Blame it on the Feng Shui.
Downtown Nashville's upscale Hotel Indigo, created from a pair of Union Street office buildings conceived in bitter rivalry with each other more than 80 years ago, is today at the center of a court battle in which a bank and a developer are accusing each other of serious financial misconduct.
Mt. Juliet-based real estate entrepreneur Mark Lineberry and related interests filed suit Monday against Branch Banking and Trust Co., accusing the lender of conspiring with other parties to wrest control of the hotel from them in violation of the federal Racketeer Influenced and Corrupt Organizations Act.
That lawsuit, available at this link, followed a Friday order by U.S. District Judge William J. Haynes placing the property in receivership at the behest of BB&T. The bank sued Lineberry's 315 Union Street Holdings LLC earlier this month in Davidson County Chancery Court and filed an amended complaint on Friday in federal court, claiming the developer had defaulted on an $18.7 million loan made in August 2008.
For its part, 315 Union says it has been paying on the note as scheduled since the hotel opened, after long delays, in March of this year. The developer asserts that the bank set it up to fail with the intent of engineering a cut-rate sale to cronies of two of its loan officers. From August 2008 onward, the complaint says, "BB&T determined to engage in a series of extortionate acts designed to force the failure of plaintiffs in this project by whatever means necessary for the purpose of enriching BB&T and its associates."
Lineberry and his affiliates claim an "incestuous relationship" exists between key bank officials and the principals of Peachtree Hotel Group, an Atlanta firm that buys up distressed hotel properties. One top official at Peachtree is a former loan officer at BB&T, while its CEO is Greg Friedman, formerly a senior officer at Georgia's Silverton Bank, which the Federal Deposit Insurance Corp. took over in May 2009.
At Silverton, the lawsuit states, Friedman had been responsible for making a $21 million loan commitment to the Hotel Indigo project in 2007. In seeking that financing, 315 Union had furnished Friedman with "tax returns, financial statements, development plan details, details of franchise arrangements and proprietary market research related to Hotel Indigo." Friedman later allegedly "reneged" on the loan commitment.
Under the terms of the receivership proposed by the bank and approved on Friday, a Peachtree subsidiary is to operate the hotel pending its foreclosure. The 315 Union lawsuit claims that management agreement "will be the precursor to the acquisition of Hotel Indigo by Peachtree," which has "acquired the reputation of a 'fast-track vulture' in the hotel management and acquisition industry."
BB&T claims in its lawsuit that the borrowers were supposed to put up $5.2 million at the closing of the loan, in part to pay off a prior loan from LaSalle Bank. In an e-mail sent on the day of the closing and appended to the lawsuit as an exhibit, a vice president with Mt. Juliet's 1st Trust Title Inc. tells the bank's lawyers: "Yes, I have received the $5,176,507.00."
Just under the officer's signature is the title company's address: 112 Lineberry Blvd. The address of the borrowers is 116 Lineberry Blvd. BB&T says it learned later that Mark Lineberry "is or was president and attorney for 1st Trust Title."
Another exhibit to the bank's complaint appears to show that 1st Trust Title had not actually received the $5.2 million that was supposed to be coming from an unnamed outside investor on the day of the closing. In a letter written last June, Nashville attorney Craig Gabbert of Harwell Howard Hyne Gabbert & Manner explained that the investor had wired only a fraction of the promised funding to the 315 Union entity.
"The new investor had defrauded his lender and my client and absconded with the funds," Gabbert wrote.
315 Union's lawsuit accuses the bank of costing it at least $1 million in additional interest and increased construction costs through its conduct after August 2008, and the complaint says BB&T "wrongly confiscated" certificates of deposit worth $2 million that Lineberry had put up as collateral. It seeks up to $12 million in damages. Nashville attorney Elliott Ozment brought suit on behalf of 315 Union. He could not be reached yesterday.
Erika Barnes of the Nashville office of Stites & Harbison, representing BB&T, declined to comment when contacted yesterday. Friedman, reached at his Atlanta office, also chose not to comment on the matter.
Covering Lineberry's purchase of the Union Street properties in 2000, NashvillePost.com co-founder Bill Carey discussed the curious history of the two buildings that have been fused to create Hotel Indigo.
As further elaborated in this 2008 history piece, the owners of the American Trust Company added floors to their building at 301 Union in 1926 when they learned that arch-rival Nashville Trust Co. was building a bigger headquarters nextdoor. American Trust also made certain its floors did not match up with those next door, in order to discourage the future merger of the two organizations.
POSTDATA: WARRANTY DEEDS