Yes, I read the Zeneca case. Hazardous waste sites are like quick sand that suck under the best of intentions. Especially so in hyper regulated, very liberal, California. This one Cherokee franchisee saw an opportunity to make money, after first committing to cleaning up the site that had been polluted long before, by another company. Then some local residents complained they were not doing enough, or making it worse, which attracted the attention of the environmental activist organizations, which brought in the state's regulatory agencies. It became politicized, and once that happens, nothing Cherokee could do, or no matter how much they would be willing to spend...would ever be enough to satisfy the various governmental, activist, and resident concerns.
At that point they did the only thing they could...file bankruptcy, and let the government deal with it. I really can not believe anyone would be so crazy to invest in brown fields. Hell, Rossi seems like a safe investment compared to that. Some of them must work out though, because they seem to have done quite a few.
Shane, these are just excuses. First of all, local residents did not complain about the fact that the work had not been done well, they complained about the fact that they were getting cancer and some of them were dead too. Those land has not been cleaned-up, Cherokee has built on a land that was still contaminated! You can not say "it became politicized" as if Cherokee was a victim of a political dispute. The California Department of Toxic Substances Control issued a remediation order mandating the remediation of the property and Cherokee was obliged to pay for remediation. It was not obliged just because someone find them unpleasant! You say that you don't understand how anyone would be so crazy to invest in brown fields, but that's just Cherokee's job, they have been doing it for years, they did not come across a wrong deal. And bankruptcy hasn't happened by chance, it is the usual loophole used to get out of these situations, which are repeated periodically. How can you think that Cherokee is made up of poor and unprepared VCs that so often bump into the wrong deal? If you read what Sifferkol reported, you know of so many other similar cases. I refresh your memory at least on some:
1) South Carolina - Charleston, Project: Magnolia Development, Companies: Ashley I LLC, Ashley II of Charleston LLC (owned by Cherokee Investment Partners LLC)
Located on a large swath of polluted land along the Ashley Rive in the Charleston Neck Area, Magnolia was part of a long-term plan to clean up the 216 acres and develop a mini-city on the northern edge of the peninsula. The land housed fertilizer factories, a lumber –treatment plant and other heavy industrial business that left a legacy of lead, arsenic, creosote and other contaminants in the soil. Cherokee described its project as the largest redevelopment of a so-called brownfield property in South Carolina. The Magnolia master plan called for a mix up to 4,400 residential units, along with hotels, office buildings, retail shops, parks and a marina.
What happened to that project?
In September 2010 , the Court concluded that Ashley was a liable party under CERCLA, that meant it was a liable party for the remediation of the site. In 2013 , the mortgage on the land went into default and a new lender , Magnolia/ARC Lender bought the bank note. In the meantime , Ashley appealed the decision of the District Court. In April 2013 the United States Court of Appeals for the Fourth Circuit confirmed the judgement of the District Court . Ashley was a liable party for the costs of the clean- up and remediation of the site.
On February 8, 2016 both Ashley I LLC and Ashley II of Charleston LLC filed for bankruptcy.
Another one:
2) Meadowlands
Project : It was a 1,230 acre redevelopment site- According to EnCap’s plan the project enclosed six landfills and encompassed six golf courses, almost 3.500 homes, two resort hotels and a commercial center.
Cherokee Investment Partners ( Cherokee) managed the Meadowlands project together with EnCap Golf Holdings LLC (EnCap), whose President was William Gauger.
What about this project?
At the beginning of 2008 the Inspector General’s office released a 277 page report about its year-long investigation: The report accused EnCap, company controlled by Cherokee, of inflating its qualification and financial backing. On May 8, 2008 EnCap and NJM filed for Chapter 11 bankruptcy protection.
In July 2009 Federal investigators subpoenaed the governor’s office for more than six years of documents records and emails related to the failed EnCap Golf and housing project
In the meantime EnCap/Cherokee ( and its subsidiaries ) received other public-backed incentives such as brownfields-development tax credits and by accepting waste material to fill in its site EnCap could benefit from the private sector For example : Cherokee was paid from the Army Corps of Engineers for accepting dredge from Newark Bay.
And we can go on:
3) Asbury Park and North Arlington
Both these projects regarded the redevelopment of old boroughs. Cherokee created two new entities: Asbury Partners LLC and Cherokee Porete LLC.
Both the City Council of Asbury and the City Council of North Arlington voted to take the properties by eminent domain. In such a way , the redevelopment became a way to confiscate the properties , businesses by municipalities and their connected redevelopers. As a consequence of that, from 2006 to 2009 many owners have complained that the developer Asbury Partners LLC had offered them too little for their properties and for example in May 2009 a jury in Monmouth County directed Asbury Partners LLC to pay a businessman $1.5 million for a beachside restaurant the city had said was worth only $230,000.
What happend this time?
With regard to North Arlington’s project, in May 2006 the North Arlington Property Rights Coalition filed a suit to stop the borough from using eminent domain for the project.
And again:
4) Colorado, Denver. Project Gates Redevelopment and Metropolitan Garden. Company: Cherokee Denver LLC
In December 2001 Cherokee Denver acquired 50 acres of the entire 85-acre site from Gates. It paid $26.5 million for the property. The deal indemnified Gates from any future responsibility for the significant soil contamination caused by eight decades of industrial use as well as for the buildings it left behind on the site. Eventually, in 2005 Gates sold the remaining 35 acres to the Lionstone Group.
In 2003 the Denver City Council approved Urban Renewal Area for the project and granted a special “Transit Mixed –Use Zoning”. Cherokee functioned as the master developer of the project.
To finance the project , including necessary remediation work and the installation of the infrastructure Cherokee was granted $126 million in tax-increment financing subsidies by the City: the Denver Urban Renewal Authority issued bonds that it would repay from sales and property taxes generated by the development in future years.
In the meantime Cherokee Denver also received $2 million in loans through the Colorado Housing and Finance Authority.
Despite the $1 billion plan , Cherokee couldn’t finance the project, therefore the project never left the drawing board .
In September 2007, a Metropolitan State College of Denver student, 23-year-old, John Polzin, during an urban exploration of the massive, abandoned industrial complex , fell thirty feet into an open elevator shaft. He left paralyze with serious injuries leading to his death a month later.
According to some witnesses, several gates around the abandoned property were either unlocked or left open, without any care of the hazardous materials and of the abandoned buildings.
How did this end up?
Because Cherokee Denver asserted that Polzin’s status as a trespasser absolved the company from liability in his accident, Cherokee Denver and Polzin family did not reach a settlement about the amount of the damages, Polzin family sued Cherokee Denver and its contractor Misers Asbestos Removal and alpine demolition. According to the court filings Polzin family sought more than $100,000 plus punitive damages , which could reach into the millions.
In September 2009,because Cherokee Denver’s project failed, Cherokee Denver sold back the property to Gates Rubber Co.
And these are just a few examples. Do you really want to justify Cherokee's actions by defining them as "wrong investments" or "political cases"? Don't be naive ..... certain actions are just to be condemned.
