Minneapolis-based Opus Corp. is scrambling to keep two of its five operating companies, Opus Northwest and Opus North, afloat amid mounting financial challenges.
The privately held firm is maneuvering through the bankruptcy process for three of its five independent operating companies. Opus South filed for Chapter 11 bankruptcy protection in April, followed in July by a Chapter 11 filing for Opus West and Chapter 7 liquidation for Opus East. Since then, Opus has been busy selling properties and establishing receiverships as it works to satisfy lenders. Opus South alone is on the hook for $324 million in bank loans.
As part of its restructuring plan, Opus also sold Opus Property Services LLC to Minneapolis-based NorthMarq Real Estate Services in late August. The Property Services group manages 30 million sq. ft. of real estate in 20 markets and includes some 140 employees.
Although the sale price was not disclosed, the disposition allows Opus to focus on its core disciplines of development and construction, while providing continued service to its properties as the firm closes offices around the nation, says Opus spokesperson Winston Hewett.
As for its remaining two operating companies — Minneapolis-based Opus Northwest and Chicago-based Opus North — Opus has no intention of filing bankruptcy, says Hewett. The two operating companies combined generated $724 million in revenues in 2008.
“We continue to have significant construction work for Opus North and Northwest,” Hewett adds. Opus Northwest recently landed a design-build contract with Nissan North America to build a 717,160 sq. ft. redistribution facility near Nashville, Tenn.
Opus emphasizes that both Opus North and Northwest are separate companies with more conservative business models. Opus North maintains a 50-50 split between its speculative and build-to-suit projects and has a diversified platform including office, industrial, retail, multifamily and institutional development, says Daniel Queenan, president and CEO of Opus North, which is building two projects for Marquette University in Milwaukee that total $100 million.
Complicating matters, however, is a lawsuit filed against Opus Corp. and its various ownership entities — including two family trusts that benefit descendants of founder Gerald Rauenhorst. The suit was filed in U.S. District Court in Minneapolis in July by a group of lenders led by Minneapolis-based U.S. Bancorp.
At the heart of the matter is a $150 million line of credit that U.S. Bank and a group of other lenders provided to Opus in 2007. The lawsuit claims Opus defaulted on the loan in February, and alleges that Opus still owes about $75 million in principal and $3.58 million from letters of credit.
The banks are suing the trusts because they allege that Opus Corp. fraudulently transferred money to the trusts that either “resulted in Opus Corp. becoming insolvent, or were made at a time when Opus Corp. was insolvent.” In response, Opus “adamantly denies” the charges and has since filed a 34-page brief with the court arguing for the dismissal of the lawsuit.
Despite financial and legal challenges, Opus North and Northwest continue to land new business. Opus North is on the “short list” for $250 million in new construction projects, notes Queenan, who constantly “educates” clients that Opus North is a separate operating company. “There is more hand-holding and explanations upfront, but so far we have been successful.”
MORE DEALERS CLOSING SHOP*
As domestic automakers face falling consumer demand for new vehicles, the number of car dealerships in the U.S. is shrinking. In 2009, as the recession continues, the industry expects to see a net of 900 closings, dropping the total to 19,075 dealerships.
|Year||Number of franchised new car dealerships||Net loss year-over-year|
* Totals as of Jan. 1 each year
Source: National Automobile Dealers Association (NADA)