Since one of Tampa Bay's landmark homes hit the market for $18 million shortly before Christmas, many in St. Petersburg have wondered why owners David and Michelle Rau were selling so soon after finishing massive renovations.
Part of the answer: A computer-training school owned by the couple has abruptly gone out business, a victim of the economy, sharp reductions in student loans and a legal wrangle with its major lender.
ComputerTraining.com, with nearly 1,000 students in 14 northern states, closed Dec. 31 after BB&T improperly froze a line of credit and "left the company with no funds to operate,'' Rau said Friday.
As a result, "all of a sudden I'm required to come up with $6 million to pay off business debt and I don't have those kinds of assets,'' he said. "The house is the collateral we've got.''
Rau, 44, who bought the waterfront Snell Isle mansion in 2006, wouldn't comment on a Baltimore Sun report that he might declare bankruptcy.
BB&T is suing the Raus and ComputerTraining.com, alleging they defaulted on a $1.5-million loan. In a separate suit, BB&T alleges the company spread false and misleading statements about the bank's role in the school's demise, the Sun reported.
Located in Hunt Valley, Md., ComputerTraining.com certified students to work on Microsoft operating systems. Despite consumer complaints about high fees and exaggerated claims of success, Rau said the company was doing well until the 2008-09 credit crunch caused Sallie Mae, which provides federally guaranteed student loans, to cut back drastically on lending.
"We had more and more people trying to get in, but they couldn't get loans,'' said Rau. "So what happened was that enrollment rates started to drop.''
To stay afloat, the company laid off about a third of its staff and cut tuition by about half, to under $15,000 for a six-month course, Rau said. He said he also put $4 million into the school last year by taking out two mortgages on the Snell Isle house.
Plans were to continue classes through the first part of 2010 and then sell the company, which was valued at up to $15 million even though it lost money last year, Rau said. In December BB&T revoked the credit line, seized certain company assets and ordered ComputerTraining.com to lock all of its locations, he said.
"It was an abrupt closure and a surprising event,'' said Leslie Bennett, an associate director of the Maryland Higher Education Commission. "The school had been operating on a favorable basis and was meeting the financial and other standards of the commission.''
When it shut down, ComputerTraining.com had about 100 students in Maryland who had paid $13,500 each for a six-month program. All will receive refunds, either from the company's letter of credit posted with the state or a fund that all private career schools in Maryland are required to contribute to, Bennett said.
A Pennsylvania native, Rau worked as a bartender at the Don CeSar Beach Resort after college. In 2004, retired from daily involvement with ComputerTraining.com, he moved back to Pinellas County and bought a house on Coffee Pot Bayou in northeast St. Petersburg.
Directly across the water was the Perry Snell House, which had undergone almost no updating since it was built in the 1920s.
"The first time we walked through this place, I said, 'No way in hell am I buying this place, there's too much to do,' '' Rau recalled. But he reconsidered after learning that a developer might tear it down and erect three homes on the 1.6-acre lot.
"I thought it was a piece of history and part of the agreement of buying was to restore it,'' he said.
In general, the Raus kept a low profile as neighbors marveled at the enormous amount of work going into the nearly 10,000-square-foot mansion. They have been actively involved in private Shorecrest Preparatory, which their four children attend. A new high school building is named in honor of Michelle Rau's brother, and the couple have pledged between $1 million and $1.5 million, according to a poster there.
"The Raus have been remarkably generous to the Shorecrest community,'' headmaster Michael Murphy said. David Rau acknowledged that not all of the pledge money has yet been paid.
Records show that the Snell Isle house was bought by the "375 Brightwaters Revocable Trust'' for $5.1 million. The Pinellas property appraiser lists the "just market value'' as $4.63 million.
Rau has been the target of anonymous online comments, suggesting he used students' tuition money to fund a lavish lifestyle, a charge he denies. He said the house is costly to maintain. The 2009 taxes of nearly $95,000 have yet to be paid; the deadline is March 31.
Times staff writer Mary Jane Park and researcher Will Gorham contributed to this report. Susan Taylor Martin can be contacted at [email protected]