Developer O’Neill on hook for $5M judgment

by Natalie Kostelni

"As he struggles to deal with multiple judgments entered against him totaling tens of millions of dollars, developer J. Brian O’Neill’s woes have grown.

Firstrust Bank secured a $5.56 million judgment against O’Neill personally as well as against Washington Street Associates III LP, an entity affiliated with O’Neill Properties Group. The judgment was entered in Montgomery County Court on May 31 after O’Neill defaulted on a loan and forbearance agreement worked out between the developer and the bank, according to court documents.

The King of Prussia developer, through Washington Street Associates, had originally taken out a $2.2 million loan in October 2004, and a second, $3.8 million loan in July 2006. The money was being use to remediate the former Hale Products site at 433 Washington St. in Conshohocken in preparation for a residential project.

The bank and O’Neill worked out a forbearance agreement that laid out a payment schedule on the two loans as well for additional security on the loans. For that, O’Neill personally “unconditionally guaranteed” payment of the loans, interest and other fees associated with the loans, according to the agreement filed in court. A March 7, 2011, letter from Firstrust to O’Neill provided the developer with formal notice that Washington Street Associates was in default by not paying monthly interest on the notes beginning in November 2010 and failed to pay the loans off in full on their extended maturity date of Jan. 31, 2011. The bank added that it would seek judgment against Washington Street Associates as well as the developer personally.

Firstrust Bank, through a spokeswoman, declined to comment, citing pending litigation. Several calls to O’Neill weren’t returned.

Perhaps O’Neill has gone quiet as a reported settlement is being worked out or has been worked out between Citizens Bank and him. I’ve heard a range of different settlement figures, the latest around $42 million. Such a deal, if true, would put to rest litigation that erupted between Citizens and O’Neill after Citizens sought and secured in November 2009 a $61 million judgment against the developer for a loan taken out for the construction of Uptown Worthington in Malvern. O’Neill vowed to “go to war” with Citizens and filed an initial $8 billion suit against the bank that was subsequently lowered. The real estate company said in court papers it wasn’t in default and the bank had “engaged in fraud and deceit and had breached its contractual obligations,” according to documents filed in Chester County Court.

While that litigation was going on, the bank continued to try to put the Worthington development in foreclosure and filed a petition to appoint CB Richard Ellis as receiver until it was time to bring the property to sheriff sale, according to court documents filed in Chester County. Several hearings on that matter were postponed while the reported settlement was being worked out.

I’m eager to see how all of this will get resolved.

Many people who know Brian O’Neill personally call him a survivor. I’ve heard that description so many times that it’s hard to disagree with it and with that in mind, it will be interesting how O’Neill and his real estate company emerge from all of these challenges. He’s got office properties up for sale and other deals in the works. He is already thinking of the future, and is seeking a mall developer for a $2 billion, 8 million-square-foot mixed-use project in Sayreville, N.J. How the project would be financed couldn’t be disclosed, according to an email from Josh Greenwald, a spokesman for O’Neill on the Point.

The other interesting facet to this goes beyond O’Neill’s troubles and Citizen’s and Firstrust’s business maneuvers. It will be interesting to see how real estate developers and banks move forward once the market fully pulls out of the doldrums, the banks’ books are cleaned up of bad loans and developers begin to build again. Both sides have learned many lessons during the recession. Let’s see how they apply them."

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