The Model Tobacco building along Route 1 in South Richmond. (BizSense file photos)
Facing federal embezzlement charges, and an attempt from his primary lender to put the property under receivership, the developer behind the Model Tobacco Lofts in South Richmond has filed for bankruptcy protection.
Chris Harrison, principal of Maryland-based C.A. Harrison Cos., filed a Chapter 11 petition Dec. 30 for his Model Tobacco Development Group LLC, which owns the 15-acre complex at 1100 Richmond Highway that Harrison has partially redeveloped into 200-plus apartments.
The filing was made two months after Harrison’s indictment in October on embezzlement charges that involve the project, and three weeks after Virginia Housing filed a request in Richmond Circuit Court to put the property under receivership due to loan payments that it said haven’t been made since last May.
Virginia Housing is listed in the bankruptcy petition as the Model Tobacco LLC’s primary creditor, with $34.7 million owed on a construction loan for the project.
Other unsecured claims listed in the petition include $4.5 million to Cedar Rapids Bank & Trust, over $446,000 to Walter Parks Architects, $100,000 to the City of Richmond Department of Public Utilities, and $50,000 and $30,000, respectively, to law firms Hirschler Fleischer and Williams Mullen.
In all, the petition indicates between $50 million and $100 million owed to fewer than 50 creditors. It lists the LLC’s assets at between $10 million and $50 million, and states that funds will be available for distribution to creditors.
A hearing in the bankruptcy case is scheduled for Jan. 29 at the federal courthouse in Richmond.
Meanwhile, an initial hearing for Virginia Housing’s receivership request is scheduled for Jan. 14 in Richmond Circuit Court. The hearing was rescheduled from an earlier date due in part to the bankruptcy filing.
In its Dec. 11 filing, Virginia Housing alleges that the LLC “has failed to pay regularly scheduled debt service payments” and, “critically, has allowed the Property to fall into disrepair by failing to communicate and cooperate with the property management company to perform material roof damage repairs,” among other needed work.
Virginia Housing wants a third-party receiver to control the property to prevent further disrepair ahead of a foreclosure sale or other disposition of the property. Its court filing, first reported by The Richmonder last month, notes the federal criminal charges that restrict Harrison from conducting financial transactions related to Model Tobacco or the LLC.
The filing states that Trigild, a real estate firm that handles court-appointed receiverships, is willing to serve as receiver in the case. It also states that the property manager, Henrico-based WPM Midsouth, is willing to resume its role under receivership after having resigned the job late last year.
Chris Harrison at the 2015 redevelopment announcement for the Ramada Inn project in Petersburg.
Harrison has pleaded not guilty to the federal charges, which include wire fraud and mail fraud, engaging in monetary transactions with criminally derived property, and aggravated identity theft. The charges carry a combined maximum prison sentence of 32 years, though actual sentences for federal crimes are typically less than the maximum penalties.
The U.S. Attorney’s Office accuses Harrison of skimming loan proceeds for the Model Tobacco project and a similar building conversion in North Carolina and putting some of the funds toward unauthorized expenses, including litigation costs related to his failed redevelopment of the former Ramada Inn hotel in Petersburg.
A former UVA and NFL football player who has been active in commercial real estate for two decades, Harrison is alleged to have submitted more than a dozen falsified invoices and lien waivers in draw requests to Cedar Rapids Bank to secure over $3.6 million in loan proceeds that he put toward personal expenses and the Petersburg litigation.
The funds allegedly stemmed from $22 million in loans from Cedar Rapids Bank for the Model Tobacco project and a project in Winston-Salem, another former tobacco building conversion called Whitaker Park. The loan agreements prohibited Harrison from using proceeds to pay himself or affiliated entities or from using the proceeds for personal expenses.
District Judge David Novak is presiding over the criminal case, which was moved from Richmond and is now being litigated in the federal courthouse in Alexandria.
Harrison was initially appointed a federal public defender following his arrest in October but has since retained a team from D.C. firm Williams & Connolly to represent him in the case. Harrison has requested a jury trial.
Kashan Pathan and Avi Panth of the Eastern District of Virginia U.S. Attorney’s Office are prosecuting the case. Jury selection is scheduled in April.
Representing the Model Tobacco LLC in the bankruptcy case is Justin Fasano with McNamee Hosea in Maryland. Michael Lacy and Peter Cox with Troutman Pepper Locke in Richmond are representing Virginia Housing in the receivership case. Calls to those attorneys were not returned Friday.
The LLC purchased the former tobacco complex for $8.5 million in 2020, and Harrison completed an initial phase of about 220 apartments two years later. The City of Richmond has most recently assessed the property at just under $7.5 million.
Model Tobacco Development Group is listed as a “pending inactive” LLC by the Virginia State Corporation Commission due to an annual registration fee that is past due.
I’m shocked I tell you, shocked.
Richmond will continue to allow these types of redevelopment deals to folks they clearly know can’t execute. And then it turns into a fraud.
Sad…..
How is this city responsible here? The only involvement I can see is that the city rezoned the property from M1 to B6 in 2018 and nothing since.
Right. The blame belongs to Harrison who cannot complete an apartment deal in the hottest such market sector in our history without avoiding trouble. The blame also extends to those who know his history and agree to work for him ahead of receiving payment for services. I’m most surprised by the law firms. However, there is excess value in the property that will likely pay the creditors. Housing is in high demand. It’s actually difficult to screw it up.
Letter of support to VHDA to start. Questions were raised during the redevelopment about his business deals. I am sure the city administration gave it full support and helped talk down the critics. Maybe they weren’t financial supports but this project was touted by the former Mayor several times.
I am not a fan of the comment but love the Casablanca reference.
“I am shocked to hear there is gambling going on……..here are you winnings sir………thank you”