April 23, 2009 - Opus South Corp., Nashville TN

Opus South developer files bankruptcy

A developer who jumped into the Nashville market two years ago is pulling out of the region entirely.

Opus South developer files bankruptcy

A developer who jumped into the Nashville market two years ago is pulling out of the region entirely.

Opus South Corp. has filed for Chapter 11 bankruptcy protection in U.S. bankruptcy court in Delaware. Opus South is an operating division of Minnetonka, Minn.-based Opus Corp., and the bankruptcy is the first move in Opus Corp.’s decision to exit the Southeastern market.

The deterioration of the commercial and residential real estate markets in the Southeast prompted Opus South and some of its subsidiaries to file for bankruptcy, Opus said in a statement.

Opus entered the Nashville market with the purchase of more than 160 acres in Wilson County for the development of the Couchville Pike Business Center, an industrial park with more than 2.2 million square feet of space originally announced.

The developer finished one 700,000-square-foot warehouse in the business park in August. Three other similar warehouses planned for the project have not been constructed.

Property listings updated early this month by the project’s broker, CB Richard Ellis, offers the unoccupied warehouse at $3.45 per square foot per year, and notes the building is expandable by as much as 600,000 additional square feet.

Don Kent, of CB Richard Ellis, says that while Opus developed the Couchville Pike property, it has new owners and will not be impacted by the bankruptcy.

The East submarket, including Wilson County, has a 32.7 vacancy rate for Class A bulk space, with 3.6 million square feet of space available, according to the Colliers Turley Martin Tucker first quarter 2009 industrial market report.

“While we began slowing the pace of new development nearly two years ago in anticipation of difficult market conditions, we must now take additional measures to enable an orderly wind down of our portfolio, protect asset values and maximize returns on lenders’ investments,” Anne Marie Solberg, chief restructuring officer for Opus South, said in the release.

The firm estimates that it owes between 200 and 999 creditors between $50 million to $100 million, according to bankruptcy documents. The company’s estimated assets are between $50 million and $100 million.

Opus South has developed more than 27 million square feet of space since its founding in 1981. It’s an independent operating company with its own board of directors, CEO and capital structure, according to Winston Hewett, an Opus Corp. spokeswoman.

Opus South has 25 employees who will remain in place until operations “wind down,” she said. Hewett stressed the bankruptcy won’t affect Opus’ four other divisions.

“We have other markets that are healthy,” she said.

Hewett said Opus South has 12 bank loans worth a total of $324 million that are either maturing or callable this year. Four of those involve condo projects valued at $103 million, and eight are commercial real estate loans worth more than $220 million. Capital markets are locked down, and there is no way Opus South could refinance the projects with loans coming due this year, Hewett said.

Florida’s condominium market was the main reason the South division had to seek bankruptcy protection, Opus Corp. CEO Mark Rauenhorst said in a statement.

During the boom years, the 93 units at Opus South’s project in Tampa called 400 Beach Drive sold quickly.

But the opening last summer of another Tampa-area project called Water’s Edge was not so successful. Of the 153 units, only 10 have sold at an average of just under $680,000 per unit, according to Pinellas County property records.

In January 2008, Opus South discovered a technicality in pre-sales contracts for Water’s Edge that moved it to offer to cancel all contracts for a full deposit refund, or to write new contracts with a 10 percent discount on the sales price.

Original Story - Nashville Business Journal

Opus News Release