The developer behind the ill-timed Cigar Factory deal sailed into a frothy market in 2007, when the wind was still gusting behind the real estate business.
These days, the large landmark property resembles a brick ghost ship, an empty vessel set adrift by the 2008 financial meltdown. A $75 million plan to transform the historic East Bay Street building into a mix of 66 urban-style condominiums atop retail shops and offices has been caught up in the doldrums for nearly three years.
Until now. The voluminous litigation that has stalled the project is over, with everyone involved agreeing to foot their own legal bills and quietly retreat.
“I think all parties are pleased that occurred,” Boyd Simpson said of the settlement.
Perhaps none more than Simpson, an Atlanta developer whose TSO Cigar Factory bought the building for about $20 million in mid-2007. The money changed hands about six months before the so-called Great Recession kicked in.
Like many Charleston structures, The Cigar Factory has a storied past.
It was built in the early 1880s as cotton mill. Some say it was where the song “We Shall Overcome” was first used in a protest during a six-month strike by American Cigar Co. workers in 1944.
It is on the National Register of Historic Places and is one of the largest privately owned commercial structure on the peninsula.
The property became ripe for redevelopment after anchor tenant Johnson & Wales University bolted for Charlotte six years ago.
Simpson jumped at the opportunity in mid-2007, even as the local real estate market was showing signs of overheating.
“We don’t think we have to have ‘boom’ conditions to succeed with the project, just normalcy,” Simpson said at the time.
Out of the norm
What followed was anything but normal. The global financial meltdown bared its full fangs in September 2008, taking a deep bite out of Simpson’s industry as lending to developers suddenly dried up.
At the same time, banks with heavy concentrations of real estate mortgages began failing by the bucketload. Among them was Simpson’s construction backer, Silverton Bank, which met its demise in May 2009.
By then, he had tapped about half of his $37 million credit line. Suddenly, his new banker was the Federal Deposit Insurance Corporation. The regulatory agency allowed a few more draws before cutting Simpson off, forcing him to shut down the Cigar Factory project. It was the day before Thanksgiving in 2009.
A flurry of lawsuits followed in federal court. Simpson’s contractor sued his group for more than $2.6 million in unpaid bills. That was after Simpson hauled the FDIC into court for not funding the rest of his loan. Others were pulled into the legal thicket as well.
All of that was settled nine days ago.
“At least we can now say that’s behind us and we can look to the future of the project,” Simpson said Tuesday. “That’s what we intended to do.”
Remarkably, Simpson and his investors somehow managed to hold on to the iconic building.
“We have full and complete control,” he said of the 4.1-acre site at East Bay and Columbus streets. “That was a very important objective to us because we wanted to maximize the ability to finish the property for the community as well as for ourselves.”
Simpson said he isn’t allowed to discuss other details of the settlement.
Sounding tired and contemplative, he acknowledged the heavy toll of the past three years.
“It’s certainly been challenging, both from a financial and a personal point of view,” he said.
Simpson is now looking to coax the Cigar Factory deal back to life. The first step will be is to revisit the original concept over the next few months.
Also, he’ll need to line up a new construction loan to complete what he started more than five years ago, just before the world changed.
“I suspect the plan will be similar to the original ... in that the project will be extensively mixed-use,” he said. “But beyond that? It’s difficult to say.”
Reach John McDermott at 937-5572.