Two Butcher Partnerships Seek Chapter 11 Protection

Posted: March 09, 1990

Two Butcher & Co. real estate partnerships that own the Biltmore Hotel in Coral Gables, Fla., have filed for bankruptcy protection from creditors.

Butcher's Deilwydd Corp. and Sovereign Group Ltd. 1986-1 filed for protection under Chapter 11 of the U.S. Bankrutpcy Act in U.S. District Court in Philadelphia last Friday. Deilwydd Corp. is the general partner of the limited partnership that owns the property.

David Lloyd, president of Sovereign Group, Butcher & Co.'s real estate subsidiary, yesterday said hotel revenues had increased, but not enough to pay off its debt to a Florida bank that was about to foreclose.

In 1986, the Sovereign partnership bought the hotel, which was built in 1925 and is in the National Register of Historic Places. The hotel had been used as a military and veterans' hospital from 1942 until 1968. The building was closed from 1968 until the Butcher partnerships bought it and began a $47 million restoration.

Lloyd said the partnerships' debt had risen above projections during the first year of renovations. He said that in 1987, Sovereign removed its development partner in the project as a result of the cost overruns.

The bankruptcy filing lists assets of $36 million and liabilities of $45.7 million. The secured creditors are Barnett Bank of South Florida, which has lent $34.5 million, and B&S Leasing, a subsidiary of Butcher & Co. which lent $2.7 million to the project.

The filings state that 30 partners invested $6 million in the Sovereign partnership. The largest investment came from the Northern Central Bank of Williamsport, which invested $2.55 million. Johnstown Savings Bank invested $750,000.

Last month, investors in another Sovereign partnership filed suit against Butcher & Co. and several of its affiliates, alleging that the Philadelphia investment firm misrepresented the financing of a Center City office building in which it sold shares.

That suit, filed in U.S. District Court in New York, alleges that Butcher and its affiliates misrepresented the costs of renovating a building at 714 Market St. when it sold interests in the partnership in 1984. The partnership still owns the property, known as the Sovereign Building.

Sovereign has been syndicating real estate limited partnerships since 1972 and has raised a total of $250 million for 63 partnerships.

Another Sovereign partnership, which owns an apartment building in Arizona, has filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. Lloyd said that project suffered from an overbuilt market.

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