MATTER OF HISTORIC MACON STATION LTD.
| Citation | 152 BR 358 |
| Decision Date | 24 March 1993 |
| Docket Number | Bankruptcy No. 90-52051,Adv. No. 90-5109. |
| Parties | In the MATTER OF HISTORIC MACON STATION LIMITED PARTNERSHIP, Debtor. HISTORIC MACON STATION LIMITED PARTNERSHIP, Debtor in Possession, Movant-Plaintiff, v. PIEDMONT-FORREST CORPORATION, Defendant-Respondent, and Georgia Power Company, United Way Macon and Bibb County, and Macon-Bibb County Convention and Visitors Bureau, Inc., Respondents. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Georgia |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Michael Weinstock, John M. Bruce, Atlanta, GA, for Historic Macon Station Ltd. Partnership.
Thomas C. James, III, Macon, GA, for Georgia Power Co. and Piedmont-Forrest Corp.
Piedmont-Forrest Corporation filed a complaint on September 11, 1990. Piedmont-Forrest amended its complaint on September 24, 1990. Historic Macon Station Limited Partnership, Debtor, filed its response to the amended complaint on October 11, 1990. Old Historic Macon Station Corporation also filed its response to the amended complaint on October 11, 1990.
On the same day that Piedmont-Forrest filed its complaint with the Court, Debtor filed a complaint entitled "Complaint Seeking Declaratory Judgment Regarding Continuation of Leases; Motion to Assume Executory Leases." The complaint was against Georgia Power Company and Piedmont-Forrest.1 Georgia Power and Piedmont-Forrest filed their responses to Debtor's complaint on October 11, 1990.
The Court consolidated the two adversary proceedings by order dated April 23, 1991.
Debtor filed a counterclaim against Georgia Power and Piedmont-Forrest on October 28, 1991. Georgia Power and Piedmont-Forrest filed their responses to the counterclaim on November 5, 1991.
A trial was held during the week of May 11, 1992. The Court, having considered the evidence presented, the arguments of counsel, and the briefs of counsel, now publishes this memorandum opinion.
Georgia Power is a supplier of electricity in the State of Georgia. It leased space for its Macon Division office in the Charter Medical building. Midway through the thirty-year lease term, the lessor offered to buy the remainder of the lease term.
Georgia Power purchased from the City of Macon (the "City") a building known as the Macon Terminal Station (the "station"). The station previously was a railroad terminal. The station and its covered platform occupy about three acres. Georgia Power also purchased three acres of land adjacent to the station. The total purchase price was $400,000 and the transaction date was July 29, 1982. Georgia Power planned to move its Macon Division office to the station. The station is listed on the National Register of Historical Places. Renovation plans must be approved by the United States Department of the Interior.
Georgia Power employed the architectural firm of Dunwoody Beeland & Henderson to prepare renovation plans. Georgia Power spent $4,000,000 renovating the exterior and part of the interior of the station. Georgia Power then decided another party should complete the renovation.
Tate Ogle is a real estate developer who specializes in downtown redevelopment partnerships. Mr. Ogle and Timothy Anderson met with representatives of Georgia Power in 1983. Mr. Ogle and Mr. Anderson considered forming a limited partnership to finish the renovation of the station.
In October of 1983, Georgia Power asked several developers to submit proposals for renovating the station. The information brochure set forth that Georgia Power would retain fee simple ownership of the station. Georgia Power would exercise certain controls over design and usage of the station and the adjacent land. All renovation work had to meet "The Secretary of Interior's Standards for Rehabilitation." Only two developers submitted proposals; namely, the Ogle/Anderson group and the Cranston/Ascronics group.
Georgia Power completed a review of both proposals on February 10, 1984. Georgia Power had a number of objectives, including:
Georgia Power's review report noted the following features of the two proposals:
Analysis Factor Cranston/Ascronics Ogle/Anderson
Investment Tax $900,000 $900,000
Credit received
by the developer
and lost by
Georgia Power
Ownership Georgia Power (1) Ogle/Anderson
(2) Georgia Power
Responsibility Georgia Power Ogle/Anderson
for ad valorem
tax
Growth space Not available Mezzanine expansion
for Macon would be available
Division office
Market Compete with Compliment specialty
specialty shops shops on Cherry
on Cherry Street Street
The review committee recommended that Georgia Power negotiate a contract with Ogle/Anderson. Ogle/Anderson was interested only if the proposed limited partnership could acquire ownership of the station so the limited partners could receive certain investment tax credits and depreciation credits. Georgia Power, however, was concerned that its public image would be damaged if it sold the station. During the negotiations, Ogle/Anderson was assisted by William Campbell of Investment Services Incorporated, a Boston real estate syndication firm. Ogle/Anderson was represented by a New York law firm. Georgia Power's counsel was John Griffin. After several months of negotiations, Georgia Power and Ogle/Anderson reached an agreement.
Mr. Ogle, Mr. Anderson, and Allan Koch formed a partnership known as Historic Macon Station Limited Partnership, the Debtor in this bankruptcy case. Thirty-three limited partnership interests were sold for $109,000 each. These contributions were payable in installments over six years. The initial structure of the limited partnership was as follows:
Historic Macon Station Limited Partnership (Debtor) | | -------------------------------------------------- | | | | Limited Partners: General Partner ISI Investment Associates X Limited Partnership Urban Properties I, Ltd. (Michael J. Dowd, General Partner) 33 limited partnership interests @ $109,000 each ----------------------------------------- | | | | Limited Partners General Partner S.F.B. Capital Corporation Urban Partners I, Ltd. B. Tate Ogle | Allan J. Koch | J. Timothy Anderson | | Limited and General Partners B. Tate Ogle Allan J. Koch J. Timothy Anderson
The Investment Memorandum2 sent to prospective limited partners stated, in part:
Of the economic arrangements between the Partnership and GPC, the single factor which weights most strongly in favor of joint venture status is the method for determining the consideration to be paid by the Partnership in 30 years for the Land should the Partnership exercise its purchase option (or should GPC require it to do so) with respect to the Land. The option price is an amount equal to 42.5% of the Property's value in 30 years. The IRS might contend that, because the Property consists of both the Land and the Station, the latter of which the Partnership will already own at the time the Partnership acquires the Land, GPC will in effect be sharing in any post-acquisition appreciation (or suffering post-acquisition depreciation) in the value of the Station.
Special Counsel believes that the parties will not be considered joint ventures as a result of the relationship between the Land option price and the value of the Station. First, for a period of at least 30 years from the Closing Date, the Partnership will have the benefits and burdens of ownership with respect to the Station. (See "Treatment of the Partnership as the Equitable Owner of the Station".) Thus, for example, if the Station were destroyed or condemned during that period, the Partnership would be the party that would economically sustain the loss, if any, with respect to the Station. The mere fact that the Partnership could possibly recoup a portion of that loss by acquiring the Land at a price lower than it would have paid if the Station had instead appreciated is not sufficient to justify treating the Partnership and GPC as joint venturers. Furthermore, the Station will be more valuable to the Partnership...
To continue reading
Request your trial