightning owner Jeff Vinik and his partners — would turn around the entertainment-retail complex.
But five weeks ago, the Vinik group backed off its bid for Channelside. That's because the bank that owns the lease tried but failed to get the previous operator, Ashkenazy Acquisition Corp., to relinquish its right to match any offer.
It doesn't appear that anyone will bid on the lease until Ashkenazy is made to go away.
That's where the nuclear option comes in.
• • •
A bank owns Channelside's mortgage but the Port Authority owns the land. Under state law, the port's interests in the complex supersede those of anyone else. And Ashkenazy's right of first refusal is with the bank — not with the Port Authority.
So the Port Authority's governing board holds the ultimate legal card: its 2010 lawsuit to evict Irish Bank Resolution Corp.
Nuking — or rather, removing — the bank's financial interest from the equation could remove the last hurdle to new ownership. Then the Port Authority could sign its own deal with a new operator for Channelside.
But that legal option could prove to be costly, cumbersome and time-consuming.
The best hope for a quick resolution, it seems, is still negotiation.
"The Port Authority would very much like to see one of these (ownership groups) purchasing the paper from the bank," said attorney David Hendrix, who represents the port's governing board in Channelside litigation.
"If that doesn't work, we will evict everybody off the property. Then the port will own the property and do what the board sees fit."
• • •
Channelside Bay Plaza is an entertainment-retail complex in name only.
Little retail is left. The only entertainment consists of what's on the big-screen TVs at Hooters. The structure seems antiquated and barren. The theater closed. Most of the restaurants fled. What's left serves as little more than a speed bump for tourists waiting to board their cruise ships.
But its commercial failings are outweighed by the legal morass in which the complex is mired.
In 2006, Ashkenazy took out a $27 million loan from Anglo Irish Bank of Dublin. In 2010, the bank foreclosed because Ashkenazy hadn't made a mortgage payment in a year.
The Port Authority wanted someone else running Channelside. It wasn't just that Ashkenazy wasn't paying rent and that patrons were disappearing. The complex also fell into a state of disrepair and violated fire codes.
Ashkenazy complained that Channelside was failing because the Port Authority was mismanaging the parking situation. The attorney representing Ashkenazy did not return a call for comment last week.
So in a June 2010 deal, the Port Authority agreed to stay its eviction suit and waive $444,000 in debt if Ashkenazy stepped aside and allowed Anglo Irish Bank to take over Channelside. A receiver was appointed to run the place in Ashkenazy's stead.
There was another reason the Port Authority agreed to suspend the eviction lawsuit: so Anglo Irish Bank — which failed and was nationalized as Irish Bank Resolution Corp. — could find a new buyer for the Channelside lease.
• • •
Earlier this year, two powerhouse groups lined up to bid on Channelside's lease:
One group was led by Vinik, who teamed up with Andrew Wright of the commercial real estate firm Franklin Street and Anthony Everett, president of Everett Realty Services.
The other included mortgage magnate Bill Edwards, who recently acquired St. Petersburg's BayWalk, along with Rick Michaels, chairman and CEO of Communications Equity Associates, and Ken Jones, CEA's executive vice president and general counsel.
In May, the Vinik group, Metis Channelside LLC, emerged as the frontrunner to negotiate a new Channelside deal with the IBRC.
The Vinik group showed its designs to the Port Authority's governing board, which compared them to L.A. Live, a large residential and retail complex built around the Staples Center, home to Los Angeles' NBA and NHL teams.
Board members called this version "Tampa Live." Vinik himself called it "Little Live."
The Vinik group was the kind of buyer that the Port Authority hoped to attract. Allowing a new owner to take over would likely prove to be faster, easier and less costly than suing to evict the old tenant, and thus the bank as well.
• • •
In July, fed up with the delays, the Port Authority's governing board voted to restart eviction proceedings.
It hoped that move would speed up the negotiations to sell Channelside's lease. The Irish bank was negotiating both with the Vinik group to take over the complex and with Ashkenazy to relinquish the right of first refusal.
By October, negotiations for new ownership appeared to be going well. The Vinik group started negotiating directly with the port over changes it wanted to make to Channelside, such as building a pedestrian bridge to the parking garage over Channelside Drive.
But on Oct. 22, the Vinik group announced it was "suspending" its negotiations.
"We have come to the conclusion that a significant legal hurdle, beyond our control, could not be overcome," said a prepared statement from Tod Leiweke, CEO of Tampa Bay Sports and Entertainment, which owns the Lightning and the lease to the Tampa Bay Times Forum.
That hurdle, apparently, was Ashkenazy's right of first refusal. The issue remains unresolved.
If Ashkenazy were to match Vinik's bid for Channelside, the Port Authority board would still have to approve any new deal because it owns the land. But the board has soured on Ashkenazy and would likely veto any deal involving the former operator.
That, however, would not prevent Ashkenazy from suing.
Vinik and his partners, as well as other potential ownership groups, probably would not want to sign a contract for Channelside only to quickly find themselves embroiled in litigation.
• • •
That's where the nuclear option comes in.
"We terminate the lease (held by the bank) and evict the (receiver)," Hendrix said, "and the bank goes with them."
And if the bank goes, what happens to the right of first refusal?
"If the bank is evicted, I would suspect that Ashkenazy's right of first refusal would be jeopardized, but I cannot give you a legal opinion," Hendrix said. "But I suspect it would be moot."
How long would the eviction route take? The soonest trial date would be mid 2013. The trial would likely last a week. Hendrix is confident the Port Authority would prevail, but there are no guarantees in litigation.
To protect its interests, Ashkenazy would likely challenge the port in court, so the authority would have to battle it and the bank at trial.
The Port Authority's eviction would no longer be based on debt. It would be about nonperformance. That's what it would have to prove in court.
"The big picture is we're evicting them because they failed to run and operate a first-class retail and restaurant facility," Hendrix said. "They have failed to clean it, fix it, rent it and provide the property security."
Assuming the Port Authority prevails, an appeal could be filed to the 2nd District Court of Appeal. That could add another year or two. The next appeal is to the Florida Supreme Court. That could add a year to 18 months.
So, if the Port Authority were fortunate, the renewed eviction case would be over in a year. But it could also drag on for two more years. Worst-case scenario: four years of this mess.
In the meantime, Channelside would continue to wither, fall into even more disrepair, lose more customers and perhaps even the few tenants it has left, like Hooters. The Port Authority would also be on the hook for its legal costs in the eviction battle as well.
The path of least resistance, then, still appears to be for the bank to negotiate with Ashkenazy to give up that right of first refusal, then sell Channelside's lease to a new operator.
"That would be nice," said the chairman of the port board, William "Hoe" Brown.
"But at the end of the day, if they don't, we have to be prepared to go full bore with the suit."
Jamal Thalji can be reached at [email protected] or (813) 226-3404.