A second regional operating company of Minnetonka-based Opus Corp. filed a bankruptcy petition Wednesday, and the beleaguered developer said a third division will file for bankruptcy later this month.
Opus East files for liquidation
Tight credit markets and a tough commercial real estate market continue to damage the nationwide developer.
July 2, 2009 at 2:39AM
Washington, D.C.-based Opus East and some of its subsidiaries filed a Chapter 7 liquidation petition in U.S. Bankruptcy Court in Delaware. Its filing listed estimated assets of $50 million to $100 million and liabilities of $100 million to $500 million. Opus East has developed more than 13.3 million square feet of space since opening in 1994.
In April, Atlanta-based Opus South Corp. filed Chapter 11 and said it will close when its reorganization is complete. Phoenix-based Opus West Corp. is expected to file a Chapter 11 reorganization petition in the next couple of weeks, according to Opus spokeswoman Winston Hewett. Opus West has developed more than 52.7 million square feet since starting operations in 1979.
Opus has five independent regional companies in the United States
In a prepared statement, Opus Chairman and CEO Mark Rauenhorst said the bankruptcy filings result from sharp declines in commercial real estate values and tight credit markets that have made it hard to refinance assets and restructure lending agreements. "A court-supervised process and transfer of distressed assets will assist Opus in reorganizing and focusing on the future," he said.
Rauenhorst said the two remaining regional companies, Minnetonka-based Opus Northwest and Chicago-based Opus North, have not been hurt as much by the industry-wide meltdown and are pursuing and completing development projects. Hewett said Opus North and Northwest were profitable in the first quarter and have healthy balance sheets with no loan defaults.
Opus Northwest's current projects include the third phase of Excelsior Crossings in Hopkins, a 700,000-square-foot office complex being built as a corporate campus for Cargill Inc., and a new sports and recreation center for the University of St. Thomas in St. Paul. Opus Northwest, which recently lost one of its top development executives, is one of Minnesota's largest developers, with other area projects that include the Best Buy headquarters in Richfield and about 2.4 million square feet of retail, office and residential space in the Arbor Lakes area of Maple Grove.
Washington office closed
Opus East's Washington office recently was closed and some of its employees have moved to Opus North and Northwest to oversee liquidation of its portfolio, which consists mostly of office, industrial and mixed-use projects. The head of that office left in January and by the time it closed, it had 17 employees, down from 95 in 2007, Hewett said.
Last month it handed over development rights for a 2-million-square foot office complex it was to build for the U.S. Army in Maryland to a Baltimore-based developer. Hewett said Opus hopes to continue to do projects in Opus East's territory and that they would be handled by Opus North and Northwest.
She said Opus East's bankruptcy was caused primarily by a recent legal dispute with the General Services Administration (GSA) involving a project the developer had been hired to build in Maryland. Opus East filed suit in federal court in May, alleging that the government had sought an unreasonable number of changes to the project that increased costs prohibitively.
To date, the GSA has not made more than $35 million in payments to Opus East on the unfinished project. "That compounded the challenge of other difficult market conditions," she said. "Opus East would not be filing [bankruptcy] if it had received the progress payments," Hewett said. The subsidiary associated with the disputed project is not included in the bankruptcy filing, she said.
Opus West plans to maintain its Phoenix office, plus one in the Dallas area and another in southern California to focus primarily on asset sales, Hewett said. It previously had seven offices in Arizona, Texas and California.
In May, the head of Opus West resigned amid speculation the division would wind up filing for bankruptcy. Two of its large projects have gone into foreclosure, and one has filed for Chapter 11 after being sued by lenders claiming they are owed $160 million in loans, interest and fees.
"We continue to take steps to resize the business, reduce expenses and cash consumption, and deleverage our portfolio," said John Greer, chief restructuring officer for Opus West.
Susan Feyder • 612-673-1723
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