Mysterious Bidder for Geneva Property Identified

Mysterious Bidder for Geneva Property Identified

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PROVO, Utah (AP) -- A mystery bidder for bankrupt Geneva Steel's 1,700-acre property has been identified by an attorney for unsecured creditors as Brownfields Development I LLC, a brownfields venture of Prudential Real Estate Investors.

Prudential Real Estate is the real estate investment management arm of life insurance and financial services giant Prudential Financial Cos.

A $44.5 million bid for the Vineyard property was submitted last month by Utah Lake Development LLC. The principals behind Utah Lake Development were not known until Wednesday, when J. Thomas Beckett, an attorney for the unsecured creditors committee, received a letter from Utah Lake identifying its owner.

Prudential Real Estate buys, mediates and develops brownfields -- underused, derelict industrial and commercial properties that are contaminated.

"We're very happy to know who the mystery buyer is. Prudential is a very fine and reputable institution with an enormous amount of experience and money," said Beckett, who remained critical of the bid.

Don Blackwelder, a commercial real estate agent with Prudential Utah Real Estate office in Orem, described the deal as a "shrewd move by Prudential to buy the last big chunk of property in the area."

"Those 1,700 acres can potentially produce 5,000 housing units that's worth millions of dollars. It's a prime piece of real estate with beautiful lake frontage that has been obscured by the (former steel plant)," he said.

"Based on a $44.5 million bid, that works out to about $26,176 an acre. You can't buy land in Orem for less than $60,000 to $70,000 an acre."

But Mike Hutchings, an attorney for rival bidder Anderson Development LLC, said Geneva's environmental cleanup costs could eat into the value of the property.

"There's a significant amount of acreage that's consumed by a 100-foot high slag pile, and there also are significant environmental challenges that our experts say will never be completely cleaned up. There's significant environmental contamination in the ground water and there isn't enough sewer capacity in the area for an additional 5,000 homes," he said.

Beckett contends the procedures proposed in Utah Lake's bid give it too much advantage over other bidders.

"How do you buy 1,700 acres in Utah County for no money down?" he said. He also cited a lack of a binding commitment by Utah Lake to buy the land, and a 90-day inspection clause that gives it the option to back out of the deal.

If Utah Lake's bid is accepted by the bankruptcy court as a stalking horse bid and it loses the bid, it would get a breakup fee from the successful bidder. Jim Markus, the Chapter 11 trustee for Geneva, is seeking court approval for a $1.34 million breakup fee to be paid to the company if it loses the bidding process.

"We don't think any party should have stalking horse status without either making a firm bid or giving something of value to the estate, like a nonrefundable downpayment," Beckett said.

A hearing on the matter is scheduled Friday at U.S. Bankruptcy Court in Salt Lake City. If the court approves the bidding procedures, Utah Lake would have to place a refundable deposit of $500,000, conduct a 90-day review of the property, and then make a $5 million nonrefundable earnest money deposit.

(Copyright 2005 by The Associated Press. All Rights Reserved.)

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