The Ball is Back in Brian O’Neill’s Court! Uptown Worthington Developer Sues Citizens Bank for $8 Billion in Damages – You Read it Right, Billions!

If you recall, I have had several posts about Brian O’Neill of O’Neill Properties in regards to his Uptown Worthington project in Malvern (future site of Wegmans). Citizens Bank had secured a $61 million judgment against O’Neill in November for unpaid loans on the project.

Breaking news . . . Mr. O’Neill is taking back the ball to his side of the court.  He has filed a lawsuit against Citizens Bank for $8 billion in damages ($4 billion in compensatory damages and $4 billion in punitive damages), claiming that the bank wrongly called for loans before they were due and the bank did not follow through with their end of the agreement with construction financing.

The O’Neill lawsuit alleges that Citizens Bank judgment was “maliciously based upon sham defaults manufactured by the bank in bad faith — as part of a scheme to pressure”.  I am guessing that Citizens Bank tried to back O’Neill in to a corner with their demand to repay the loans.  O’Neill’s lawsuit points to a couple of major problems with Citizens Bank.  First, the bank was demanding repayment on the financing loans before the loans were scheduled to be due; and secondly, Citizens induced O’Neill to amend the initial loan agreements and increase the amount borrowed when they had no intention of doing so.

After Citizens Bank secured its judgment against O’Neill (in essence leaving the Worthington project without promised financing as the lead lender), O’Neill has been challenged in his efforts to find other financing.  Without Citizens Bank’s financing, O’Neill has faced great difficulty in restructuring the financing required for the Worthington project.  We are acutely aware that the economic climate is far different now than it was in 2002 when Brian O’Neill and O’Neill Properties began this major redevelopment project in Malvern, making this current financial situation all the more difficult for both sides.  Because of Citizens Banks actions, O’Neill alleges that he has lost not only tenants but also damages to his company far exceeding the $61 million loan amount.  As a result, O’Neill is seeking damages of $8 billion from Citizens Bank.

If you are keeping score, looks like the ball is in O’Neill’s court.  Citizens Bank, you are up next . . .

Is the Role of Scrooge Being Played by Citizens Bank?

This is a follow-up to my posting a couple of days ago re Citizens Banks $61 million judgment against Brian O’Neill and O’Neill Properties Group’s Uptown Worthington project.

The $540 million Uptown Worthington mixed-town center plan calls for 752,500 square feet of lifestyle retail space, 227,960 square feet of office space, 753 residential units and 160,000 square feet of hotel space. The site location of Uptown Worthington is on Route 29, between Route 202 and Route 30 in Malvern. Although there does not appear to be much other construction underway on the 100 acre site, the Wegmans grocery store is nearly complete and  appears on track to open by summer 2010 (delayed from the earlier stated fall 2009 date).

Like so many other commercial real estate developments, the Uptown Worthington project has been faced with the challenges of our country’s severe economic times. O’Neill Properties Group’s remaining loan balance of $61 million matured this past June. Even after the loan was 90-days past due, Citizens Bank attempted to renegotiate the loan agreement in late September, probably trying to ward off any legal court wranglings. Attorneys for O’Neill Properties Group offered Citizens Bank various terms for the loan agreement but all were deemed unacceptable by the bank. Some of the proposals involved O’Neill using Pennvest loans from the Pennsylvania Infrastructure Investment Authority to pay for certain loan expenses. Pennvest loans are made for infrastructure improvements and to spur local economic development. Apparently, Citizens Bank wanted to take the expected Pennvest loan money to pay O’Neill’s outstanding loan principal. However, when O’Neill and Citizens could not come to an agreement over the Pennvest loan money, Citizens threatened legal action and as we have now learned, filed a $61 Million judgment against O’Neill a few weeks ago.

Although Mr. O’Neill has not filed a petition to strike the recent Citizen Bank judgment, he did make the following statement to Philadelphia Business Journal,

 “Citizens commenced suit. We are not in default. Citizens is in default. They are having their own internal problems which caused this and their inability to live up to their contractual commitments. We are hopeful that they will acknowledge the error of their position and reverse course. Alternatively, we will go to war.”

Sounds like ‘fighting words’ from Brian O’Neill.  This situation is setting the stage for a real power struggle between these two corporate giants, O’Neill Properties Group vs. Citizens Bank.  It’s hard to know who’s right . . . is Brian O’Neill and his company the wronged party?  Or is Citizens Bank being unreasonable and the ‘Scrooge’ in this scenario?  I certainly can not offer an opinion, except to say this situation probably has many lawyers on both sides seeing green this holiday season!  One thing for sure though is that the community certainly doesn’t want to see this project hang in limbo in its current incomplete state.  In the spirit of the season, here’s hoping that both sides will quickly reach an amicable solution.