Ginn Labeled ‘Puppet’ By Investors
An amended complaint against Credit Suisse and international real estate firm Cushman Wakefield, filed on January 25, 2010, in the US district court for Idaho, alleged that the Swiss institution’s foreclosure on the Ginn sur Mer project was part of a plan to disguise the fact that it was now the “new successor developer” for the West End, Grand Bahama project. The plaintiffs in the class action lawsuit against Credit Suisse, which headed a lending syndicate that advanced $525 million to Ginn to finance Ginn sur mer and its other resort project, alleged that the institution’s foreclosure on the West End project was all part of its “predatory and illegal” scheme to ultimately gain control of the development.
Tribune Business revealed last month that Credit Suisse had foreclosed on Ginn sur mer and its immediate holding company, Ginn-LA West End, and the amended lawsuit alleged: “On December 31, 2009, Credit Suisse Cayman Islands Branch, as administrative and collateral agent, foreclosed on Ginn sur mer owning nearly all the balance of the Ginn sur mer property. As part of the uncontested foreclosure and judgment before the Supreme Court of New York, Credit Suisse agreed with Ginn that Ginn could reserve a limited interest in the development and remain the fictitious developer in order for Credit Suisse to avoid admitting it was the new successor developer.
“Ginn has become a ‘puppet’…. to give cover to [Credit Suisse] refusal to develop the resort as promised by the former developer Ginn..”
The plaintiffs alleged that the Swiss institution had “created a fiction that Ginn is the true developer of Ginn sur mer, when in truth and fact, the developer in control is Credit Suisse”. And they further claimed: “Credit Suisse, having taken actual and constructive legal control of Ginn sur mer, has no intention of developing the resort as promised [to the plaintiffs], and is hoping and anticipating that the owners…. will give up and default on their interests so Credit Suisse or their syndicated agents or representatives can acquire their properties for pennies on the dollar.
“Credit Suisse again employed a ‘puppet’ developer, Ginn, to avoid its contractual obligations as the actual controlling developer. [Its] refusal to develop Ginn sur mer and the promised amenities described herein, and to use Ginn as a proxy developer and shield itself against successor developer liability, is a continuation of its scheme… Credit Suisse is the actual owner, not the de factor owner.”
The thrust of the allegations against Credit Suisse is that it used allegedly inflated real estate appraisals provided by Cushman Wakefield to inflate the value of Ginn’s West End real estate holdings “by hundreds of millions of dollars”.
This, they claimed, induced Ginn to obtain the $525 million credit facility that it ultimately defaulted, and was allegedly a scheme for Credit Suisse to pick up and take control of prime real estate for a minuscule price. Two plaintiffs alleged that they had each lost $1 million in their Ginn sur mer real estate investments, with the $160 million that financed the build-out of the West End project’s infrastructure coming from the purchase of 195 lots.
Meanwhile, sources in West End confirmed that Bobby Ginn was in West End yesterday, while those close to the project confirmed that Credit Suisse’s intentions for Ginn sur mer will be “key”.
A September 22, 2009 letter from Allen G. Ten Broek of the Florida-based Mariner Group, which handles real estate sales and management for Ginn’s Old Bahama Bay property, confirmed that Credit Suisse and its lending syndicate had been given a joint venture “economic interest in the approximately 630 unsold Ginn sur mer lots and future joint venture development land at the far east end of Ginn sur mer, and the airport”.
According to Mr Ten Broek, Ginn had transferred its ownership in the Ginn sur mer “core” from its Ginn-LA West End vehicle, which was subject to the foreclosure proceedings, to Ginn-LA OBB, the entity that holds Old Bahama Bay. This entity also controls the project’s utilities, golf courses and other development sites, in addition to having an agreement to operate the airport.
“A key question is the Credit Suisse investors’ intentions for the approximately 630 lots that will soon be completed,” Mr Ten Broek wrote. He added that Ginn and Credit Suisse had established a special steering committee, which would have “a special focus on a game plan for the lots”.
The letter backed, to some extent, the fears of the plaintiffs in the Credit Suisse lawsuit in relation to the bank’s plans for Ginn sur mer.
And, further confirming previous Tribune Business revelations, Mr Ten Broek said: “It is my understanding that Ginn is seeking new capital partners/development entities to join in the development of the [Ginn sur mer] centre core, the north shore land and other Ginn-owned sites, with special emphasis on a casino hotel and related condominium projects at the centre core site.
“Marina development is also a high priority. Their plans, too, will be influenced by the economy. In my view, they fully realise that a return on their enormous existing investment can only be achieved by the further development of their property.”
Tribune Business previously revealed that as a result of the foreclosure, Credit Suisse will control some 1,600 acres at the West End site, including most of the real estate earmarked to be sold as lots.
Ginn will be left with about 350 acres, Tribune Business understands, most of it in the centre of the project where the largest assets, namely the hotels and casino, are supposed to be located. The development firm will also retain the Old Bahama Bay resort and most of the land around it, plus the airport and golf course. “Ginn is hoping to do something with those 350 acres on the vertical construction,” the source added, indicating the company, which is headed by Bobby Ginn, is seeking to long-term find investors willing to buy-out Credit Suisse.
Tribune Business also understands that the 18-hole golf course has been completed, and that Ginn is “on schedule” with the project, having completed Phase I. The first three years, this newspaper was told, were all about putting in infrastructure.
Source: The Tribune
