What happened in bankruptcy hearing involving Panthers’ failed Rock Hill, SC, project
Thomas Lauria, representing GT Real Estate Holdings Monday in bankruptcy court, outlined for the judge what led to this case after efforts failed that would have brought the Carolina Panthers practice facility and headquarters to Rock Hill.
GT Real Estate Holdings is the company that Panthers owner David Tepper established specifically to be the owner and developer of a Rock Hill, S.C., site that would have served as the Carolina Panthers’ practice site and headquarters. The project also was projected to include mixed-use retail, offices and a host of other uses.
GT Real Estate Holdings is the debtor for the bankruptcy case filed last week in Delaware.
A virtual hearing was held Monday morning with attorneys representing GT Real Estate, the City of Rock Hill and other parties listed in the case. Judge Karen Owens largely heard preliminary motions involving the use of bank accounts, payment to utility providers at the site and similar items.
The parties met online for almost two hours Monday. They agreed to meet again in a virtual hearing June 29.
Through a series of agreements in recent years, Lauria said, the City of Rock Hill would contribute $225 million through the issuance of municipal bonds. The city and York County would contribute additional funds through tax incentives, and GT Real Estate would fund the rest of the project. Plans involved loans and contributions from the Panthers and affiliates of Tepper Sports & Entertainment.
“The arrangements originally contemplated that the city would use its reasonable best efforts to issue bonds,” Lauria told the court, “and for the funding to be provided by Oct. 31, 2020.”
Lauria said the date was extended to Feb. 26, 2021. GT Real Estate was under no obligation to start construction until bond funding was provided, Lauria said, but did so anyway with a July 2020 groundbreaking.
“Over the next 20 months the project was carried forward to its current partially completed status,” Lauria said.
When it became apparent funding wouldn’t be provided, GT Real Estate first suspended construction and a month later terminated and rescinded two agreements with the city. One is a finance and construction administration agreement, the other a land development agreement.
Laurie did not elaborate on the meaning of these agreements during Monday’s hearing. He did acknowledge that Rock Hill officials dispute GT Real Estate’s ability to terminate and rescind the agreements, and said his group didn’t intend to ask the court Monday for a finding or conclusion on that matter.
“We acknowledge the city’s dispute and we are content, I believe, the city’s content, to reserve all rights for another day,” Lauria said.
Lauria said as of the date GT Real Estate suspended construction in early March, the Panthers had funded about $163.5 million of loans to GT Real Estate. The city had contributed $20 million and the county $21 million.
After construction was suspended, GT Real Estate got funding for a scheduled $19 million payment to the project contractor and subcontractors in two ways, Lauria said. The company sold a parking facility to an affiliate of the Panthers for $15 million, the price GT Real Estate had paid for it several months prior. Another $4 million came in a loan from another affiliate, secured by the debtor’s ownership interest in a nearby golf course.
While Lauria didn’t mention that golf course by name, later discussion in the hearing Monday centered on Waterford Golf Club which a Panthers affiliate bought in March 2020.
When a bankruptcy filing became increasingly likely, Lauria said, more funding was needed. A $3.2 million loan from parent company DT Sports Holding came in to secure and protect the site plus prepare for bankruptcy filing.
“Once it became apparent that the project could not be completed,” Lauria said, “the debtor’s driving objective shifted to navigating towards and orderly windup of the project, and to do so in a fashion that treated the people who had worked on the project fairly.”
Now more than $280 million has been invested in the project, Lauria said. The current best estimate is $55-$90 million of claims incurred related to construction or procurement and fabrication of materials.
“The debtor believes that the aggregate value of its assets is substantially less than the amount it owes to affiliates and third parties,” Lauria said.
GT Real Estate had discussions with the city, county, state and contractor that brought on the one-month standstill that ended June 2. GT Real Estate proposed a non-disclosure agreement to the city and county that would extend the construction hold another month and expand it to include the county, Lauria said.
Lauria said the county instead sent a letter to GT Real Estate on May 31 demanding the return of its $21 contribution. Facing mounting notices and claims, and continued litigation, the debtor decided bankruptcy filing was the best option, Lauria said.
The bankruptcy filing also was the only way to get additional funding, Lauria said, which came via a $20 million loan from DT Sports Holding.
‘Reasonable best efforts’
City officials declined to comment last week on the bankruptcy filing.
The project’s future first came into question in March when construction was halted on the 240-acre development in Rock Hill.
Throughout the high-profile disagreement, Rock Hill maintained it met all obligations required under the agreement, and several officials defended the city’s expertise in successfully executing multi-million dollar projects.
“We’re familiar in dealing with these kinds of projects and these sizes of projects, but we need to do it on terms that make sure the city’s financial credit is protected,” City Manager David Vehaun said at a March City Council meeting.
The dispute between Rock Hill and the Panthers centered around the $225 million in bonds.
Vehaun said in March that despite several requests from the Panthers, the city insisted it would not “backstop” — or guarantee — the debt.
And the financial and construction administration agreement between Rock Hill and GT Real Estate outlines just that.
According to the agreement, the city was expected to use its “reasonable best efforts” to issue the $225 million in bonds by Feb. 26, 2021.
The agreement states the city’s “reasonable best efforts” should not be construed as “an assurance or guarantee by the city that there will be a buyer for any of the bonds.”
However, the agreement also states that the city’s failure to use its “reasonable best efforts” to issue the bonds by Feb. 26, 2021, would result in a default. And in March, GT Real Estate issued a 30-day notice of default to Rock Hill.
“On February 26, 2021, the City of Rock Hill became delinquent on their obligation to fund the public infrastructure,” GT Real Estate said in an Alpril statement. “Despite our persistent efforts throughout 2021, the City of Rock Hill failed to issue the bonds or provide the funding for the public infrastructure for the project.”
Despite the disagreement, Vehaun said in March that Rock Hill continued to work for months toward getting the bonds issued.
Vehaun said the city was prepared to issue the bonds in early 2022, but the Panthers asked the city to stop.
“We felt that everybody was on the same page, including the Panthers,” he said.
This story was originally published June 6, 2022 at 4:15 PM with the headline "What happened in bankruptcy hearing involving Panthers’ failed Rock Hill, SC, project."
