In Wallace Bajjali exit, a Prime loan isn't fully funded

The city of Joplin’s master developer contract was terminated Feb. 3, and a prominent Springfield trucking company is left holding a $5 million promissory note in default. The fallout clears the way for a potential lawsuit by Prime Inc. against Wallace Bajjali Development Partners LP as the city looks to move past its recent history of violent winds and suspicious redevelopment deals.

Prime’s loan losses
Joplin officials named Wallace Bajjali master developer for redevelopment efforts in 2012, a year after the town was devastated by an EF5 tornado. The circumstances under which the Sugar Land, Texas-based development firm was named master developer garnered a formal inquiry that led to the termination of former City Manager Mark Rohr one year ago this month.

Joplin City Manager Sam Anselm, who succeeded Rohr, said two redevelopment projects in the works under Wallace Bajjali – a senior living facility and a city library complex – should not be impacted by the master developer’s contract termination.

Anselm said more than $1 million in pursuit costs related to land acquisitions in the tornado zone has been handed over to New Prime Inc., aka Prime trucking, as part of the agreement penned over two years ago between the former master developer and the Springfield transportation company.

Anselm said the Wallace Bajjali-Prime agreement spelled out the developers would exchange certain financial rights to Prime in exchange for a $5 million loan. Anselm said Prime’s financial rights include development fees, owner’s representative fees and reimbursement for pursuit costs.

“In exchange for some money that Wallace Bajjali borrowed, New Prime would have financial rights to any of the pursuit costs or any of the other things they used that loan for,” he said. “That was allowable under the master developer agreement.”

In the Feb. 3 termination letter penned to David Wallace, CEO, and Costa Bajjali, president, Anselm said city officials were able to verify facts that led them to believe the company was insolvent.

“Those facts include, but are not limited to, Wallace Bajjali’s default under terms of the promissory note held by New Prime Inc. in the amount of $5 million,” Anselm said in the letter.

According to the letter, the developer’s debt includes a $1.5 million default in U.S. District Court in Houston, Texas, on a settlement to repay investor BizRadio under a lawsuit brought by the U.S. Securities and Exchange Commission. In addition, Wallace Bajjali was obligated to buy $2.14 million worth of real estate that it had not purchased at the time the contract was terminated.

“Wallace Bajjali has committed acts of gross negligence, fraud and willful misconduct in the performance and observance of its obligations,” the letter states.

Richard Walters, a partner with the Springfield office of Spencer Fane Britt & Browne LLP who represents Prime with regard to the promissory note, declined Springfield Business Journal’s interview request citing impending legal matters. He issued this statement: “Prime was introduced to Wallace Bajjali through third parties and had no prior dealings with Wallace Bajjali or its principals. The credit facility was established to assist Wallace Bajjali with its obligations as the master developer for the city of Joplin. However, we are in discussions with the city of Joplin to see what we can do to assist the city of Joplin in its redevelopment efforts. It is a very unfortunate situation for the city of Joplin and its citizens, and I believe it will take the citizens and businesses of southwest Missouri to complete the redevelopment efforts in Joplin.”

Prime, a billion-dollar national trucking company owned by Robert Low, had not filed suit against Wallace Bajjali by press time, according to Missouri and federal court online portals.

Sitting on 35 acres
According to Joplin Globe reports, Wallace tendered his resignation in early January to business partner Bajjali after the company missed payments to the Houston court. Bajjali resigned a few days later after firing the company’s staff, the Globe reported.

As part of the fallout, online court records show two former employees – Christine Bryant and Bruce Anderson – have filed civil suits this month in Jasper County against the company.

Looking back, Anselm questions whether hiring a master developer was needed because the city had established Joplin Redevelopment Corp. to buy land on the city’s behalf. However, he said there was a benefit to having an agent in the form of a master developer working with the JRC.

“I think where the issue ultimately started to come undone was when that master developer wanted to start being the developer on a lot of the projects. That was never the intent,” Anselm said, noting the city does not plan to hire another master developer.

He said the master developer was supposed to help identify developers and not to insert themselves in that process.

Just before their contracts were terminated, Wallace Bajjali was developing plans for a theater project to accompany the city’s library. While those plans are not in progress as a result of the termination, Anselm said the library project supported by a $20 million grant will move forward.

In all, the city has paid out $1.68 million in reimbursements to Prime, according to Anselm, and Wallace Bajjali spent about $2 million in private capital. He said there is about $400,000 still tied up in real estate fees the city can recover when land is sold.

“I feel pretty good about the shape we’re in,” Anselm said. “We paid $1.68 million, but we’re sitting on 35 acres of land that we can use to help with redevelopment and recovery.”