Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, June 24, 1990 TAG: 9006250020
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: SANDRA BROWN KELLY BUSINESS WRITER
DATELINE: LENGTH: Long
According to its clients and public records, The Nashville, Tenn.-based developer has:
Fallen behind in paying real-estate taxes and contractors, prompting a series of liens against the projects.
Failed to complete road work required as part of permits to build the centers. Work was not finished at one center and was done incorrectly at another.
Left some tenants waiting more than a year to occupy space they rented.
At one point, construction workers at BD&E's Hunting Hills Plaza hung a banner at the center that said, "This will be finished when I get paid."
BD&E is developer of Hunting Hills Plaza on U.S. 220 South, Towne Square near Roanoke Regional Airport, Market Place in Christiansburg and Seven Hills Plaza, under construction in Lynchburg.
The Roanoke area BD&E projects appear, according to clients, developers and contractors, to be victims of unresponsive management, a radical development idea that went sour, and a glutted shopping-center market.
The development company is headed by Barry Dotson and Gerald Ezell. BD&E was credited in a 1989 national survey with having developed more than 3 million square feet of shopping-center space in a three-year period.
BD&E officials declined to respond to repeated requests for comments about problems at their centers. A company attorney, however, laid blame on contractors for the construction woes and failed to address other issues raised by tenants in the centers.
"We've never just flat been ignored for payment," Edward B. Cassada Jr. of Danville said. Cassada, the vice president of Mustain Glass/Piedmont Glass, said his company stopped work on the Christiansburg center in November because of lagging payments from BD&E.
As of June 1, Cassada said, his November bills to BD&E had not been paid. He also has filed to enforce a mechanic's lien of $14,000 for work at Hunting Hills Plaza.
A mechanic's lien represents a claim on property for work done or materials furnished for which money has not been paid. After a lien is filed, the claimant has six months to file suit to ask that it be enforced.
Some BD&E tenants report severe operating problems as a result of the contractors'payment problems with BD&E and their refusal to finish work because of lagging payments.
Service Merchandise, a Nashville-based catalog showroom retailer, announced in April 1989 that it would open a 50,000-square-foot outlet at Towne Square this spring.
Floyd Dean, of Service Merchandise's real-estate department, said his company has "a signed deal" with BD&E "and we're waiting for him to build the building." He said the company, which sells jewelry, brand-name housewares, appliances, gifts, silverware, cameras and sports equipment, is eager to do anything it can "to move the deal along" in Roanoke.
Even happy BD&E tenants said they will be happier when they see more shops open at area centers.
Ginger Mumpower of Radford, owner of Ginger's Jewelry stores at Towne Square, Radford Shopping Plaza in Fairlawn and Twin County Plaza in Galax, said, "The only thing I want to see from here is the other shops opening up."
"We're not really having a lot of people coming through shopping," said Richard Bong of Sal's & Duca's Italian Restaurant at Towne Square.
Bong said he had asked if he could add a Sal's & Duca's at Hunting Hills Plaza, but was told "they already have someone" to open a restaurant there.
That someone is Lou Greco, who operates two pizza shops, Lou's Pizza and Frank's Pizza, in Rocky Mount.
Greco said he should have had his Hunting Hills Plaza shop open nine months ago. He said he gave BD&E a rent deposit, bought the equipment for the restaurant and paid to have some plumbing work done at the shopping center, but the quarters still aren't ready.
Spokespersons for The Rack Room, Toad'ly Kids and Hobby & Craft Shop at Hunting Hills Plaza said they were shown layouts of the center with names of stores that supposedly had leases to open there. Those stores haven't opened.
They said they need more stores in the center to generate more customer traffic.
Rodney Jordan of Hobby & Craft said he moved from a full center in Rocky Mount when he came to Hunting Hills in September. He said he is disappointed at the lack of tenants in the project and unhappy because there isn't even a sign with the name of thecenter on it.
For Roanoke officials, problems with BD&E deal with unfinished road work. Ted Tucker, a city planner and subdivision agent, said the city is in "the final stages of dealing with BD&E" on road work at the entrance to Towne Square off Airport Road.
Tucker said that it "does not seem this company will comply with plans." He said a $150,000 bond to guarantee completion of the entrance has been renewed twice and is in its third year. He indicated that the city will have to complete grading work that BD&E was supposed to do at the shopping-center road's juncture with Airport Road.
Tucker also said that BD&E has not lived up to its agreement at Hunting Hills Plaza to build 300 feet of road that could be used as access to adjacent property, owned by Pheasant Ridge Associates.
"The road was put in incorrectly . . . without permits and inspections," Tucker said. He said the road does not have required storm drains or curb and gutter.
Tucker said the Hunting Hills road work is covered by an escrow account, which is large enough to pay for the road work needed.
BD&E arrived in Western Virginia with its May 1986 announcement to develop Towne Square, a $26.5 million center to be built in three phases. It was to eventually include an eight-to-10 screen theater and a grocery store in 500,000 square feet.
At the time he announced the Towne Square Joint Venture project, Dotson said he was building seven other centers in Florida, Georgia, Tennessee, Kentucky and Missouri. A few months after the Towne Square announcement, Dotson announced the $8.2 million Hunting Hills Joint Venture project on U.S. 220 South. Construction on that project began in mid-1988.
Market Place in Christiansburg, an $18 million project, was announced in the spring of 1987.
Monitor, a shopping-center trade publication, ranked BD&E 22nd among the top 50 developers of strip shopping centers last year . The ranking was based on gross-leasing square footage, said Robert O'Neill, editor of Monitor in Clearwater, Fla. BD&E was credited in the 1989 list with developing 3.98 million gross square feet in the three years before the survey period.
The first tenant at Towne Square was Sam's Wholesale Club, which opened in November 1987. Construction began on Hunting Hills Plaza in the summer of 1988, and Wal-Mart opened there in June 1989.
Market Place in Christiansburg got under way in March 1988, and Wal-Mart opened there in early 1989. Wal-Mart also is to be the first tenant at Seven Hills Plaza in Lynchburg, which is more than a year behind in construction, according to projections when work began.
In addition to powerful anchor tenants, BD&E had a plan to guarantee a core group of small stores for its centers by capitalizing the stores. Typically, a developer's largest profits come from leases on small stores. Yet in many markets the small shops are the most difficult part of a center to fill because small retailers lack the financial means to open and stay in business.
BD&E's core group included Label Collections, a discount women's clothing shop; Party Depot, a gift and party supply shop; Christian's clothing shop; and Menken Silk Imports, a silk flower, wicker and gift shop.
Party Depot is open at Towne Square, and scheduled to open at Hunting Hills. Menken Silk Imports has a store at Towne Square, and is opening one at Market Place in Christiansburg. It had hoped to open in January at Hunting Hills Plaza, and had even put the Hunting Hills store in the 1990 telephone book.
Label Collections never opened in this area. Gary Utay of Nashville, who was associated with the stores, declined to discuss the situation, except to say that Label Collections is out of business and definitely will not open at the Roanoke centers.
Christian's never got off the ground. It apparently was to be an outgrowth of the Raleigh, N.C., department store that is no longer in business.
Fulton Combs of Clearwater, Fla., owner of nine Menken Silk stores, said BD&E promised but never gave financial help to the stores he put in its centers. BD&E's concept, Combs said, was a "Heart of the Center" project featuring Menken Silk and several other stores. The financial help was to include merchandise purchase as well as preparation of store space.
"It was a great concept and a great idea. We've lived up to our end of it," Combs said. Combs said he is 2 1/2 years into his three-year lease, and the Hunting Hills store still isn't open.
That delay in occupancy means lost rent to BD&E and lost income to the retailers.
Combs said his company was strong enough to get along without financial help from the developer. Other stores weren't as lucky, he said.
Combs said he thought the developers weren't totally aware of all that was involved in capitalizing the stores.
Tom Kirwan, editor of Value Retail News trade magazine, said, "Generally speaking, developers make good developers and retailers make good retailers."
For reasons that are not totally clear, a pattern of problems has emerged for BD&E.
At one time, the company faced up to $1 million in mechanic's liens against its Christiansburg shopping center alone.
Most of the Christiansburg liens have been paid, but as of mid-June, there were outstanding balances of $336,000: $76,023 to Branch Highways Inc., a Roanoke construction company; $45,915 to Gulf States Manufacturers Inc. of Starkville, Miss.; $50,327 to H.T. Bowling Inc. of Radford; $6,580 to Gregory Seeding and Landscaping of Pulaski; and $157,265 to Adams Construction of Roanoke.
There were a number of liens on the Towne Square project in early 1989. J.M. Turner & Co. Inc. filed a lien for $579,000 in May 1989, which was satisfied in September. James M. Turner, chairman of the company, said it took almost a year to collect for work at Towne Square, and the company still has bills outstanding with BD&E.
Towne Square, assessed at $12.9 million, owed overdue real-estate taxes for the 1989-1990 period of $93,846 until a partial payment Monday cut the amount due to $48,179, Gordon Peters, city treasurer, said.
A small tax bill on the Hunting Hills property will be overdue July 1, according to city records. There are no overdue taxes on Market Place, which is assessed for $5.1 million, and has a 1990 tax bill of $41,365.
When Baird Drywall & Acoustic Inc. of Roanoke filed in late April to have its $33,000 lien against Hunting Hills Plaza enforced, the Baird legal papers asserted that there were existing liens from other companies totaling more than $800,000.
Hunting Hills Plaza still has liens and suits for more than $300,000, including a lawsuit from Branch Highways for $94,792 and liens of $109,194 by John S. Clark Co. Inc. of Mount Airy, N.C., and $40,582 by S.R. Draper Paving of Roanoke.
And a South Boston contractor says he is owed more than $1 million for Seven Hills Plaza, under construction on U.S. 29 in Lynchburg. Edmond Milam, president of W.T. Milam, will take his case to arbitration in Nashville in early July.
Milam's attorney, John Barr of Richmond, said BD&E has acknowledged it owes Milam "a considerable amount of money," but the company has a counter claim over the amount owed.
The Seven Hills shopping center has been a difficult site to develop, Robert White, a Lynchburg city planner, said. The site has an extensive flood plain, White said, plus site preparation proved to be difficult when graders ran into a lot of rock.
There even was a dispute over payment for the site. Jerry Falwell's Old Time Gospel Hour and the Bank of Tazewell had to sue to collect payment of $975,000 for the land for the Lynchburg project. The case was settled before it came to trial, Nashville attorney Justin Wilson said.
A check on other projects announced by BD&E revealed that, in mid-June, an Alabama bank filed a $19 million foreclosure suit against Embassy Crossing Plaza in Port Richey, Fla. The suit named Barry Dotson as a partner, and said no payments had been made since January on a loan from Southtrust Bank of Alabama.
Dotson was quoted in the St. Petersburg Times on June 13 as saying that the suit was a surprise to him and that "we're not an active partner in [the shopping center] any more."
Embassy Crossing was described in that news article as one of the most successful centers in Pasco County.
A tenant in BD&E's Battlefield Plaza in Springfield, Mo., said her sales are good, but she has had to resort to a lawsuit against the developer for reimbursement of $15,000 spent finishing the quarters of her Subway Sandwich Shop.
Janet Wendt of Springfield, one of the few tenants in the project, said she has been unable to get in touch with the developers.
Indeed, more than 25 phone calls seeking comment by company officials about their centers in Roanoke produced little response.
"We are in a very tender moment," said a company secretary who took one call.
Two weeks ago a secretary took a list of questions and said an official would call about them. No one returned the call with answers.
Calls as recently as Wednesday to Ezell's office at BD&E and Dotson's office at Pinnacle Trust Development, produced no response.
Alan Fister, BD&E's staff attorney,however, said there were no problems with leasing at the BD&E centers, only problems with quality and quantity of work done by contractors. He acknowledged that the general contractor on the projects, McCollum Construction of Nashville, has offices in the same building as BD&E and shares some of the same partners.
McCollum also has a mechanic's lien against Hunting Hills Plaza. No one with that company would comment.
Banks that are lenders on the company's area shopping centers are Dominion Bankshares, NCNB of Charlotte and Metropolitan Federal Savings & Loan of Nashville. Other backing came from Laing Properties, an Atlanta real-estate development and investment company.
In March 1989, the Nashville Tennessean newspaper reported that Laing was entering a joint venture with BD&E on four projects valued at $72 million and with 1,076,000 square feet. The projects included the Christiansburg and Lynchburg centers.
Laing officials declined to comment on the venture. Bank officials also would not comment.
Ralph Shivers, president of Branch Highways, described DB&E as "developers who mean well. They claim they're trying to package some new deals."
Tenants and others, however, just want them to hurry and do something.
Staff writer Peter Mathews contributed to this story.
by CNB