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VOL. 124 | NO. 21 | Monday, February 2, 2009

Beale, Lee’s Landing Battles Continue

By Bill Dries

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GROWING SOUTH: The Westin Memphis Beale Street hotel, across Third Street from FedExForum, has been a visible sign of an expansion of the Beale Street entertainment district to the south.PHOTO BY BILL DRIES

Once upon a time there was talk of a change in the management of the Beale Street entertainment district. And for a rare moment in November, it seemed that all of the many sides that have some role in the running of Beale Street were about to agree to it.

After the funeral of former Lemoyne-Owen College president Walter Walker that month, Memphis Mayor Willie Herenton approached Beale Street developer John Elkington. Herenton, according to Elkington, said he wanted to resolve the city’s nine-year-old lawsuit involving a forensic audit of Elkington’s Performa Entertainment firm. Elkington said he didn’t start the court fight. He didn’t dismiss Herenton’s overtures, but he had heard the same before and it never worked out.

Battle royale

It came to involve the tentative idea that The Cordish Cos., a development firm from Baltimore, might be the successor to Elkington, who indicated in a November cover story in The Memphis News that he was ready to end his tenure as the street’s developer.

Since then, Elkington has become convinced Cordish wouldn’t be his successor as much as his rival, with the Herenton administration pushing Elkington off the street instead of settling the lawsuit as a prelude to a negotiated and voluntary exit.

“It’s all-out war,” is how Elkington described the situation to The Daily News last week at a book signing at Davis-Kidd Booksellers in East Memphis.

“I think it’s deteriorated to a pretty low level right now. … I have a lot of admiration for what government has done. But I think they raised the rhetoric and the decibel level to just a really high level. They’ve gone into ridiculous areas.”

He accuses the city of using proprietary information gathered in its lawsuit against the Beale Street Development Corp. (BSDC) to give Cordish an advantage in luring away the tenants of the clubs in the district.

Memphis Housing and Community Development Director Robert Lipscomb has acknowledged talking with Cordish executives. But he has denied he talked with them about becoming the new managers of Beale Street.

Ricky Wilkins, attorney for the city in the lawsuit, couldn’t be reached for comment. But in November he told The Memphis News that the audit and the information sought for the audit from Performa is about “whether there had been a proper collection and accounting of all revenues that are generated for properties on Beale Street.” Last month, Elkington was ordered to turn over more Performa records to the city.

THE SPOT: Ground Zero Blues Club is one of the tenants of Lee’s Landing south of Beale Street.PHOTO BY BILL DRIES

Beale Street is owned by the city of Memphis, subleased by the Beale Street Development Corp. and managed by Elkington’s Performa Entertainment. At least, that is how it was supposed to happen on paper.

The arrangement is the product of a 52-year agreement signed by Wallace Madewell, who was interim mayor for a matter of weeks following the 1982 resignation of Mayor Wyeth Chandler. It has made the flow of money back to the city anything but simple and basically nonexistent, according to the city, as it continues to press its claim for an accounting by Elkington and the BSDC.

Herenton began calling for the accounting in 1992, the first year he was in office and about the time that Beale Street began to show some signs of prosperity after a rough 10-year break-in period.

“It’s a non-recourse lease,” Elkington told The Daily News. “There is no liability. … We’re not worried about any liability. We’re owed money.”

Trouble to the south

Despite the byzantine lease arrangement, one block to the south of the district, there is an equally complex business relationship coming apart by one definition – evolving by another – with the Lee’s Landing development that opened in late 2006. The Landing is a parking garage with commercial tenants on the ground floor including Ground Zero Blues Club. The Westin Memphis Beale Street hotel, which is also part of the property, sits next door facing FedExForum.

Two years after the opening of Lee’s Landing, there is once again no clear picture and conflicting accounts of who is owed what and by whom.

The property, developed by Performa and built on what had been a parking lot between Beale Street and the Gibson Guitar plant, is in foreclosure. It is scheduled for auction sale on the steps of the Shelby County Courthouse at noon Thursday.

Last month, Elkington was ousted or left as manager of Lee’s Landing Garage LLC, depending on who is asked. His departure came as Sun Life Assurance Co. of Canada sued the parking garage and entertainment complex south of Beale for being in default of a $5.9 million promissory note.

Attorney Michael Marshall, representing Lee’s Landing Garage LLC, told The Daily News Friday his clients and Sun Life are talking to try to reach an agreement before Thursday’s sale.

Sun Life is seeking the appointment of a receiver by Chancellor Kenny Armstrong to make sure it gets the monthly payments it is due from tenants in the development.

Armstrong had delayed a ruling on the matter of the receiver at least until a Feb. 23 hearing in his court.

In responding to the request for a receiver, Lee’s Landing President Michael Dumas and Vice President Steve Sallion wrote in a Jan. 6 response that they “sought to remove (Elkington) as manager and owner of Lee’s Landing” when they learned of the money owed.

“Mr. Elkington is no longer associated with Lee’s Landing,” their notarized response reads. Several other officers and members of the LLC also left in a reorganization of the board of directors.

Elkington told The Daily News his exit from Lee’s Landing was more amicable. He attributes the financial problem to the national economic downturn that has made business bad not only for that particular corner of Downtown but entertainment venues throughout the nation.

Elkington remains as the owner of Lee’s Landing Commercial LLC – the entity that leases to retail tenants. Dumas and Sallion claim Elkington, in that capacity, is in default of his lease to the tune of $1.1 million as of Jan. 6.

Dumas and Sallion also wrote that their LLC will “at least for the short term, need to raise additional capital to cure arrearages caused by its past management.” They argue raising the capital will become “much more difficult” if a receiver is appointed because potential investors would see that the company is not in full control of the garage.

PROPERTY SALES 140 207 19,653
MORTGAGES 128 196 22,629
BUILDING PERMITS 166 367 40,371
BANKRUPTCIES 40 102 12,588