Developer’s bankruptcy filing may be dismissed
A bankruptcy filed by the Cowles development company that owns the former J.C. Penney’s building is scheduled to be formally dismissed today by a judge who says it’s unnecessary.
U.S. Bankruptcy Judge Patricia Williams recently called the bankruptcy filing by CPC Development Co. “simply a device” to avoid posting a bond in the appeal of a $6.5 million judgment against CPC and three companies connected to nearby River Park Square mall.
The four companies that are owned by Cowles Publishing Co. were ordered by a Spokane Superior Court jury last summer to pay that amount to the mall’s former management firm, RWR Management. The jury agreed with RWR and its owner, Bob Robideaux, that he was not paid enough for his work in redeveloping and running the downtown mall. That case is on appeal, a process expected to take a year or more.
The value of the former Penney’s building, which occupies Main Avenue between Lincoln and Post, is listed in the bankruptcy papers as $2.4 million, far less than the judgment against the development companies. It has no tenants and isn’t generating any revenue to pay taxes or maintenance.
CPC filed a Chapter 11 reorganization petition in October, asking for protection from its creditors while the company restructured and brought in new tenants. That bankruptcy, and the threat of further bankruptcies for other Cowles development firms, was cited by the Spokane City Council when approving a settlement in the city’s long-running legal dispute with the mall owners.
In voting for the settlement, City Councilman Al French said he felt like he had a gun to his head because of the talk of bankruptcy and what it might do to any claims the city might have.
The other development companies have not at this point filed for bankruptcy protection, but company officials said it was an option they considered for their downtown development affiliates because of legal fights over the mall’s financially troubled garage. Cowles Publishing Co. also owns The Spokesman-Review.
Attorneys for RWR contend the bankruptcy case for CPC should never have been filed, arguing it was merely a “bad faith” attempt to avoid posting a bond that would guarantee RWR will be paid if it wins in the appeal.
“There is no prospect for a successful reorganization in this case,” attorney Armand Kornfeld said in a hearing last week.
Michael Currin, a bankruptcy attorney for CPC, argued the company does have plans for the building that could eventually result in the property generating income for its owner, and RWR.
In papers filed with the bankruptcy court, Steve Rector, chief financial officer for CPC and Cowles Publishing Co., said the owners are negotiating with a national restaurant chain to occupy some 8,000 square feet on the first floor. Shops would follow for the first floor, with more retail space, a health club and residential condominiums sharing the second floor and more residential condominiums on the third floor.
“The judgment for RWR threatened the viability of this plan,” Currin said.
The company is still working out financing, and it has hired an appraiser who can’t start his work until early 2005. The restaurant might open by next November.
Gary Dyer, a trustee appointed by the court for CPC, said much of the plan is uncertain, including the costs of renovating the space for the restaurant, and when the plan might be ready.
Williams said CPC was “a shell” for Cowles Publishing Co., and the bankruptcy case was essentially a dispute between two organizations – RWR and Cowles. She described the building’s possible renovation as “a hope and a dream, not a plan of reorganization.”
Bankruptcy can’t be used “simply as a device to avoid posting” a bond in the appeal, Williams said in ordering the bankruptcy petition dismissed.
Attorneys are scheduled to bring Williams an order dismissing the bankruptcy this morning.
Rector said Tuesday afternoon the development company will file a motion for Williams to reconsider the dismissal.
“The dismissal doesn’t change our plans for the building,” Rector said.
Robert Dunn, an attorney for RWR, said his client will continue to go after all available assets from the development companies to satisfy the $6.5 million jury verdict unless the Cowles firms obtain a bond to guarantee the money will be available if they lose their appeal.