At present Propst Properties of Huntsville holds the note on Vestavia’s City Center , but Alex Baker of AIG Baker is taking the company to court in an effort to regain ownership and control of the shopping center. In April, he put the property in foreclosure to halt Propst’s intended sale of the City Center.

According to the Birmingham Business Journal, Baker believes that Propst “was acting in bad faith, claiming the assignment of the note was not valid and Propst knew of AIG Baker’s financial condition before the sale.”

However, Propst has plenty of claims of their own, including the accusation that “this is a wholly inappropriate use of bankruptcy – using bankruptcy as a sword rather than a shield.”

According to the Business Journal, Propst believes that AIG Baker had enough capital to pay its debts and that this foreclosure was designed to “force a sale of the note at a greatly reduced price to AIG Baker’s CEO Alex Baker, since he’s not personally the guarantor of the debt.”

Propst claims the foil to Baker’s plan was that he wanted 90 days to purchase the City Center’s note from the bank, while Propst was more than happy to close the deal before that. He added that “bankruptcy relief wasn’t designed to prefer one purchaser over another.”

We will keep you posted on developments in this case.

Brice Johnston
Goodrich Law Firm, LLC

Both retail properties were owned by Alex Baker, CEO of AIG Baker Vestavia, LLC, a subsidiary of the troubled AIG Baker who was the recipient of a large government bail-out last year.

Presently, the loan on Vestavia Hills City Center is owned by Huntsville firm Propst Properites, which is headed up by John Hughey.  Patton’s Creek’s loan is held by Tate Capital Real Estate Solutions, LLC of Miami.

Hughey, of Propst Properties, felt the property was a good investment and intended to hold a foreclosure sale on April 27 of last month.  Days before the sale, Baker put the property into bankruptcy to stave off the sale, according to al.com.

Baker wants a chance to repay his debt on the property and maintain the development. He is also ending his 17-year relationship with the larger AIG entity. Lawsuits continue, as Baker challenges the legality of a bank selling a loan to an entity other than another bank or financial establishment.

However, according to al.com, Hughey remains “unfazed” by these recent developments and potential legal snares. In an online article, he is quoted as saying “’We’ve got legal rights, too … Our legal counsel says we’re in a pretty good position.’”

Again according to the Birmingham Business Journal, Tate Capital intended to put Patton Creek in foreclosure sale on May 11 of last week.

AIG’s other Birmingham properties include the Village at Lee Branch and Wildwood Centre. The Journal also says that the company already defaulted “on a $10.4 million construction loan” that would have established Hayes Marketplace, a proposed Pelham shopping center.

Business amongst the individual retailers should remain relatively unchanged in coming months, but it remains to be seen who will own what properties once the dust settles.