Suing FDIC

The developer of the stalled Cigar Factory renovation, mired in the failure of a Georgia bank, has fired a legal volley against the government agency that seized the lender and cut off the project's financing.

In a lawsuit filed last week, The Simpson Organization is seeking an order that either requires the Federal Deposit Insurance Corp. to resume funding the builder's loan or removes a lien that the FDIC has on the property.

Last spring, the FDIC took control of a Georgia bank that had agreed to lend $37 million for the Cigar Factory overhaul. The project was to transform the historic landmark building at East Bay and Columbus streets into 66 luxury condominiums with a mix of shops and an upscale restaurant.

Several months later, the FDIC stopped making construction loan payments, despite the developer's requests to draw additional money, according to the lawsuit.

Days before Thanksgiving, The Simpson Organization told its construction crews to stop all renovation work. The building now sits half-completed, with part of its interior exposed.

The developer alleges that the FDIC cut off funding without officially terminating the loan agreement through a process called "repudiation," according to the lawsuit filed in Charleston County Court of Common Pleas.

Developer Boyd Simpson said he is seeking to nullify the lien that the FDIC inherited when it seized his company's main construction lender, Silverton Bank.

"It's our contingent that since the FDIC has refused to perform under the loan documents, they're not entitled to the first lien security on the property," said Simpson, who declined to comment further.

A spokesman for the FDIC said the agency doesn't comment on active litigation.

The Simpson Organization already has tapped $17 million of it construction loan.

Silverton was seized by the FDIC last May 1, becoming one of a record number of 140 banks to fail during 2009. It was the largest bank failure in Georgia's history. Officials estimate that the takeover will cost the FDIC's insurance fund $1.3 billion.

The agency has split up the bank's assets, valued at $4.1 billion at the time of its failure, to be auctioned off publicly. Simpson said the loan for his Cigar Factory project is a part of a $610.5 million package of assets that has a bid deadline of April 6.

Meanwhile, he said, his company is continuing to seek out other sources of funding to restart the project.

Despite tight credit and anemic demand for luxury condominiums, Simpson has said that his project still makes economic sense. Buyers have signed contracts to purchase about 20 percent of the Cigar Factory's units, which range from around $380,000 to $1.6 million.

Reach Katy Stech at 937-5549 or kstech@post andcourier.com. Reach John McDermott at 937-5572 or jmcdermott@postandcourier.com.