Landmark letdown: Hotel project's lender folds
The legal and financial mess that is the Landmark Hotel project just got a lot messier today. Amid lawsuits from and alleged defaults by its owner Halsey Minor, on Friday, May 1, the Federal Deposit Insurance Corporation announced today that it is taking over the operations of the Landmark's construction lender, Atlanta-based Silverton Bank. This makes the Silverton the 30th bank to fail in calendar year 2009.
"This means they had a lot of bad loans," says local real estate developer Richard Spurzem. "Beyond that, I'm not sure what it means, other than that it adds a new level of complexity."
Minor had entered a loan agreement with Silverton Bank in March 2008, with Minor putting up $7 million in equity and Silverton agreeing to provide the additional $23.6 million for the construction of the hotel.
Then on November 12, 2008, after Silverton withheld one of its regular payments and Minor cried foul.
"It’s a mess,” Minor told the Hook. “I’ve already got my money in this. I put up $7 million in equity up front. They had until Friday to pay $1.1 million, and they just didn’t. They flat-out did not pay.”
"We disagree with Mr. Minor's comments," said Silverton Bank in a statement to counter Minor's suggestion that the bank was on shaky ground. "The loan is proceeding per the terms specified clearly in the loan agreement between the borrower and [Silverton subsidiary] Specialty Finance Group. Any assertion otherwise is inaccurate."
In February, Silverton filed a notice of default against Minor in Fulton County, Georgia and in April appointed Richmond attorney Stuart Simon as the substitute trustee for the Landmark, two key steps the bank would need to take before foreclosing on the property and selling it to someone else. Now, it remains to be seen whether that will ever happen, and how this affects Minor's pending fraud suit against the bank and his former developer Lee Danielson.
The FDIC, however, assures clients in their press release that their move allows Silverton to continue to operate "with the least amount of disruption" and that "there is not expected to be any meaningful impact on the bank's clients."
FDIC spokesperson David Barr says it's "too soon to say" how their takeover affects both the Landmark Hotel and the lawsuits surrounding the project, but does say that their takeover doesn't mean Minor is off the hook.
"We just got in there today, but the FDIC always reviews pending litigation," says Barr. "We could move to dismiss the case, or we could try to settle. We just need to get in there and review all the facts."
Minor did not return the Hook's call for comment by the time of this post.
–updated May 1 at 6:19pm