Sony today. Who's next?
Jan. 31--Arkansas real estate deals that went bad have exposed the finances and sometimes lavish lifestyle of a Memphis scion.
Martin S. "Marty'' Belz, son of Jack Belz and president and chairman of the Peabody Hotel Group, filed for Chapter 11 bankruptcy on Dec. 27.
The missteps were Martin Belz's personal side deals and do not involve the family's larger Belz Enterprises, parties on both sides told The Commercial Appeal.
Business entities within Belz Enterprises include the iconic Peabody Hotel on Union in Memphis and substantial commercial and industrial real estate holdings.
While his liabilities amount to $97.7 million against $60.2 million in assets, Martin Belz seeks relief from $27.3 million in debt involving about 15 of his largest creditors.
"It primarily is a result of personal guarantees on unsuccessful real estate ventures in Arkansas coupled with bankruptcy filings of his partner on those projects," said attorney L. Don Campbell Jr. He and attorney James E. Bailey III, both of the Butler Snow law firm, represent Belz in the bankruptcy case.
"Mr. Belz funded tens of millions of dollars of deficits on those projects," Campbell said. "As a result, demands of the lenders exceeded his liquidity."
The reorganization plan Belz proposed earlier this month would pay those banks 40 cents on the dollar, or $10.9 million total.
The poor performing properties in which Belz invested include the former Little Rock Hilton Metro Center, the 127,449-square-foot Brandon Building across the street, and one of Jonesboro's largest commercial buildings, the former MBC Plaza.
Belz had partnered on several deals including the Little Rock Hilton with developer Bruce Burrow of Jonesboro, Ark. Burrow filed for Chapter 11 bankruptcy in 2012 after another Little Rock project faltered.
Almost two years of out-of-court negotiations by Martin Belz with his largest creditors nearly prevented a bankruptcy. All but one bank agreed to receive 40 cents on the dollar.
The set back involved a Jonesboro building, MBC Plaza. Belz owned an interest in MBC Holdings, which in 2008 borrowed $5 million from Little Rock-based Metropolitan National Bank (now Simmons First National).
Metropolitan started foreclosure proceedings last summer and got a $4.8 million judgment. The bank received $3.1 million of what it was owed when Belz sold the building for that amount. The sale cut the debt to $1.7 million.
Belz filed suit this month against Metropolitan to recover $1.7 million garnisheed by the bank. Meanwhile, the bankruptcy case is proceeding in federal court in Memphis.
In a Chapter 11 bankruptcy, a debt-payoff plan is worked out that satisfies creditors and the federal judge.
If and when the plan is confirmed by a vote of the largest creditors, Belz will give each a cash payment equaling 40 percent of their claims.
A nucleus of the Belz family businesses comprises Jack Belz, his sons Martin and Ron Belz, daughter Jan Groveman, and Jan's husband Andy Groveman.
The court documents show that Belz Investco has agreed to an arm's-length transaction to help Martin Belz get out of his financial mess. Belz Investco will loan him $13 million. Martin will add another $1.9 million of his own cash and the nearly $1.8 million he plans to recover through court from Metropolitan Bank.
Belz Investco conditioned its loan in part by requiring that Martin sell a luxury vacation home at Big Sky, Mont.
The lodge, built in 2006, is currently priced at $24 million. Martin Belz owns a 49.37 percent share of the house.
Belz Enterprises is distancing itself from Martin Belz's bankruptcy.
"Marty Belz's recent financial issues arise from some of his personal real estate investments, which have been negatively affected by the unexpected turn in the market that is generally associated with the Great Recession of 2008," Andy Groveman, senior vice president of Belz Enterprises, said in a written statement.
"Those investments are private matters that Marty engaged in and are not related to the businesses commonly referred to as Belz Enterprises, nor do they involve other members of our family," Groveman said.
"The Belz Enterprises family of businesses is not affected by this and continues to be strong and growing. We continue to invest in expansions and improvements of our Memphis Peabody Hotel, where we have just completed the renovation of all the guest rooms," Groveman said.
Martin Belz by the numbers
Total assets: $60.2 million
Total liabilities: $97.7 million
Current monthly income: $20,729
Current expenses: $201,490
Net monthly income: negative $180,761
Income other than from business operations
(Belz owns part or all of about 45 business entities):
2011: $15.6 million
2012: $18.2 million
2013: $5.6 million
Average monthly expenses: $201,490
Home upkeep: $5,400
Transportation (other than cars): $1,000
Homeowners insurance: $2,900
Support for dependents not at home: $2,000
Expenses for business, professional or farm operations: $97,000
Legal, professional fees: $38,000
Miscellaneous personal expenses: $6,400
Source: U.S. Bankruptcy Court documents
The largest creditors with claims against Martin Belz:
Metro Financial Services, Memphis: $45,292,000 (1)
Centennial Bank of Conway, Ark. : $13,371,776.92 (2)
Centennial Bank: $6,500,000 (3)
Internal Revenue Service: $5 million
Bank of the Ozarks, Little Rock: $4,698,000 (4)
Iberiabank, Birmingham, Ala.: $4,031,000 (5)
InSouth Bank, Memphis: $3,281,000 (6)
Bank of the Ozarks, trustee: $2,690,000 (7)
First Security Bank, Jonesboro: $1,523,000 (8)
Redwood Regions Economic Development Co.,
Eureka Calif.: $1,220,000 (9)
First Arkansas Bank & Trust, Jacksonville: $1,083,000 (10)
Unico Bank, Mineral Point, Mo.: $875,000 (11)
Western Equipment Finance,
Devils Lake, N.D.: $593,000 (12)
First Community Bank, Batesville, Ark.: $444,000 (13)
Red River Valley BIDCO, Shreveport, La.: $418,000 (14)
Here's a summary of how the money was used:
(1) Metro Financial shares offices in Memphis with Belz Enterprises Inc., which develops, owns and manages warehouse, retail, office, housing and hotel properties.
(2) Project involves Hilton Little Rock hotel.
Centennial inherited loan when it absorbed Liberty Bank of Jonesboro, Ark.
(3) Project involves Caraland, undeveloped retail site at Jonesboro.
(4) Project involves Hilton Little Rock.
(5) Involves Turtle Creek mall project at Jonesboro.
(6) Project involves Kearney Cinema Inc.
(7) Project involves Hilton Little Rock.
(8) Involves MBC Holdings Worldwide, a Martin Belz partnership with Jonesboro developer Bruce Burrows.
(9) Involves Belz Broadcasting Co.
(10) Involves MBC Bank Properties LLC.
(11) Involves Arkansas Cinema LLC.
(12) Involves Kearney Cinema LLC.
(13) Involves MBC Holdings Worldwide, a Martin Belz partnership with Jonesboro developer Bruce Burrows.
(14) No project information listed in creditor's report.
Source: U.S. Bankruptcy Court document
(c)2014 The Commercial Appeal (Memphis, Tenn.)
Visit The Commercial Appeal (Memphis, Tenn.) at www.commercialappeal.com
Distributed by MCT Information Services