On September 1, Minor Family Hotels, LLC—which owns the Landmark Hotel on the Downtown Mall and is overseen by CEO Halsey Minor—filed for Chapter 11 bankruptcy protection in federal bankruptcy court in Lynchburg.
Chapter 11 is typically a “reorganization” bankruptcy, where the debtor files a reorganization proposal with the court to keep the business alive and pay creditors over time. According to a news release, Minor Family Hotels filed Chapter 11 “in order to more quickly resolve the burdensome lawsuits that have prevented it from completing construction and putting people back to work.”
“Chapter 11 allows the debtor to consolidate litigation in a single venue. The intent here was to bring all of the litigations from Virginia and from Georgia together in one venue, so that it could be resolved more quickly than with different venues,” Aaron Curtiss, Minor’s publicist, tells C-VILLE.
Minor has eight lawsuits involving the Landmark Hotel, in Georgia and Virginia courts, according to the news release.
In it, Minor says his company’s goal “is to complete this project, save taxpayers additional costs, and provide much needed jobs for the community as well as bolster local businesses by completing this first-class hotel.
“I am committed to seeing this through, and the Chapter 11 process allows us to resolve the legal disputes delaying this important project for my hometown,” says Minor.
A three-week trial involving Minor, former Landmark developer Lee Danielson, the Federal Deposit Insurance Company (FDIC) and Specialty Finance Group (SFG)— a real estate financing company that lent Minor $23.6 million for the construction of the hotel in 2008—was scheduled for November. (SFG’s parent company, Atlanta-based Silverton Bank failed in May of last year and was taken over by the FDIC.)
Now, thanks to the Chapter 11 filing, the trial is on hold. “This action freezes everything. Everything is stayed,” says Curtiss.
Asked where the money to pay for workers to complete the half-built hotel will come from, Curtiss says it is still too early to know. “As you know, Mr. Minor has a significant equity in the hotel and he is committed to its completion,” he says.
In early July, Danielson lost an arbitration hearing over the Landmark Hotel, and the court awarded Minor $6.4 million in damages and attorney fees. Danielson says Minor’s filing is too little, too late.
“He could have filed this two years ago, when he was initially planning to. And that could have resolved it two years ago. I don’t believe what he is saying. It’s only a stall tactic,” he tells C-VILLE. “It’s not a resolution tactic, that’s for sure.”
A document obtained by C-VILLE last month alleges that the loan for the Landmark Hotel was divided among eight banks, including Old Dominion National Bank, based in nearby North Garden. FDIC spokesman David Barr previously told C-VILLE that the practice of dividing a loan among multiple banks, a process he called a “participation loan,” is commonplace in the banking industry. Barr declined to comment on recent developments, citing confidentiality.
Minor blames ongoing lawsuits for the bankruptcy filing. “It is unfortunate that our lenders and the FDIC have forced us to take this step,” he says in the press release. “However, the Chapter 11 process provides us with the most expeditious manner in which to resolve the litigation that has effectively shut down the project and put people out of work.”
Documents in the bankruptcy suit reveal 20 creditors owed money by Minor’s company. One creditor is local attorney Steve Blaine, who is well-known in development circles (he represented Biscuit Run’s developers, for example) and is owed close to $15,000. Blaine could not be reached for comment by press time.
