Aloft hotel at EpiCentre bought by investment group

A Los Angeles-based investment group has bought the Aloft hotel at the EpiCentre in uptown Charlotte. Lowe Enterprises Investors announced Thursday that it bought the 175-room hotel on behalf of an investment client. A subsidiary, Destination Management, has assumed management of the hotel, which will continue operating under the Aloft banner.

Terms of the transaction were not announced.

"Charlotte is one of the strongest markets in the Southeast and one of the fastest-growing cities in the U.S., making it a very attractive area for investment," said Bleecker Seaman, co-CEO of Lowe Enterprises Investors.

This summer, McKibbon Hotel Management of Florida and Charlotte-based Vision Ventures and Mount Vernon Asset Management announced plans to build a 20-story, 302-room hotel tower at the EpiCentre. Vision Ventures and Mount Vernon Asset Management sold the EpiCentre earlier this year to Los Angeles-based CIM Group for $130.5 million.

EpiCentre's unsecured creditors appeal ruling

The committee of unsecured creditors in the EpiCentre's bankruptcy case has appealed a judge's decision to disband the committee.

In January, U.S. Bankruptcy Judge George Hodges approved a motion by the EpiCentre's trustee to disband the committee. In his order filed with the court, Hodges said he approved the trustee's motion because the committee "is no longer necessary to protect the interests of its constituency; the administrative expense of the Committee is not justified; and the Committee has appeared to be counter-productive to the process of this case."

The decision came as the uptown complex's developers, lenders and bankruptcy trustee argue over whether millions of dollars in parking revenues and other money was wrongfully diverted from the project so they wouldn't have to be paid out to creditors.

The committee's attorney, Dennis O'Dea, has told the Observer such a move was unprecedented. Unsecured creditors are among the last to be repaid in a bankruptcy case, with secured creditors and administrative expense claims being paid first.

The project's bankruptcy trustee, Elaine Rudisill, managing director of The Finley Group, is investigating the EpiCentre's finances, looking for money and property that should be recovered to pay off the project's debts.

In an order explaining his decision, Hodges said the trustee "is capable of and required to adequately represent the interests of unsecured creditors in these cases."

So far, more than $220,500 has been paid in legal fees and expenses for the committee, court filings say. This money comes from cash generated by the EpiCentre.

"In these cases the secured creditor has a lien on the cash generated by the debtors' operations. Consequently, the Committee's fees are paid out of cash collateral of that creditor," the order says. "This continued free ride for one group of creditors at the expense of another is an administrative burden that is no longer merited.

At stake in the bankruptcy case is the future of the prominent, 302,000-square-foot retail and entertainment complex, which has been mired in court battles since holding companies Pacific Avenue and Pacific Avenue II filed for Chapter 11 bankruptcy protection in 2010.

The EpiCentre's owners filed for bankruptcy protection after Regions Bank started to foreclose after a $93.9 million loan came due.

Regions later sold the construction note to Blue Air 2010, a limited liability company. Since then, a new company has been hired to manage and operate the complex at Trade and College.

Rudisill has sued EpiCentre developers Afshin Ghazi and George Cornelson III contending that the men "fraudulently, intentionally and knowingly caused the Debtors to transfer millions of dollars in parking revenues to affiliated entities for the benefit of Ghazi and Cornelson personally." The court filings allege the men used shell companies to hide the revenues, and that they did not disclose the companies or the transfer to the bankruptcy court.

Home to restaurants, bars, an art gallery, movie theater and offices, the complex at Trade and College streets sits across from Time Warner Cable Arena, site of the upcoming Democratic National Convention, which will attract tens of thousands of visitors.

Attorney for EpiCentre developer Afshin Ghazi withdraws citing litigation's ongoing cost

An attorney representing EpiCentre developer Afshin Ghazi in bankruptcy court has withdrawn from the case saying the long-running, contentious court proceedings are draining Ghazi financially.

"I have thought for years that money is what controls politics," attorney David Badger told the court Thursday afternoon, when U.S. Bankruptcy Court Judge George Hodges approved Badger's request. "Money is what controls the outcome of litigation as well. You can outspend (a defendant) until they are defenseless."

"I'm in a position where they, quite frankly, don't have the finances to stay in," Badger said referring to Ghazi and fellow developer George Cornelson III. Badger also said he had "considerable accounts receivable."

Ghazi and Cornelson have been involved in heavy court battle since July 2010, when their two limited liability companies that own the EpiCentre, Pacific Avenue and Pacific Avenue II, filed for Chapter 11 bankruptcy protection to avoid foreclosure.

The uptown entertainment project's original lender, Regions Bank, had recently started foreclosure proceedings when a $93.9 million loan came due.

Since then, Regions Bank has sued the developers, questioning how Ghazi and Cornelson spent their loan money and kept records. Ghazi and Cornelson denied claims of self-dealing.

That case was dropped after Regions in November 2010 sold the construction note to Blue Air 2010, a limited liability company. Since then, a new company has been hired to manage and operate the 302,000-square-foot entertainment complex at Trade and College streets.

Things seemed to progress more smoothly until October, when the EpiCentre's new lender sued the project's developers, accusing them of wrongfully diverting money from the troubled entertainment complex before filing for bankruptcy protection.

Blue Air's lawsuit claims Ghazi, Cornelson and others "manipulated and falsified" bookkeeping records and transferred assets to "various insider companies" before the project filed for Chapter 11 last year.

The lawsuit also claims the debtors made "numerous false statements" in their pleadings and court filings. Blue Air is arguing that Ghazi and Cornelson are responsible for returning the EpiCentre's assets, according to court documents.

Blue Air and the EpiCentre's owners have said they were close to agreeing to a reorganization plan this fall. The plan would have released the project from bankruptcy protection.

But the plan fell apart in October when Blue Air changed its terms, according to the court filing by 210 Trade, a Ghazi-affiliated company. 210 Trade owns valuable air rights above the EpiCentre. These air rights, which are connected to potentially millions of dollars in parking revenues, are currently being examined by the bankruptcy trustee appointed to investigate the case.

"Blue Air thereupon proceeded to wrest control ... and began what is a transparent effort to obtain what it could not obtain through negotiation or blackmail ... parking revenue associated with the Air Rights Tract, " the documents say. "Whether due to lack of due diligence or otherwise, it is clear that Blue Air has buyer's remorse and that it does not like the deal it negotiated."

Currently, attorneys in the case are doing discovery and conducting numerous depositions.

A confirmation hearing on the reorganization plan is expected to be held later this month.

Unsecured creditors could get money back from EpiCentre

Unsecured creditors owed money by the EpiCentre's developer could end up being paid all of what they are owed - a rarity in a real estate bankruptcy case, experts say.

Attorneys for the entertainment complex, its developers, the lender and others met in federal court Thursday to continue working toward an end to the ongoing bankruptcy case. The EpiCentre's developer filed for Chapter 11 bankruptcy protection in July 2010 to stave off foreclosure attempts by its lender.

On Thursday, Travis Moon, an attorney for the trustee appointed to oversee the project, told the court that he expected the bankruptcy case would be "a 100 percent case," slang meaning "people are going to get paid," said Dennis O'Dea, the attorney for the committee of unsecured creditors.

The debtor is expected to present a reorganization plan to U.S. Bankruptcy Court Judge George Hodges next month. As part of that plan, O'Dea said, the project's lender, Blue Air 2010, seems willing to let more money go to the unsecured creditors.

O'Dea said creditors are owed between $5 million and $9 million.

"It's quite unusual in real estate cases that people who provided goods and services to the debtor get some money back," he said. "General creditors are usually just kind of swamped by the tide in the fight between the giants (the developer and lender)."

The uptown project has been mired in court battles since the original lender, Regions Bank, started foreclosure proceedings in July 2010 after the loan came due.

Shortly after Regions started to foreclose on the property, the two limited liability companies that own the EpiCentre, Pacific Avenue and Pacific Avenue II, filed for bankruptcy protection, stalling the foreclosure. Regions Bank then filed documents questioning how developers Afshin Ghazi and George Cornelson spent their loan money and kept records. "The integrity of the Debtors' financial records, and the earning power of the EpiCentre itself, must be established, " Regions Bank wrote. Ghazi and Cornelson denied claims of self-dealing.

That case was dropped after Regions in November sold the $93.9 million construction note to Blue Air 2010, a limited liability company. Ghazi also agreed to transfer assets owned by the EpiCentre to Blue Air.

Last fall, shortly before a reorganization plan was expected to be approved, Blue Air accused the defendants of wrongfully diverted money from the project before filing for Chapter 11 and in engaging in self-dealing.

Among other claims, it says the defendants changed or backdated leases to eliminate obligations owed by affiliated companies. Blue Air, for example, says in its filing the defendants wrongly removed from the books $800,000 in back rent owed by Ghazi-controlled EpiCentre Theaters Partners LLC. Blue Air also claims valuable contracts were transferred to a Ghazi-affiliated company on the eve of the bankruptcy filing.

The EpiCentre sits at College and Trade streets on the site of the old convention center, which was abandoned for years. City officials have viewed it as an important part of uptown's redevelopment.

A reorganization plan is expected to be presented to U.S. Bankruptcy Court Judge George Hodges next month.

210 Trade Investments talking to hotel chain about development rights

The developer 210 Trade Investments LLC is negotiating with a hotel chain over air rights above the EpiCentre entertainment complex in uptown, talks that could be in jeopardy if court proceedings don't progress, attorneys said Friday.

The EpiCentre is in bankruptcy protection and its developer and others have been accused by its lender in court of self-dealing and manipulating and falsifying bookeeping records. The company 210 Trade is affiliated with EpiCentre developer Afshin Ghazi. Last year, it bought development rights for what ultimately was a failed condominium tower on the corner of the project at Trade and College Streets.

On Dec. 8, 210 Trade Investments asked the court to let it record documents that it says have sat in escrow for two years. The documents involve ownership of some air rights above the 302,000-square-foot complex.

But attorneys for the lender and creditors, as well as the trustee appointed to handle the EpiCentre's affairs, told a bankruptcy court judge Friday that while they are working to understand the lengthy motion, they still do not understand all the details. They are neither prepared to support or oppose the motion, they said.

Federal judge George Hodges gave a nod to the motion's complexity saying: "I was impressed it took a 28-page, single-spaced report to represent what is supposedly an administrative act."

Asked about 210 Trade's urgency in pushing the motion, the group's attorney, Bob Stephens, said 210 Trade "is a developer like any other and wants to be able to do things..."

Stephens said 210 Trade is in "real" negotiations, although there is no letter of intent, and that negotiations need to move forward before Dec. 31.

Attorney Dennis O'Dea, who represents the committee of unsecured creditors, opposes 210 Trade's request, which he calls a "land grab."

On Friday, O'Dea told the judge that instead of trying to "revive" a document that O'Dea considers "misleading," 210 Trade should instead sit down with the trustee to talk and "do what they have to do."

The two parties continue to talk and a new court hearing will be scheduled.

Judge expands power of trustee overseeing the EpiCentre

A bankruptcy judge Thursday broadened the powers held by the trustee overseeing the EpiCentre entertainment complex in uptown, despite objections by the EpiCentre's developer and owner.

In October, the judge appointed Elaine Rudisill to manage the 302,000-square-foot project at the request of the EpiCentre's lender, Blue Air 2010. Blue Air has accused EpiCentre developers Afshin Ghazi, George Cornelson III and others of wrongfully diverting money from the EpiCentre before filing for bankruptcy protection last year.

Rudisill, managing director of The Finley Group in Charlotte, had been limited to management duties. Now, Rudisill has full control of the project and could sue people if she felt it appropriate, said attorney Dennis O'Dea. As the attorney for the committee of unsecured creditors, O'Dea supports Rudisill's new power.

"Her voice is now very important in this case," he said.

During the hearing, which lasted more than a hour, attorneys for the EpiCentre and its developers told the judge they wanted the trustee to have to tell their clients what she was doing.

Travis Moon, an attorney representing Fulcrum Construction, objected. The general contractor is owed $3.5 million for its work on the project.

Saying that attorneys are investigating allegations of self-dealing and other actions by the principals, Moon said: "If you are saying we have to call if we just found a pot of money that was hidden, we are not going to do that."