A Series of Unfortunate Events
by Ron Davis
The severe financial problems of a beleaguered Pennsylvania shopping center project just never seem to end. That project is the Heritage Village Shopping Plaza in Philadelphia, and the latest episode in its nearly three-year history of mishaps is the court’s appointment of a receiver to try to cope with the approximately $3.4-million debt of the project.
Since construction began on Heritage Village, a series of problems has beset its principals. First were the financial woes. Wachovia Bank provided the construction loan to the principals, but due to default on that loan, the bank foreclosed and refused to advance any additional funds. Meanwhile, some of the subcontractors working on the shopping center sued after not receiving payment. Then the general contractor also sued, contending that mismanagement of the project resulted in the inability to pay for the construction work.
The project’s principals agreed with the general contractor and admitted they owed $316,000 for work performed.. But their efforts to secure additional financial assistance have been unsuccessful.
Currently, the project is about 85 percent completed. During the nearly three years of construction, however, exposure to the elements may require costly redoing.
Most recently, a Pennsylvania court conducted a fact-finding hearing. After testimony from all sides of the issue, the judge appointed a CPA firm as receiver. That firm first took over the assets of the project’s principals, determined their liabilities, made recommendations on a course of action, and reported on the feasibility of a sale of the project property.
The project’s principals objected to the appointment of a receiver, arguing that they are not in fact “insolvent,” as the court found.
In ruling in the case, A Pennsylvania rejected the principals’ argument, explaining, “The record demonstrates that the project’s assets continue to deteriorate while its creditors clamor, to no avail, to get paid.... The court has given the principals several years to obtain alternative financing to solve their financial problems, but they have not succeeded in doing so. Nor have they pointed the court to any other remedy for this deplorable situation that will accomplish the goal of determining what is owed and paying the project’s creditors. The appointment of a receiver is wholly justified under such circumstances.” (Davis-Giovinazzo Construction Co. v. Heritage Village Ventures, II, Inc., 2005 WL 1816839 [Pa.Com.Pl.]
Decision: July 2005
Published: August 2005