Developer to cut ties with snake-bit center
Developer Ken Morin has made millions on other local projects. But he’s lost millions on Walter’s Crossing.
By JAMES THORNER
Published June 22, 2006
Walter’s Crossing shopping center owns an enviable location at Interstate 275 and Dale Mabry Highway and has strong sales at its anchor stores, Target and the Wild Oats health food emporium.
So why isn’t developer and owner Ken Morin leaping for joy?
For all its success as a model of urban redevelopment — ripping down the former Walter Industries headquarters to build one of Tampa’s popular shopping destinations — the project has turned out to be a geyser of red ink for Morin.
He’s days from selling the shopping center at a multimillion-dollar loss to Inland Real Estate Acquisitions Inc. The sale occurs as Morin’s lender, Merrill Lynch Capital, is foreclosing on the property to recover $31-million it lent the developer.
Before Morin can close the sale of the 350,000-square-foot shopping center to Inland, he has to satisfy millions of dollars in liens on the property. Everyone from the project manager to the general contractor to the architect has yet be paid in full.
Morin has been something of a wunderkind in area development, making millions on such projects as the AMC Veterans 24 movie theater off Veterans Expressway and the Suncoast Crossings mixed-use project in southern Pasco County. But the 52-year-old Tampa developer admits Walter’s was, if not his Waterloo, at least a tactical setback.
“You have to weigh things out. I’ve had five incredibly successful projects,” Morin said. “Nobody who has been in the business any time is batting a thousand. I won’t name names, but everyone in this market has had his Walter’s Crossing.”
Morin was hailed for his creativity when he bought the Walter Industries headquarters in January 2001. Walter would move operations about a mile away to Corporate Center Two.
Dominating the 13 acres were twin eight-story towers built in 1957 and connected by a sky bridge. Morin budgeted his retail redevelopment project at $42-million, but a series of unfortunate events dogged it for the next five years.
First came the 9/11 attacks. The economic blow temporarily froze expansion plans for some retailers scouting the site. Walter Industries had built on a former lake bed. The soil turned out to be unstable.
Morin’s engineers broke the bad news: To reach bedrock 400 feet underground, Morin would have to bury multiple steel and concrete footings stretching a combined mile. That alone cost him more than $2-million.
By the time construction started in 2004, commercial builders, competing with the residential boom, were paying premiums for everything from steel bars to concrete to fill dirt. The price of concrete block more than tripled from about 85 cents to $3 apiece. Morin was in too deep to back out. Target, Toys “R” Us, Macaroni Grill and other tenants were on board.
Exacerbating matters, two former investors sued last year, alleging Morin was withholding their share of returns on Walter’s Crossing. He settled the case this year, but not before Merrill Lynch launched foreclosure proceedings.
“I think the world of Ken Morin. He’s a good person and a great developer,” said Patrick Berman, a retail development expert with Cushman & Wakefield in Tampa. “But he just got squeezed here. He couldn’t control 9/11. He couldn’t control the soil.’’
The project manager, Skanska USA Building Inc., is still demanding payment of $4.1-million. According to foreclosure documents, other large sums are owed to Tampa’s Alfonso Architects and Tarpon Springs’ Hawkins Construction Inc.
Skanska, one of the country’s largest construction firms, has entered arbitration with Morin, Skanska general counsel Tim Harvey said. “They can’t transfer title without satisfying us as lien holder,” Harvey said of Morin’s sale to Inland.
Morin said he plans to make good on debts to subcontractors, starting as early as Tuesday. The deal with Inland is supposed to close by the end of the month. An Illinois real estate investment trust, Inland is an aggressive buyer of real estate in the Southeast, Berman said. Inland prides itself on paying cash.
“We’ll start swapping cash next week,” Morin said. “All the commitments have been honored. Everybody understands.”
Morin said he’s moving ahead with his next big project, a $200-million renewal of five West Tampa city blocks. He hopes to build townhomes, condominiums and apartments on 12 acres of mostly industrial land he recently bought from Graybar Electric Co. for $17-million.
“I’m still friendly with all my bankers. I’m negotiating with Merrill Lynch as friendly as can be. I’m negotiating with Skanska as friendly as can be,” Morin said.
“Walter’s Crossing is a hiccup. It’s not career ending.”
James Thorner can be reached at firstname.lastname@example.org or (813) 226-3313.