Business

Packard Place at issue in bankruptcy court case

A new apartment building rises behind Packard Place in uptown, built partly on land that once was part of the entreprenuerial hub’s property. The initial 2010 purchase of Packard Place by Dan and Sara Roselli has been an issue in a long-running bankruptcy case.
A new apartment building rises behind Packard Place in uptown, built partly on land that once was part of the entreprenuerial hub’s property. The initial 2010 purchase of Packard Place by Dan and Sara Roselli has been an issue in a long-running bankruptcy case. Mark Hames

In 2010, Dan and Sara Roselli bought a decades-old uptown building that once housed a luxury car dealership and turned it into a bustling hub for Charlotte entrepreneurs called Packard Place.

The renovated facility, complete with distinctive black-and-white paint scheme, has become a fixture on Charlotte’s start-up and small business scene, and the Rosellis have emerged as key promoters of the city as an attractive spot for new companies.

But an examination of court documents shows that the purchase of Packard Place is a central issue in a long-running bankruptcy case stemming from the collapse of the Rosellis’ former marketing firm. The documents show how two pioneers of Charlotte’s entrepreneurial scene have faced challenges in their own ventures.

Multiple lawsuits filed as part of the bankruptcy case allege the Packard Place building was bought using money from Redf Marketing, even though that firm was insolvent at the time. The suits have been making their way through court for more than a year, and it’s unclear when they will be resolved and whether they will have any direct impact on the entrepreneurial hub.

In an interview, Dan Roselli declined to comment on pending litigation but said Packard Place “has millions of dollars of positive equity in the building and continues to be a strong business model.” He added: “Current litigation, no matter the outcome, does not jeopardize the company.”

The bankruptcy court suits don’t name the Rosellis or Packard Place as defendants, but have led to claims filed against them. A judge has dismissed those claims, but future legal action could be considered, depending on the outcome of the suits, an attorney in the case said.

In a sign of the potential money at stake, the lender on the Packard Place property required the borrower – a company created by the Rosellis – to place $1.1 million in a reserve fund that can be used to pay attorney’s fees and other costs from the Redf bankruptcy case, according to a filing with the Mecklenburg County Register of Deeds.

Asked about the fund, Roselli said “that was done because lenders are lenders,” adding: “We didn’t spend anything close to that.” A representative for the lender declined to comment.

The last year or so has been a time of transition for Packard Place, a former Packard auto dealership dating to 1928 that is now home to about 140 start-ups and other businesses.

In late 2014, the Rosellis sold a portion of the property for $2.4 million to an apartment developer, records show. And in February, the couple announced a deal with a firm called HQ Raleigh to manage the building’s co-working space, in which multiple companies share a work area. The arrangement comes as competing co-working spaces sprout up around uptown.

Roselli said selling part of the property was a smart business move that allowed the couple to monetize some of their investment. And bringing in HQ Raleigh to manage the co-working space takes that task off his plate, so he can give more attention to nurturing start-ups, he said.

“That is a strategic move so I can focus on the things I want to focus on, like accelerator programs, community building,” Roselli said.

Trade secrets judgment

Dan and Sara Roselli, now in their mid-40s, met in college at Michigan State and then pursued careers at Fortune 500 companies after they graduated.

Dan Roselli’s early career stops included positions at consumer products giant Colgate-Palmolive, candy maker Mars and a wine and spirits company called Allied Domecq. “I know more about M&M’s and Tequila then any human being you have ever met,” his LinkedIn page says.

In 2000, he and his family moved to Charlotte when he was named brand and communications executive at Bank of America. In only his early 30s, Roselli was a top executive at one of the nation’s biggest banks. But in 2003 he jumped to a fast-growing marketing company called Redf, launching his career as an entrepreneur.

Two years later, Redf – founded in 2000 by Ric Elias and Dan Feldstein – shifted its business model and took a new name: Red Ventures. The Rosellis bought the Redf unit that was spun off from the company, and Red Ventures is now a separate firm based in Indian Land, across the South Carolina line.

By 2007, Redf had 30 full-time employees, with sales of more than $8 million and clients that included Wachovia, Verizon and R.J. Reynolds Tobacco. But the company suffered an ultimately deadly blow in May 2010 when a Fort Mill-based marketing firm called Bridgetree filed a lawsuit alleging Redf and other parties misappropriated trade secrets, among other offenses.

According to the complaint, Dan Roselli, a top Bridgetree employee and others “entered into a conspiracy to raid certain of Bridgetree’s key personnel, confidential information and trade secrets” to allow Redf and another firm to “unlawfully and improperly” compete with Bridgetree.

The defendants disputed the claims, but after a 2012 trial the jury returned a $4.2 million judgment against Redf, Dan Roselli, the former Bridgetree employee and two other defendants, according to court documents. Two months after the judgment, Redf filed for Chapter 11 bankruptcy protection.

It’s not clear how much of the judgment Bridgetree has received, but a 2014 court filing detailed at least $1.25 million in payments from the Rosellis. Dan Roselli and Bridgetree declined to comment on the case.

Packard Place issue in bankruptcy

More than three years after the Chapter 11 filing, the bankruptcy case is still active – and the Packard Place purchase has emerged as a key issue.

That’s because, according to court documents, the Rosellis used $1.2 million in Redf money to buy the uptown building in December 2010 – after Bridgetree’s suit had been filed but before the jury had returned its judgment.

Using a limited liability company, the couple purchased the building for $3.3 million from a subsidiary of Atlanta developer Novare Group, real estate records show. The Rosellis used $6.5 million in financing backed by a bond offering to help buy the building and make renovations.

As part of the project, Redf moved its headquarters into the building, and pledged to add 60 employees over three years. (State and local officials promised Redf tax incentives, but they were never paid out.)

Packard Place quickly became a major player in the local entrepreneurial scene, even hosting events during the 2012 Democratic National Convention. It now has multiple accelerator programs designed to nurture start-ups in finance, technology, energy and other industries.

But as Packard Place was taking off, Redf was coming to an end.

In April 2013, a bankruptcy court judge approved a liquidation plan for the firm that included the sale of assets to a marketing company called Mythic, where Sara Roselli now works. In 2014, the bankruptcy trustee liquidating Redf also started filing “adversary proceedings” against various entities involved in the Packard Place purchase, including the seller of the property.

These suits alleged that Redf was insolvent at the time of the Packard Place purchase, making the payments to the other parties “fraudulent transfers.” The trustee’s goal is to reclaim as much money as possible for the bankruptcy estate – and its creditors.

While the Rosellis are not named as defendants, these cases have spurred other claims against the couple. Novare Group and its subsidiary, for example, filed a “third-party complaint” against the Rosellis seeking damages and the return of the Packard Place property.

A judge in September recommended the third-party complaint be dismissed, indicating in his order that the claims were premature until the original complaints filed by the trustee were resolved. Those suits are still moving through U.S. Bankruptcy Court in Charlotte.

Jeff Oleynik, an attorney representing Novare Group, said his client is confident the Packard Place sale was conducted appropriately by all parties. Novare’s claims against the Rosellis and Packard Place were dismissed because the court considered them “not ripe” and because they might need to be tried in another court, he added.

“Should the bankruptcy court conclude that the Rosellis or Packard Place Properties took some fraudulent or inappropriate action during their purchase of Packard Place, Novare will naturally consider all legal remedies against the entities or property at the appropriate time, and in the appropriate court,” Oleynik said.

Renovation plans

Meanwhile, the Rosellis plan more renovations as part of the HQ Raleigh deal, and a restaurant group is building a new eatery called Ink ‘n Ivy in the base of the building. Dan Roselli envisions it as a hot spot for the “millennial tech crowd.”

The Bridgetree lawsuit received attention in the entrepreneurial community in 2012, but the bankruptcy case hasn’t been a topic of conversation lately, said Paul Wetenhall, president of Ventureprise, which supports early-stage companies at a location on the UNC Charlotte campus. Packard Place “has done a wonderful job of creating a hub for entrepreneurs in the community,” he said.

The couple’s legal issues are just part of being in business, Dan Roselli said.

“People can sue anyone for anything anytime they want,” he said. “We’re really not worried about it.”

Staff researcher Maria David contributed.

Rick Rothacker: 704-358-5170, @rickrothacker

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