Naval Hospital redeveloper sued over real estate bills

The former Charleston Naval Hospital in North Charleston.

The new owners of the former Charleston Naval Hospital, a building central to North Charleston's plans to revitalize the south end of the city, have been sued over money allegedly owed to a local real estate firm.

The claim filed this month by Lee & Associates shows that the dispute, involving $276,000 plus unspecified damages, began during the summer and threatened to derail North Charleston's $5 million sale of the long-vacant hospital building to Chicora Gardens LLC.

The city purchased the 10-story building on 23 acres at McMillan and Rivers avenues from the federal government for $2 million in late 2012. The new owner, now called Chicora Life Center, has focused on attracting tenants that are service providers in the health care field.

Charleston County's decision to lease about a quarter of the building, and pay nearly $1.2 million in annual rent, was a key to making the deal work. Lee & Associates claims it is owed commission on that lease and during the summer placed a lien on the hospital property that complicated Chicora's pursuit of a $10.9 million loan.

"As you know, your lien is preventing the new loan from closing and being secured by the property," Chicora Life Center Project Manager Jeremy Blackburn wrote in an email that's included as a lawsuit exhibit. The company needed the loan in order to make a final payment to North Charleston, and to finance renovations, he said.

In other words, the company gave North Charleston a down payment on the hospital, then needed to borrow money against the property in order to make the final $2 million payment to the city. Otherwise, the city would have kept the $3 million down payment, and the property.

The lien, Blackburn wrote, "is having a catastrophic effect on this project and will hurt a lot of people."

The lien issue was resolved when Chicora secured a bond that removed the lien. Chicora then secured the $10.9 million loan that allowed the group to make the final payment to North Charleston and pay for renovations.

Lee & Associates claims the mortgage and the concurrent transfer of the deed from Chicora Group to Chicora Life Center - which have the same owners - "were undertaken with the intent to deprive Lee & Associates of the outstanding and future commissions owed by Chicora Gardens."

Chicora has not yet filed an answer to the suit, but the Blackburn email said the lease with Charleston County went under contract after Chicora terminated the listing agreement with Lee & Associates.

"You are seeking large sums of money for a transaction that you took no part in," Blackburn wrote.

Chicora's agreement with Lee & Associates, which was to run through January 2015, said the real estate firm would get a 1 percent commission on leases signed this year between May 1 and June 30 with any of the entities that were already discussing potential leases, specifically including Charleston County departments and offices that were later included in the lease.

"We're of the position that there are solid defenses to the claims of Lee & Associates," Utah lawyer and real estate developer Doug Durbano said, speaking for Chicora, "You can anticipate seeing a counter-claim."

Lee & Associates' lawsuit also accuses Blackburn of libeling the company in his three-page email.

"As a direct and proximate result of Blackburn's defamatory statements, Lee & Associates has suffered, among other things, humiliation and scorn, and injury to its reputation both with respect to reputation within the community," the suit claims.

The email's recipients included Durbano, North Charleston Mayor Keith Summey, Charleston County Administrator Kurt Taylor and real estate tycoon Donald Trump Jr., who is a minority investor in the redevelopment project.

"There are two sides to every dispute," Durbano said. "We look forward to presenting Chicora's side. Truth is the ultimate defense to a defamation claim."

North Charleston spokesman Ryan Johnson said the city has no involvement in, or comment about, the dispute that complicated the hospital sale.

"Regardless of the lawsuit, as long as (Chicora) closed on the sale by the date they were supposed to, then as far as the city is concerned they did what they were supposed to do," he said.

The sale was completed prior to a September deadline. Charleston County's spokesman said the county would also offer no comment.

Blackburn's relationship with North Charleston predates the hospital project. A company he used to run sold the miniature wind turbines that sit on the roof of City Hall, and he was involved in construction of a rental property owned by the mayor.

The dispute with Lee & Associates isn't the first time Blackburn has been sued for allegedly failing to pay bills incurred by a North Charleston company.

Blackburn and Trump were investors in Titan Atlas Manufacturing, a company in North Charleston that shut down in 2012 after a string of costly patent-related disputes. A law firm sued the company, and Blackburn, for failing to pay legal bills.

Blackburn declared bankruptcy, wiping away his debts in 2013, and that same year became CEO of Titan Atlas Group, which was created after a company registered by Durbano purchased Titan Atlas Manufacturing's assets.

Carl Pierce, a lawyer representing Lee & Associates, said the payment claims involving the hospital site should not be seen as something that raises questions about the redevelopment project.

"We don't want to put any cloud over the property, because there is no cloud," he said. "We're still, even to this day, presenting potential prospects (to lease parts of the building) for this project."

"We wish them (Chicora) all the best, as soon as they pay us in full," said Pierce.

Reach David Slade at 937-5552