Developer rolls with economic punches

[Lunican]

OrlandoSentinel.com
Developer rolls with economic punches

Dan Tracy and Jerry Jackson

Sentinel Staff Writers

October 14, 2007

The fortunes of downtown Orlando and Cameron Kuhn are so intertwined, it sometimes seems as if one could not succeed without the other.

Kuhn, a longtime developer who owns or has an interest in more than a dozen properties within the city core, is completing the largest redevelopment in downtown history -- the $140 million Plaza towers -- and is attempting to revive the nearby Church Street Station entertainment complex, withered by years of indifferent ownership.

He maintains he has plenty of capital to handle both projects and that his finances have never been stronger, but there are signs the real-estate slowdown and the recent tightening of the credit markets may be exacting a toll on downtown's most prolific developer:

Kuhn missed a $180,000 payment in January to the city of Orlando for traffic improvements near his Plaza complex on Orange Avenue.

He walked away three months ago from a $200,000 deposit when he reneged on an agreement with Orange County to buy the former Florida A&M University law school on Orange Avenue for $6.5 million.

Two months ago he sued, and was countersued by, a dissatisfied Minnesota investor who contends that Kuhn owes him more than $25 million -- including $2 million on a loan with an annual interest rate that jumped from 24 percent to 36 percent.

He agreed in late August to spend an extra $22,000 to delay for one year his repayment of a $2.2 million loan to a Chicago investor. The extension was partly the result of Kuhn's decision to back away from construction of a mixed-use tower on the site of a historic but dilapidated building at 100 N. Orange Ave., which he bought for $1.2 million about three years ago but now has for sale.

Kuhn has also put the brakes on an ambitious redevelopment in downtown Jacksonville -- his first project outside Orlando -- that originally included building a 33-story condominium hotel and garage and restoring three historic buildings.

Kuhn estimated during a recent interview that his properties in Orlando and Jacksonville are worth $156 million altogether. He said they carry a combined debt of $26 million, leaving him with total equity, or net value, of about $130 million.

But real estate can take months or years to mature as an investment. That means it can be difficult to sell a building or vacant land for cash quickly without taking a loss.

"My financial situation has never been stronger," Kuhn said. "But you have to understand, the value of what I own is in the properties."

Tough to analyze

Experts say it is almost impossible to analyze the finances of private developers such as Kuhn -- unless they seek protection from creditors in federal bankruptcy court -- because they don't operate as publicly traded companies. Public firms are required to file disclosure statements and other information with federal regulators on a regular basis.

Even his investors don't necessarily know how things are going financially for Kuhn. "That's the question everybody is asking us. Our response is always the same: We don't know," said Orlando lawyer Tucker Byrd, whose Minnesota client, Frank Vennes, is suing Kuhn over what he contends are unpaid loans for ventures in Orlando and Jacksonville.

Still, given the lawsuits and what can be found of Kuhn's business dealings in the public record, it would appear that "things have turned against him. . . . He's caught in liquidity problems," said Wayne Archer, a University of Florida professor of finance, insurance and real estate.

The decline in some real-estate prices in Central Florida and across the nation, plus the tightening of the broader credit markets, have put financial pressure on many developers, Archer said. In Kuhn's case, Archer said, it appears "the cash just hasn't come in yet, and he still has to make investments. . . . It may take him a while to get past the liquidity scare."

'Acceptable levels'

But Bill Owen, a real-estate-research consultant often used by the city of Orlando, thinks the downtown core is handling the real-estate downturn better than most areas. All of the new condominiums and offices that have been built or are soon to be finished could very well be snapped up within a year or two, he said.

"I'm talking about acceptable levels of vacancy. People paying market rental rates and prices. Getting back to a more typical market," Owen said.

Kuhn, meanwhile, offers various explanations for his recent financial decisions and legal wranglings.

He said Vennes, the Minnesota investor whom he is battling in court, is trying to take his properties from him and has a vendetta against him for political and religious reasons -- accusations Vennes' lawyer denies.

He noted that a separate legal skirmish that broke out earlier this year between him and the Plaza's general contractor was recently settled out of court. Both sides agreed not to discuss the settlement publicly, but Kuhn described the $5.4 million dispute, with Brasfield & Gorrie of Birmingham, Ala., as typical of the kind of billing and breach-of-contract arguments that can spring up during very large construction projects.

Kuhn said the Vennes loan with the 36 percent interest rate was the result of his needing money quickly in April to complete the purchase of the former J.C. Penney department-store building, which has been converted to office space.

'That happens'

As for the $180,000 payment that Kuhn still owes the city for downtown-traffic improvements, Thomas Chatmon, executive director of Orlando's Downtown Development Board, said the city isn't worried. "That happens," Chatmon said of the missed payment. "He's upfront [about it]. He's not ducking our calls."

The loan repayment that cost Kuhn $22,000 to delay for a year involves money from one of his longtime backers, Chicago real-estate investor Jeffrey Aeder, who said he has no qualms about his dealings with Kuhn.

"We love Cameron. We've been doing business with him probably for 10 years," Aeder said. "We've only made money with him."

Aeder said his most recent investment with Kuhn involves the developer's $34 million purchase in June of Church Street Station, an eight-building complex developed in the 1970s by entrepreneur Bob Snow. Aeder described himself as a 50 percent partner with Kuhn in the acquisition and planned revival of the half-block entertainment center.

Under Snow, the complex drew 1.7 million visitors a year in the mid-1980s before stumbling dramatically under a succession of other owners.

Aeder would not say how much money he put into Church Street Station. Kuhn has promised to spend as much as $14 million to return the 7.3-acre property to its former glory.

Snow, whom Kuhn has hired to restore the Cheyenne Saloon portion of his once-famous entertainment complex, said money problems are not in evidence there.

"Everybody is in the street, painting and putting up iron, and everything is moving forward," he said recently.

As for losing the $200,000 deposit to Orange County over the former FAMU law-school building, Kuhn conceded "it hurt" to surrender the money. But once he had decided the structure was no longer worth the asking price he had agreed to in May, he said, he needed to walk away from the deal.

Deals in Jacksonville

In Jacksonville, Kuhn paid a combined $42 million two years ago for a couple of well-known downtown office towers -- the 23-story SunTrust building and the 18-story former Barnett Bank building -- as part of a move to expand beyond Orlando. A short time later, he announced plans for a $250 million project called River Watch at City Centre, which was to include a renovated SunTrust office tower, a parking garage and a 33-story tower with mixed-use retail and residential condos. He also paid $4.5 million for a historic, six-story office structure, the Dyal-Upchurch Building.

Kuhn has gutted the Barnett building, which was in disrepair when he bought it, and he said office tenants are leasing space in the SunTrust tower and that work on the parking garage is supposed to start soon. But the 33-story tower is on hold, and Kuhn has been trying to sell the Barnett building or part of his River Watch holdings.

As a result, he has yet to collect any of the more than $6 million in economic incentives pledged by various Jacksonville agencies when he offered to redevelop the downtown tracts.

Another piece of real estate troubling Kuhn is the space set aside inside the Plaza for a 2,000-seat movie multiplex.

Even though the city of Orlando has offered $3.5 million in incentives over 10 years to anyone willing to own and operate a cinema there, Kuhn has failed to land a buyer. He and his representatives continue to insist a deal is imminent, but the 12-screen operation was supposed to open 10 months ago.

Chatmon, the city's downtown-development chief, said he is convinced Kuhn eventually will sign an operator for the theater space -- possibly by November, or about a year behind schedule.

Kuhn also has plenty of office space left to sell in the Plaza's two commercial towers. His companies still control about 45 percent of the project's office-condominium space, public records show. Those same Kuhn companies also control two penthouses in the Plaza's residential tower, which is owned by an Atlanta company, not by Kuhn.

That may be one reason Kuhn's longtime home on Lake Butler in Windermere is for sale at $2.9 million. Kuhn said he wants to move into a downtown penthouse, though he would not say in which building.

Public records also indicate the Windermere house is collateral for a $2 million loan related to the Jacksonville projects. But Kuhn downplays the significance of his home being on the market.

He said it has been for sale for seven years. "I buy and sell real estate for a living," he said. "That's what I do."

http://www.orlandosentinel.com/orl-kuhn1407oct14,0,4307606.story

[thelakelander]

Nothing new here, although its good he never received that money from the city.  However there was also no mention of the hotel company looking at purchasing either the Riverwatch Tower site or the Barnett.  I wonder how that's going and when will a decision be made.

[Ocklawaha]

Lake, didn't you hear? JTA is going to buy these and make BRT TOD's out of them.... uhhh huh?

Ocklawaha

[02roadking]

Just another Kuhn article from the Weekly:   


http://www.orlandoweekly.com/features/story.asp?id=11898

[thelakelander]

At least its good to see proof that Jax isn't the only area of the state affected by the slowing market.