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VOL. 128 | NO. 183 | Thursday, September 19, 2013

Beale Street Future Returns to Bankruptcy Court

By Bill Dries

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The future path of Beale Street development is back in federal bankruptcy court after a plan that would both lease Handy Park and pay off a $600,000 loan for park improvements was scrapped Tuesday, Sept. 17, by Memphis Mayor A C Wharton Jr.

Musician Adam Warren plays a solo guitar at Handy Park on Beale Street. The future path of Beale Street development, including a lease for the park, is headed back to U.S. Bankruptcy Court.

(Daily News File/Lance Murphey)

Wharton would instead use revenue the city is getting from the Beale Street entertainment district to pay off the loan Beale Street developer John Elkington took out to make improvements to Handy Park, including its existing amphitheater.

And if U.S. Bankruptcy Court Judge Jennie Latta approves that as the final piece of the settlement of Elkington’s Performa Entertainment bankruptcy, the city would move ahead with a three-part change in who runs the district.

City Attorney Herman Morris outlined the tentative steps Tuesday as Wharton scrapped the previous lease his administration negotiated with a group of Beale Street tenants.

The lease proposal drew criticism from several council members, who complained that the city didn’t open the process to bidders or take various proposals before settling on one.

And Tuesday, several council members said they plan to closely watch how the new process works.

The city administration will seek an interim contract and then a permanent contract with firms to manage the street, including the park, for the city of Memphis separate from the settlement of the loan for park improvements.

“It could happen as soon as tomorrow. It probably won’t,” Morris said of the first part, which is a settlement in bankruptcy court. “But we hope that it will take place over the next several months at the outset.”

The loan Elkington got for park improvements from what is now Wells Fargo Bank is the last piece of the bankruptcy court settlement between the city and Performa. That allows Elkington to exit from his role as developer of the district since it reopened in late 1983. Performa filed for bankruptcy after the company and the city settled a Shelby County Chancery Court lawsuit. The bankruptcy filing was part of the settlement of that case.

“It really makes sense for the city for expediency sake to step in and address it simply straight on and get that part of it out of the way so that we can then take charge and work through the rest of the process of getting Beale Street under a more permanent and long-term management,” Morris said.

He conceded Performa could be among those who make a proposal. But he said the whole point of the multisided court case and the years of settlement talks that began when Wharton took office in late 2009 is over the terms of Elkington’s departure.

Until the settlement is a done deal, Performa runs the district day to day.

If the timeframe of months is the case for the settlement, a group of city division directors would run the entertainment district on a day-to-day basis for a “limited period of time,” Morris said, while the administration hires an interim management and development firm.

While that firm is working, the city would undertake a more extensive process of seeking applications and proposals from firms to run and develop the district permanently.

Wharton has said repeatedly that the city has no intention of directly managing the entertainment district for any extended period of time. But he has also said any new agreement for management and development of the district will be much shorter in duration than the 50-year contract the city signed with the nonprofit Beale Street Development Corp., which then subleased the property to Elkington’s company, which became Performa Entertainment.

Elkington has said the terms were necessary for any developer to take on the rebirth of a district that was boarded up and behind chain-link fences. The city approached the founders of Overton Square in the late 1970s about running the district, but they refused. Beale’s original developer, Gene Carlisle, gave way to Elkington, who soon discovered his firm would not only run the district and tend to its tenants, but also have to get into the restaurant business to make the district work.

The long-term nature of the agreement and its multiple moving parts, including the development corporation, made for a complex lawsuit in Chancery Court and in federal bankruptcy court. And the settlement between the city and Elkington does not at this point include a settlement with the development corporation.

Morris has expressed confidence that with the bankruptcy court’s rejection of the development corporation’s claim that Performa owes it several million dollars, there is a higher likelihood of a Chancery Court settlement of BSDC’s claims.

PROPERTY SALES 23 23 1,365
MORTGAGES 21 21 1,068
BUILDING PERMITS 117 117 3,173