By Toni Marshall and Danielle Armour
DELRAY BEACH – Tom Hinners, the co-founder and chairman of the Auburn Group, the parent company of Auburn Trace and the Village at Delray is broke, and his company is busy trying to negotiate a $4 million debt with the city, according to official documents.
Just one day after the Delray Beach Tribune reported that city staff recommended against a request to remodify the loan and at least one commissioner opposed it, an official for the Auburn Group fired off a Sept. 11 letter to city officials.
“We understand that City staff is now recommending that the proposal we made to the City nine months ago be rejected, and that instead we should offer a payment of a discounted amount to support City projects…,” wrote Brian Hinners, co-founder and CEO of the Auburn Group. “We will instead be focusing on determining and proposing a discounted amount, as the City’s consultant has suggested.”
Commissioners have postponed the issue indefinitely.
Since 1992, the loan that was acquired two years prior, has been through a series of modifications, according to city records.
City Manager David Harden is frustrated, “Because we’ve put a lot of effort into trying to resolve this.”
“We’ve negotiated with him for several months now trying to get what we thought was a reasonable deal for the city,” Harden said. “It looks like we were close to something when they came back and said, ‘No, he wants to go back to our original proposal.’”
According to court documents, Thomas Hinners filed for Chapter 11 protection in US Bankruptcy Court in West Palm Beach on March 22 this year.
Hinners, who said that he is single, listed a monthly income of $34,191.68, including $2,206.33 from Social Security and $1,152 from his daughter’s Social Security, according to court documents.
However, he owes an estimated $8 million, according to the documents.
Among those Hinners owes the largest amount:
- Argent Corporation, a collections agency, for $878,463.25.
- Iberia Bank, two personal loans for $416,000 and $4,625,000 respectively
- JPMorgan Chase Bank, $2,360,000 on a home at 10625 El Pariso Place, Delray Beach
- JPMorgan Chase Bank, $1,500,000 on another home at 2155 S. Ocean Blvd., Delray Beach
- Legacy Bank, a personal loan for $467,350.00
- France Hinners, his ex wife for $64,000
- Palm Beach County Code Enforcement, $20,000 in fines on the home at 10625 El Pariso Place
- Palm Beach County Tax Collector, $11,712.39 in taxes
- Peter D. Adams, $1,200 for educational counseling for Hinners’ son
- Swat Mosquito Systems, $881.49 for services
- Tierra Del Rey Property Owners Association for $26,091.40
Hinners also asked the judge to expedite a motion so he could sell his home via short sale for $1.36 million to help defray some of his debt, according to the court document.
Repeated telephone messages left at Hinners’ office seeking comment were not returned.
City officials said they were not aware of Hinners’ financial maladies.
Harden however said there may have been some early indications when they last went through a loan modification with the Auburn Group. They were talking about their return on investment, when then City Attorney Susan Ruby said return on investment is not the issue, what they need to focus on is return on equity, he recalled.
“And when we started talking about that, they sort of backed off and gave us a better deal than they had originally proposed because their return on equity was extremely good,” Harden said.
A Delray Beach Tribune investigation reveals that over the years the Auburn Group failed to honor its obligations.
For example, Auburn’s loan with Iberia Bank matured on Dec. 31, 2011 and is currently in default, according to city records. They are negotiating with the bank to extend the loan for one year subject to refinancing to renovate the property.
Four years ago, Auburn came before the city asking officials to “subordinate its position” on the loan. Subordination means that in the case of a foreclosure, the first grantor, in one instance— Iberia Bank- would be the first to be paid and the City would be next.
Then finance director Joseph M. Stafford cautioned officials against such.
“We have to be concerned with the ability of Auburn Trace to complete this project according to their initial projections given the current real estate market, the decline of property values, the present mortgage market, and the overall general economy,” Stafford wrote in an Aug. 28, 2008 memo to Ruby. “Given these concerns, we should not support any further subordination of our outstanding loans to Auburn Trace. We do not find that this current proposal from Auburn is of any benefit to the City.”
One string of emails dating back to Jan 5, 2010, shows the city treasurer, Becky O’Connor, informing Hinners that a previously agreed upon loan restructure was past due.
“This is a reminder that the UDAG (Urban Development Action Grant) payment was due 12/31/09,” O’Connor wrote in January 2010. “Please get your payment in to us as soon as possible otherwise we will have to levy a 5 percent penalty.”
Six days later Hinners apologized for the delinquency, stating that Auburn Trace had been operating at a deficit of close to $40,000 per month for more than two years and was not able to make its payment.
Back in 1990, city commissioners weren’t satisfied with terms of the 15-year note. Then, Commissioners Richard Dougherty and Jimmy Weatherspoon requested that the city begin receiving repayment from the developer within five or 10 years, rather than the 15-year-plan proposed.
Their concerns have been validated.
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