VOL. 122 | NO. 153 | Wednesday, August 15, 2007
One Commerce Square Sale Tied Up In Court Dispute
By Andy Meek
REDRESS OF GRIEVANCES: The parties involved in a proposed sale of Downtown's One Commerce Square are now caught up in a lawsuit. -- Photo By Andy Meek
The parties involved in a proposed sale of Downtown's One Commerce Square building for nearly $31 million, a deal that fell apart back in March, are still haggling in court over part of the transaction.
One Commerce Square LLC, which owns the 470,000-square-foot building, has filed a breach of contract lawsuit in U.S. District Court for the Western District of Tennessee. The suit was filed against Hertz Investment Group, the California-based real estate company and former suitor of the Downtown landmark.
The Hertz group, founded in 1979, is a national real estate investment company that specializes in buying, marketing and managing high-end properties. That group entered into a purchase and sales agreement in February for One Commerce Square, the 31-story building at the corner of Main Street and Monroe Avenue.
A few days before that, several participants involved in the deal, including Hertz CEO Judah Hertz, conducted a walk-through of the property. But on March 22, the Hertz group exercised its right to back out of the deal.
$1M down the drain
The 2007 appraisal of the One Commerce Square high-rise is $16.5 million, according to the Shelby County Property Assessor's Office. Two adjacent buildings have been included in recent sales of One Commerce Square - a smaller bank building and a parking garage - and push the collective 2007 appraisal to a little more than $23 million.
The current legal dispute, meanwhile, is over a $1 million deposit Hertz was asked to pay under the terms of the sales agreement. Court documents filed by One Commerce Square LLC show the deposit was put into an escrow account with Chicago Title Insurance Co.
On April 4, a representative of the One Commerce Square group - Michael Williams, an attorney at Evans and Petree PC in Memphis - sent a letter asking Chicago Title Insurance Co. to release the money.
"I am also enclosing a second e-mail ... after the purchaser made the decision not to go forward with the closing of the contract 'requesting' that the seller agree to refund half of the deposit," Williams wrote. "My client, the seller, is unwilling to agree with that request and I submit that e-mail to you as further confirmation that the buyer acknowledges that the deposit is nonrefundable."
John Forbess, an attorney in Santa Monica, Calif., also wrote Chicago Title Insurance Co. but asked that the money stay where it is.
"You are hereby notified that the entitlement of ... these funds is in dispute, and you are not authorized to turn over said funds," Forbess wrote.
Onward, maybe not upward
Yet court exhibits also include an e-mail from Forbess to John Lamberson - a senior vice president at CB Richard Ellis Memphis who was handling the sale of One Commerce Square - that suggested something different about Hertz's deposit.
"If, after looking at all of these, we decide that we don't want to go forward with the purchase, we have the right to back out of the deal, but in that case we would forfeit the deposit," Forbess wrote to Lamberson on Jan. 29.
A scheduling conference in the court case has been set for Aug. 30 before Magistrate Judge Tu Pham.
A clause included in the sale agreement regarding the deposit reads: "Purchaser acknowledges and agrees that ... the deposit shall be non-refundable upon receipt thereof; provided that if the closing occurs, the same shall be applied against the purchase price at closing."
Hertz officials could not be reached for comment on the lawsuit or the unsuccessful sale, which became publicly known at the same time One Commerce Square's major tenant - SunTrust Banks Inc. - was preparing to shift its operation eastward.
Earlier this year, the Atlanta-based bank announced plans to consolidate five existing office buildings in three locations by 2009. SunTrust moved into the One Commerce Square building when in 2004 it acquired National Commerce Financial Corp., the parent company of National Bank of Commerce (NBC Bank) for $7.4 billion.
Evans & Petree attorney Michael Marshall, listed as the representative of One Commerce Square LLC, declined comment, citing a policy of not discussing pending litigation.