Minor faces foreclosure on Landmark

Will the Georgia-based bank financing the stalled Landmark Hotel project on the Downtown Mall foreclose on the half-finished 10-story property?

Recent court filings show that the hotel’s owner, CNet co-founder Halsey Minor, is worried about foreclosure, a move he says will doom the project.

“The Project was to be my legacy in my hometown of Charlottesville,” Minor wrote in a filing as part of his ongoing lawsuit against the hotel’s developer and bank. “In my opinion, if the property I purchased for the Project is foreclosed on, the hotel will never be built.”

The filing, which asks a judge to block the bank from taking the hotel, goes on to say that foreclosure would wipe out the entirety of Minor’s $6.8 million investment. His company, Minor Family Hotels, would lose “invaluable investment time, resources and talent” spent working on the hotel over the past two years.

“Charlottesville will lose an upscale boutique hotel and a five-star restaurant, both of which I believe would be tourist draws and city landmarks,” Minor wrote. “Charlottesville will also lose a significant source of tax revenue and jobs.”

At a Charlottesville Circuit Court hearing earlier this month, Judge Edward L. Hogshire rejected Minor’s request to issue a temporary restraining order that would have blocked the bank from moving forward with foreclosure of the unfinished hotel.

The bank, a subsidiary of Silverton Bank called Specialty Finance Group, says in its own court filing that it has not yet initiated foreclosure proceedings against Minor, but goes on to say that foreclosure might be the best way for the project to come to fruition.

“The subject property is [Specialty Finance Group’s] primary asset securing the outstanding debt, and every day this property is delayed, the property decreases in value. The only way SFG can protect the value of its security is by foreclosing and taking control of the property.”

The bank’s court filing adds that the “public interest” would be better served by allowing foreclosure proceedings to move forward.

“The most expeditious manner in which to complete the hotel is to allow SFG to take control of the property and sell it to another developer who has the wherewithal to complete the hotel,” the filing says.

The bank has filed its own $10.5 million lawsuit against Minor that asserts the Los Angeles-based millionaire defaulted on the project’s $23.6 million construction loan.

According to the bank’s court filings, Minor defaulted on the loan “almost immediately.” A month after obtaining the loan, the bank asserts, Minor submitted a “draw request” for more cash to pay for additional work by the project’s general contractor and subcontractors.

Officials with Specialty Finance Group, a subsidiary of Silverton Bank, asked Minor to explain the project’s cost overruns last fall. Minor told them that he “simply did not know where the project was with respect to the current budget,” according to the bank’s court filing.

“Given Minor’s inability to answer basic questions regarding the status of construction, [Specialty Finance Group] requested in writing that Minor provide documentation regarding the status of the project, as well as any other information relating to change orders, cost overruns or other factors that would cause the project to be over budget,” the bank’s court filing says. “Not only did Minor refuse to provide the requested information, they cut off all communication with [the bank], and referred [the bank] to their legal counsel.”

The bank sent Minor a notice of default Feb. 19. The letter asserts that Minor violated the project’s loan agreement, which originally stated that construction needed to wrap up by March 7.

Minor’s court filings say that the bank agreed to extend the target opening date to August.

And a court filing by Minor also says that he has never missed a monthly payment on the loan, even after the project came to a standstill.

“Plaintiffs have lived up to their end of the bargain — and then some,” it says. “[The bank’s] Notice of Default is nothing more than a pretext to insulate itself from liability from its own misconduct and to reach into the deep pockets of Mr. Minor,” the filing says.

In Minor’s lawsuit against the bank and the project’s former developer, Lee Danielson, Minor asserts that the lender and developer “colluded” and convinced Minor to participate in the project by relying on “woefully inadequate” budget assumptions. Minor also alleges that the bank unfairly changed the terms of the construction loan after it closed.

Minor did not return a call for comment. A spokeswoman for Silverton Bank also did not return a call for comment.

Minor is facing several lawsuits around the country over alleged nonpayment of debts. The largest suit, filed by the private finance arm of Merrill Lynch, is seeking repayment of $25 million it loaned Minor in late 2007.

In his court filing, Minor said his other lawsuits — particularly the one filed by Merrill Lynch — have nothing to do with the troubles facing the Landmark Hotel.

“There has been no material adverse change in my financial status or my ability to perform under the Construction Loan,” Minor said.