ST. PETERSBURG — The financial meltdown of BayWalk is bad news for its biggest investors.
They're just not who you might think.
City taxpayers spent at least $20-million to build the downtown entertainment complex, significantly more than BayWalk's original developer, the Sembler Co., or current owner Fred Bullard, according to a Times analysis.
In fact, it's unclear how much money the Sembler Co. or Bullard ever spent on BayWalk, according to the analysis, which relies on mortgage and city records.
While it cost the city $8.3-million to acquire the BayWalk properties, Sembler and Bullard paid nothing for the land.
And bank loans financed all construction costs. The loans, which total more than $14-million, are now in default. Virtually none of the original principal has been repaid.
Sembler Co. chief executive Greg Sembler and Bullard both insist they invested heavily in the project, which was conceived in the 1990s to energize the city's downtown. They brush off any notion that the city will be the only loser if BayWalk fails.
However, if BayWalk does fall to foreclosure, the Sembler Co. says it will have made a small profit. Bullard says he will have lost some money. Neither would say how much.
A court hearing in the foreclosure case is scheduled today.
"We left our heart and blood out on the field and did the best we could," said Greg Sembler. "For many years, BayWalk was exciting. (Its demise) is just a combination of factors, and I'm not wise enough to tell you whatever percentage each one was."
Who's in charge?
Under the surface of an outdoor retail and entertainment center, BayWalk is a complicated and tenuous partnership among at least four private entities and the city.
BayWalk's movie theater is owned by a New York real estate investment trust but managed by theater company Muvico. The adjacent retail and restaurant space is now controlled by Bullard and will soon become property of the bank holding the mortgage, Wells Fargo.
The surrounding parking garage and retail space, which includes Starbucks and Atlanta Bread Company, are owned by the city.
The cavalcade of disjointed interests has produced bickering and backstabbing between the parties, and has created questions about who is ultimately responsible for the development.
In interviews with the Times, Sembler criticizes the city, which refused to give the developer rights to the complex's main sidewalks so it could keep demonstrators away.
Muvico blames the city and the developers for BayWalk's failings. Bullard blames the bank for not being more flexible in renegotiating the loan.
Everyone fingers the economy.
"This whole thing has had a hugely detrimental effect on our business," said Muvico CEO Michael Whalen. "Everyone is throwing the keys to BayWalk at each other. We're an innocent bystander of all this negativity."
The largest stakeholder — the city — surprisingly has the least amount of influence. City officials have acknowledged they can do little to affect the project's future, other than lobby for a reputable next owner. One official described it recently as a "monitor mode."
The situation has created a sense of uneasiness among BayWalk's 40 businesses, while city leaders remain hopeful the broader economic stability of downtown will create its own solution for BayWalk.
It's possible the foreclosure could be finalized at a court hearing today, where BayWalk could be placed in the hands of a temporary trustee.
"When I talk to people, they think the stores and restaurants are closed. And it's not the case," said Bruce Rabon, who owns two BayWalk clothing stores, Hurricane Pass Outfitters and Metropolitan Outfitters. "The mood here is we're ready and kind of anxious for the next owner."
What's going for BayWalk, Mayor Rick Baker and others say, is its prime location in a relatively prosperous downtown. BayWalk will eventually come out of its tailspin, they say.
But how much damage will be done before it does?
Cadillac stalled out
Sembler and Bullard were the "Cadillac" of developers, then-Mayor David Fischer said, in announcing the deal for BayWalk in 1999.
The Sembler Co. had developed shopping center projects across Florida and the Southeast, and Bullard built the Feather Sound neighborhood in Pinellas County.
To win their business, the city committed to build an $11.6-million parking garage and make another $2-million in nearby landscaping, utility and street improvements.
The city also agreed to sell the theater and retail portion of the site to the developers for $3.2-million, more than half of which was to be paid as part of a mortgage in the event BayWalk sold at a huge profit.
The up front cash, $1.45-million, was provided by Muvico, not Sembler or Bullard.
The mortgage — $1.75-million — will never be repaid, said city attorney John Wolfe, adding that the city never expected to see the money. He described the mortgage terms as necessary to get developers to agree to the project.
Also as part of the development agreement, the BayWalk land returned to the city's tax rolls. Since opening in 2000, the city has received $1.56-million in property taxes from the BayWalk properties.
The city parking garage, which was largely built with Penny for Pinellas dollars, is paid off.
But like BayWalk, it has seen better days.
The garage housed 312,000 vehicles in 2008, the fewest in its history and a drop of 24 percent from just two years prior. Annual profits, which peaked at $230,000 in 2006, dwindled to $14,000 in 2008. City parking and transportation director Joe Kubicki described the downturn as "largely a function of the performance of BayWalk."
BayWalk, meanwhile, faces the prospect of its third owner in five months. After unsuccessfully trying to sell BayWalk in 2007, Sembler instead agreed to turn its interest in the property over to Bullard in September 2008. Bullard, in turn, has refused to make monthly mortgage payments after talks to renegotiate the bank loan stalled. The property faces foreclosure.
It turns out Muvico also might be stretched thin, mortgage documents show. The company, which runs 11 Florida theaters and three others nationwide, built its St. Petersburg theater using an original $17.8-million construction loan.
But to finance other theater projects nationwide, Muvico refinanced its original BayWalk mortgage to $55-million. It sold the theater to a New York REIT but remains responsible for the debt. Muvico CEO Michael Whalen said the company has considered closing the St. Petersburg theater.
"They've overleveraged themselves," Bullard said. "They buried themselves. BayWalk is not overleveraged. But with the current economic situation, it is overleveraged."
Bullard, who plans to walk away from the property after eight years, said the economic wrongs can be righted. But not easily. In many ways, he describes it as another phoenix-like ascent — Bay Plaza to BayWalk, BayWalk to something else.
"It's going to take a lot of money," Bullard said. "And whoever is prepared for that can build BayWalk back to where it was or even better. It would not be impossible for someone to make a great success out it . But they better have deep pockets — and a lot of good fortune along the way."