The owners of the vacant Parole Plaza shopping center filed for Chapter 11 bankruptcy protection this week, forcing cancellation of a foreclosure auction set for yesterday, and buying much-needed time to execute possible sale of the property in the next few weeks.
Anne Arundel County officials - who found out about the federal bankruptcy court filing yesterday morning - worried that it further complicates plans to revitalize the 1960s-era shopping center.
"We are disappointed that this may result in further delay [in redevelopment] of this prime piece of land in the Annapolis market," said William A. Badger Jr., executive director of the Anne Arundel Economic Development Corp., which has been working with the county to demolish the mall and build a new commercial and residential hub in its place.
According to bankruptcy documents filed Monday in federal court in Camden, N.J., mall owners, among them Seymour Freedman and Howard Wagman, general partners of Parole Shopping Center Limited Partnership, owe $22.2 million to creditors. That includes $3 million to Sears, Roebuck & Co. and $223,000 to Anne Arundel County in back property taxes.
Company assets were listed at $25.6 million - $615,000 of it in personal property held by Freedman and Wagman, according to court documents. Freedman and Wagman also are owed $201,000 and $335,000 respectively, by the limited partnership.
Freedman's son, Carl Freedman, who runs his own development firm and has represented Parole Plaza partners in meetings with county officials for a decade, also has been supporting the mall financially. Court documents show that Carl Freedman's business is owed $450,000.
A New Jersey attorney representing Freedman in the bankruptcy case, Douglas S. Stanger, said he could not discuss the case yesterday because he didn't have permission from the Freedman family and other Parole Plaza partners.
An attorney who represents the Freedmans in the Annapolis area could not be reached for comment last night.
Carl Freedman did not return calls to his Mount Laurel, N.J., office and his cellular telephone.
Anne Arundel County Executive Janet S. Owens - who signed a development agreement with Carl Freedman two years ago, and has promised to revitalize the Parole area - declined to comment on the bankruptcy filing through a spokeswoman.
But the county's economic development chief said that county officials are frustrated by the on-again, off-again nature of the Parole Plaza negotiations. "At this point, it's hard to predict what will happen," said Badger.
In recent months, two developers have announced that they intended to purchase the mall property only to say later that they couldn't strike a deal with Carl Freedman or Parole Plaza partners.
In July, Bernstein Companies, of Bethesda, bought the mortgage note on Parole Plaza from Fleet Bank of Boston. The Bernstein group has been pressuring Carl Freedman and his father to make good on back payments, as well as late fees and interest rate insurance, for a total of $15.7 million.
Bernstein officials initiated foreclosure proceedings Aug. 18. A foreclosure auction was set for 9:30 a.m. yesterday at the Anne Arundel County courthouse, but was canceled at the last minute because of the bankruptcy filing.
Bankruptcy documents filed by Parole Plaza representatives allude to an Oct. 2 purchase settlement date. No further information was provided.
But Carl Freedman recently met with Owens to discuss the future of the mall. At that time, Freedman told Owens that he had the financing he needed to take control of the property and move forward with redevelopment plans, said Badger, who did not attend the meeting but discussed it with Owens.
"At the time, there was no mention of this," said Badger, referring to the bankruptcy filing. "At the time, he insinuated that he had control of the property."
By filing for Chapter 11 protection, Parole Plaza owners and Carl Freedman delayed imminent takeover of the mall, a 34-acre property that occupies prime real estate on Route 50 at the gateway to the state capital. In doing so, they gave themselves breathing room to prepare for their next move.
One bankruptcy expert said the court will give them 90 days to come up with a financial plan, as well as a three-month reprieve from debt collectors.
"They had to do this, otherwise they were going to lose the property at foreclosure," said Debbie H. Devan, head of the bankruptcy practice at Neuberger, Quinn, Gielen, Rubin & Gibber in Baltimore, who reviewed the Parole Plaza bankruptcy case for The Sun.
The bankruptcy filing is the latest twist in a development saga that started more than 50 years ago.
Seymour Freedman built the mall in the 1960s and unveiled it as the first suburban shopping center in the Annapolis area. At the time, the plaza was heralded as a shopper's delight and a bonus for county and city officials looking to build a commercial tax base.
The mall - which has been vacant for at least a year - has fallen on hard times lately. As retail shopping tastes evolved and competitors such as Westfield Shoppingtown and the Harbor Center opened nearby, Parole Plaza had trouble keeping merchants and customers. A BGE Home appliance store was one of the last tenants to pack up and depart earlier this year.
"It's been quite a trail," said Walt Petrie, an Annapolis developer who came close to buying the plaza from Freedman's father and his partners earlier this summer. "Nothing surprises me with this deal anymore."