When SteelFab began work on the massive Carolina Panthers headquarters project in Rock Hill two summers ago, it didn’t know how much the price of steel would jump.
Over a two-year period during the coronavirus pandemic, as SteelFab ordered materials for the 700,000-square-foot headquarter building, steel prices increased in some cases by 215%. Other prices such as labor also shot up.
This meant the Rock Hill project was already turning into a “financial loser” for the subcontractor, Glenn Sherrill, chairman and CEO of SteelFab, told The Charlotte Observer in an exclusive interview.
But after the project was halted in March and contractors received stop-work orders, SteelFab’s cash flow was made worse by another factor. In June, GT Real Estate Holdings, LLC, the company billionaire Panthers owner David Tepper established for the project, filed for Chapter 11 bankruptcy.
The filing was done “to effect an orderly wind-down of the project,” GT Real Estate Holdings said at the time. The project came to a halt because of a disagreement between the City of Rock Hill and the company, even though construction had already started.
Now, as the bankruptcy case proceeds, SteelFab — one of many subcontractors on the project — wrote in federal bankruptcy court records it is owed $4.6 million for work already performed. GT Real Estate Holdings owes nearly $77 million, according to federal bankruptcy court records.
The company is unsure when or if it will be paid back, Sherrill told the Observer. In the meantime, the company is sending monthly invoices to GT Real Estate Holdings for about $6,400 because it’s been forced to store around 200 tons of steel at an offsite property. Those materials couldn’t be delivered to the site due to construction halting and the lack of room at SteelFab’s plant, Sherrill said.
There have been other impacts to the business. SteelFab had to find other work for its crew.
Sherrill said he believes other contractors are dealing with similar problems.
“It’s hard to quantify what this did to our company but the disruption is significant,” Sherill said.
The loss SteelFab was experiencing due to increased steel prices was “exacerbated” by Tepper’s “unwillingness to pay his bills,” Sherrill said.
Blythe Development Company, another subcontractor, told the Observer it is owed $2.6 million. The Charlotte company performed site work, meaning clearing and grading the roughly 240 acres off Interstate 77 as well as performing erosion control. Blythe was also working on installing water, sewer and utility lines, the company’s vice president of operations Luke Blythe said in an interview.
The company is large enough to not be greatly impacted by nonpayment, but Blythe said not being reimbursed the $2.6 million has been a “huge drain.” With inflation leading to higher fuel prices and other costs like labor, the company’s bottom line has been impacted, Blythe said. While they’ve been able to pay their employees, the nonpayment could affect employee bonuses and raises.
“It definitely flows down a long way,” Blythe said. “It’s not just a matter of us not getting paid. It affects companies and families.”
Reached Tuesday, a spokesperson for Tepper Sports & Entertainment declined to comment.
In a statement earlier this month, GT Real Estate Holdings wrote that it had been “confronted with various claims, some valid and some not, from vendors, contractors and other third parties, including York County, SC.”
“GTRE is taking this action to ensure legitimate claims are processed as fairly and expeditiously as possible under a court-supervised process, and to achieve the project’s orderly and safe wind-down. GTRE intends to resolve its legitimate obligations.”
In creditors’ interest
GT Real Estate Holdings’ proposed plan in the bankruptcy process is in the “best interest” of all the potential creditors in the case in federal court in Delaware, according to its bankruptcy filings. The company wrote that its path forward will “maximize the value of the estate.”
Creditors and a bankruptcy judge in the case are set to meet Wednesday morning in the case. Attorneys representing GT Real Estate, the City of Rock Hill and other parties listed in the case met with a bankruptcy judge for two hours on June 6.
Meanwhile, several of the potential creditors have joined in with general contractor and project construction management company Mascaro/Barton Malow to have the case moved from federal bankruptcy court in Delaware to South Carolina’s federal courts.
The creditors claim the case belongs in South Carolina where the property is and where the decision should be made, records show.
GT Real Estate has objected to having the case moved, court filings state. The company says the venue change would not benefit GT Real Estate Holdings, the creditors or other parties. The company argued, among other reasons, that Mascaro/Barton Malow could present its concerns over the bankruptcy plan in Delaware “just as well as it could in a South Carolina bankruptcy court,” records state.
But there are other impacts to the Charlotte region to consider, lawyers for Mascaro/Barton Malow wrote in court filings.
“The negative impact of the contemplated wind down of the Project will have on the City of Rock Hill and York County, South Carolina, residents and businesses cannot be overstated,” the lawyers wrote.
Lawyers in the case told The Herald of Rock Hill on Tuesday that a decision on a change of venue remains pending and likely will be scheduled for arguments next week.
Other contractor liens
A review of federal bankruptcy filings shows that SteelFab is among seven contractors and subcontractors who have filed liens against GT Real Estate Holdings.
One of them is Mascaro/Barton Malow.
The joint venture lists a lien of $67.8 million, according to court records. Other companies list liens in lower amounts including Baker Roofing Company for about $119,000. All told, liens filed in publicly-available court records total about $77 million.
Attempts to reach Mascaro/Barton Malow on Monday were not successful.
York County claims it is owed $21 million, court records show.
Questioning business decisions
SteelFab’s contract for the project totaled around $55 million, Sherrill said. The company was using 10,000 tons of steel to build the state-of-the-art facility. The steel work was nearly complete and can still be seen standing from Interstate 77.
SteelFab is not unaccustomed to not getting paid for its work, Sherrill said. He can recall a company that ran out of cash and couldn’t pay them.
For the Rock Hill project, Sherrill thinks about how it’s tied to one of the wealthiest owners in sports.
Sherrill questioned Tepper’s business practices, wondering why the Panthers owner couldn’t take out a loan or otherwise find a way to pay to finish the project instead of filing for bankruptcy.
The SteelFab leader says that his crew of up to 100 workers worked long hours to ensure meeting deadlines. That included working 6 1/2 days a week.
Sherrill said SteelFab has been able to pay all of its hourly workers, but the money it’s owed has meant the company hasn’t been able to pay suppliers — a trickle down effect of not receiving the $4.6 million from GT Real Estate Holdings.
He questioned why a dispute between GT Real Estate Holdings and Rock Hill needed to involve the construction crews.
For Blythe, the other subcontractor, the Rock Hill project was something he said his company targeted to work on. As a native Charlottean and a Panthers fan, he viewed the project as a positive for the South Carolina city and something his company could be proud of. He called the halting of construction and bankruptcy filing “disappointing.”
Earlier this year, Forbes magazine’s annual ranking of the world’s richest sports team owners put Tepper’s net worth at $16.7 billion, earning him a No. 8 spot on the list.
“I never dreamed there could be a chance of him shutting the job down and then not paying us,” Sherrill said.
Pointing to Tepper’s net worth, Sherrill said: “Paying his bills is not a problem if he wanted to do the right thing.”
The (Rock Hill) Herald staff writer Andrew Dys contributed to this report.