Covington's Madison Place building is at the center of a legal fight between Bill Butler and the Bank of America.
Corporex is raising $23 million from investors for five hotels catering to the energy industry in Northeast Ohio.
Recent projects by Corporex includes the $50 million Art Hotel in Denver
Covington's riverfront is full of Corporex buildings, including Rivercenter I and II and the Ascent condo tower (left)
Some might be intimidated if the nation's second largest bank sued them for $130 million. Covington developer Bill Butler isn't among them.
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COVINGTON, Ky. - Corporex Cos. Chairman Bill Butler has plenty of steam left at 71.
That much is evident in Aurora, Colo., where one Corporex affiliate is building a $90 million Hyatt hotel and conference center near the University of Colorado Anchutz Medical Campus.
It’s evident in Northeast Ohio, where another Corporex company is raising $23 million from investors to build five new hotels catering to energy companies that imported workers to hunt for natural gas in that region’s Utica shale formations.
And it’s evident in Charlotte, N.C., where yet another Corporex entity is hotly contesting a month-old lawsuit in which the Bank of America is seeking $130 million in damages from Northern Kentucky’s most powerful real estate developer.
The lawsuit is the latest salvo in a three-year-old fight over $55 million in loans for three projects. The bank accused Butler of shifting assets from one of his limited liability companies to another to keep it from collecting on performance guarantees. Butler said the bank “has no grounds for their allegations” and is trying to harass him into a settlement.
“The matter with Bank of America is a nuisance but it’s just what I call the remnants of the recession,” the Corporex chairman told WCPO in a recent phone interview from his Denver office. “The matter is something we always have to discuss with our lenders but everyone seems to understand around the country that the Bank of America has transferred their own problems onto their borrowers in many cases. We know it has impact but it’s not stopping us in any way."
The fact is, not much has stopped Butler, a Covington native who grew Corporex “from a one-man construction company to a diversified real estate company with more than $1 billion in assets,” according to his official corporate biography .
Along the way, Butler made friends and foes from his hyper-involvement in economic development endeavors, including the Forward Quest regional planning initiative, the Tri-County Economic Development Corp. and the redevelopment of Covington’s riverfront.
It’s been seven years since Butler appointed Tom Banta to manage daily affairs at Corporex, but in a 30-minute conversation, Butler still calls up fresh details of his feud with Bank of America and the roughly $200 million in projects Corporex is now building in Colorado and Ohio.
That’s despite the fact that Butler spends more than a third of his time on community projects, including the Lindner Center of Hope and the Life Learning Center in Covington.
So does Butler have a succession plan?
“Two or three,” he said.
“We’re gradually transitioning the company to be more of an investment company and less of a full-service, ground-up, do it all yourself development company,” said Banta, managing director of Corporex Realty & Investment Corporation, LLC. “We’ve sold assets. We’ve continued to lease up our portfolio and we’re doing something that we haven’t done previously, bringing in outside equity as opposed to just reinvesting everything in the next project.”
Hotel Expansions Near Cleveland And Denver
The new strategy is evident in Northeast Ohio. Corporex has raised $10 million so far in a private offering to finance five new hotels in Akron, Canton, Carillon and St. Clairsville. The Northeastern Ohio Hotel Energy Fund LLC was launched after 18 months of research into the fracking industry. Three hotels are under construction, two more planned.
“You can’t imagine the amount of money spent up there in the last five years,” said Banta. “We were up there with an investor, flying in a helicopter for over two hours. The entire time we were in the air, you could always see some kind of oil or gas-related facility … that was less than 10 years old.”
Some of the fund’s investors are oil and gas companies. Others are business partners who’ve dealt with Corporex before. The company spent 18 months researching the fracking industry. Other areas of exploration, including Western Pennsylvania and North Dakota, didn’t have strong enough highway access and leisure travel.
“What we tried to do is avoid relying solely on that energy business,” said Nicholas Heekin, vice president of Corporex Capital. “All of these locations are on major travel corridors, so you pick up the business that is up there, the leisure travel that comes through and the activity driven by oil and gas.”
In Colorado, where Corporex has about 500,000 square feet of office space in its portfolio, the company is building a 245-room, full-service Hyatt hotel with a 30,000-square-food conference center. It’s part of a larger mixed-use project called Fitzsimons Village , near the Anschutz Medical Campus, which includes a Children’s Hospital ranked 7th in the nation by U.S. News and World Report and a highly
rated cancer center.
Corporex has already built a 150,000-square-foot office building at Fitzsimons and a 153-unit Springhill Suites Hotel. It is pre-leasing a 200,000-square-foot office building and has 20 acres available for further development.
“Denver has been a strong market for Corporex for a number of years,” Butler said. “We’ve undertaken some significant signature type projects right in the middle of the recession and accomplished them when other people could not. The marketplace here is four to five times stronger than Cincinnati. The opportunity to profit is very strong by comparison.
"We intend to be in this market for a long, long time.”
Banta said Corporex hasn’t given up on the $1 billion Ovation project in Newport. Stalled since 2008, the development site at the mouth of the Licking River was originally planned for 1,000 housing units, 1.1 million square feet of retail space and three office buildings each towering between 10 to 25 stories. Banta said roads will be installed this year, but new buildings aren’t likely until 2015.
Legal Battles Rage
At the same time, Butler is gearing up for another round in his bout with the Bank of America. The parties have fought since 2011 over loans for Madison Place in Covington, an Erlanger office building and a hotel in Tampa, Fla.
Butler said the Erlanger loan is settled. But litigation is proceeding on three other fronts.
In Florida, investors who bought the Tampa loan from the Bank of America are suing to collect on the $9.7 million debt. That case is set for trial in February. In Covington, Butler is pursuing a counterclaim against the Bank of America, claiming it misled Corporex in talks to refinance the three loans in 2011. That case is pending the outcome of the Tampa litigation, but Butler asked U.S. District Court Judge David Bunning to lift the stay Jan. 22 after the bank filed a new lawsuit.
On Dec. 16, the bank filed suit seeking at least $30 million in compensatory damages and $100 million in punitive damages in U.S. District Court in Charlotte, N.C., where Bank of America is based.
“This case involves an elaborate and brazen fraudulent scheme by a sophisticated commercial real estate business enterprise controlled by Butler,” said the complaint. It names Butler and Corporex President Tom Banta as defendants along with Corporex Companies LLC, the legal entity into which Butler allegedly transferred Corporex Realty assets.
“Butler embarked on a litigation strategy to obstruct and delay the Plaintiff’s collection efforts to give Butler time to drain most of the assets and cash owned by Corporex Realty,” the complaint states.
Butler answered those allegations in a Jan. 17 filing in which he asserts Corporex Realty still has $125 million in assets and $13 million cash as of Nov. 30, more than enough to fulfill the requirements of its guaranty.
“This action is an egregious and overreaching act by the bank designed to unfairly gain an advantage in the existing litigation (in Covington) and to strike personally at two individuals who did not execute personal guarantees on the loans held by the bank,” Butler’s attorneys argued.
Butler thinks Bank of America decided to exit the Cincinnati market in 2010 to rid itself of loans acquired in the 2007 acquisition of LaSalle Bank. It was one of Cincinnati’s most active commercial lenders before the recession, with a client roster that included Kenwood Towne Place developer Bear Creek Capital.
“We were the only borrower in the city who was making their payments,” Butler said. “We offered to advance $9 million on Madison Place for a four-year extension on the loan. First they said they would and then they reneged at the last hour. The whole time they were negotiating to sell our loans, trying to modify the loans to get around our rights.”
The declined to comment on the litigation, but says it remains committed to the Cincinnati market.
"We are growing our commercial banking business in Cincinnati through new clients and deeper relationships with current clients," including "legacy LaSalle clients," said bank spokesman Jefferson George.
The Corporex case is detailed in a 36-page filing in the Tampa case. The Oct. 7 filing asserts the bank made “false promises” about refinancing debt while secretly planning to sell the Corporex loans. Among its evidence is a March, 2011 email in which a bank official acknowledges a plan to foreclose, but adds: “Mums the word.”
In coming months, Butler said he hopes to get the Charlotte case dismissed and the Covington case restarted.
Whatever the venue, Butler doesn’t appear close to backing down.
“Corporex is too strong for them to bring us down,” he said. “We’re too strong for them to do to us what they did to everybody else.”