Baltimore developer David Kornblatt, a fixture on the city's real estate scene for nearly 30 years, took his flagship company into bankruptcy protection yesterday in an effort to keep its bank accounts from being attached by Sovran Bank of Maryland.
The David Kornblatt Co. asked the U.S. Bankruptcy Court in Baltimore for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. That would ordinarily keep creditors from taking action to collect the company's debts, but Sovran has already moved to attach the accounts.
Joel I. Sher, an attorney for the David Kornblatt Co., said Sovran refused on Wednesday to dissolve the attachment, which led to yesterday's filing. "All the banks were willing to go along with us to some extent, except Sovran," Mr. Sher said.
He said that the company filed suit late yesterday to dissolve the attachment, but Sovran attorney Stephen A. Goldberg said the bank will challenge that suit.
Sovran had moved March 18 to attach the company's accounts and some of Mr. Kornblatt's personal accounts, as well as to put a charging order on some of his partnership interests in development projects, in an effort to enforce a judgment for more than $600,000 owed to Sovran by the company. That judgment was prompted by the company's failure to repay a $500,000 credit line opened in 1989, Mr. Sher said.
Mr. Kornblatt's personal accounts were attached because he and his wife personally guaranteed the note. Mr. Sher said the partnership interests are legally protected from seizure, though a charging order would divert any money Mr. Kornblatt earns from the partnerships to Sovran.
Mr. Goldberg said Sovran didn't foreclose on Mr. Kornblatt's Pikesville home, a tactic some banks have used against delinquent developers, because it is heavily mortgaged to another bank.
The David Kornblatt Co. is a commercial real estate brokerage and property management firm that is separate from other ventures, also controlled by Mr. Kornblatt, that run his development projects. Those other ventures did not file for bankruptcy yesterday. Mr. Kornblatt also did not file for personal bankruptcy protection.
Mr. Kornblatt's best known developments include the headquarters building of First National Bank of Maryland at 25 S. Charles St. and St. Paul Plaza, a combination office building and parking garage at St. Paul and Lexington streets that includes the main offices of the state Attorney General's office.
Mr. Kornblatt said that the St. Paul Plaza project won't be affected by the bankruptcy filing because it is owned by partnerships distinct from the David Kornblatt Co.
But he and Mr. Sher did say the company's bankruptcy was also caused in part by the collapse of a deal under which the state would have bought six floors of the building for $22 million.
The deal to sell six of the 13 stories of office space at St. Paul nTC Plaza was killed by the General Assembly's refusal to budget money for the purchase, which had been recommended by Gov. William Donald Schaefer.
"Schaefer couldn't get a dog licensing bill through," Mr. Sher said, referring to the governor's recent spats with key legislators. "David is a victim of some of the problems down there as well as slow leasing."
Mr. Goldberg said the collapse of the deal with the state contributed to Sovran's tough stance in negotiations.
"We were being asked to stand still for as long as two years -- do nothing," he said. "The rationale for that began to unravel. They were going to sell it to the state and that was going to be everyone's salvation. But the General Assembly didn't approve the funding, and that's why we are where we are today."
Mr. Sher said he has not yet prepared the company's statement of assets and liabilities, but he said that he expects its liabilities to exceed its assets.
In addition to the judgment related to the credit line, Mr. Kornblatt also owed Sovran more than $1 million from a delinquent mortgage on 217 N. Charles St., a small office building that Mr. Kornblatt and several partners were renovating.
Bank of Baltimore, Signet Bank/Maryland and Carrollton Bank of Baltimore have also called loans owed by the developer.