Following judge’s ruling new chapter begins for downtown ‘Boise hole’

A new chapter began June 16 in the saga of the “hole” at the heart of downtown Boise after U.S. Bankruptcy Judge Jim Pappas ruled that developer Gary Rogers’ bankruptcy case be converted from Chapter 11 reorganization to Chapter 7 liquidation.

That means the property at Eighth and Main streets could be sold and the assets of Rogers’ firm, Charterhouse Boise Downtown Properties, distributed to creditors under the oversight of the Office of the U.S. Trustee.
The decision brings to an end Rogers’ plans to build on the long-barren property that has remained undeveloped since a fire destroyed the Eastman Building in 1987.
Rogers purchased the property in 2006 from Rick Peterson, who spent nearly 10 years trying to build a 25-story building called the Boise Tower on the site. Peterson got no further than excavating a hole in the property and filling it with concrete and rebar before financial difficulties stalled construction. A long legal battle ensued between Peterson and urban renewal agency Capital City Development Corp., which tried to reclaim the land under the terms of its development agreement with Peterson. The settlement of the lawsuit included selling the property to Rogers.
Charterhouse planned a $126 million, 31-story tower for the site but defaulted on the loan it took out to buy the property. It filed for bankruptcy last August on the eve of foreclosure.
Overall, Charterhouse owes $3.7 million to secured creditors – $2.8 million to Robert Capps, who purchased the loan Charterhouse defaulted on – and as much as $8.6 million to unsecured creditors – $7.6 million of which is claimed by Peterson, according to court documents.
During the bankruptcy proceedings, Charterhouse claimed that outside investor Robert E. Plummer would finance Rogers’ bankruptcy plan. Pappas ordered the release of more information about Plummer to creditors, but he refused to comply, which ended hopes that Charterhouse could reorganize.
During the hearing last week, Pappas said a liquidation under Chapter 7 is now the “best hope” for creditors who would otherwise go unpaid since the trustee has broad special powers to investigate the finances and management of Charterhouse and to sell the property in an auction regardless of any liens in dispute.
“I never cease to be amazed at what a good, diligent, hard-working, creative trustee can create in value,” Pappas said.
Pappas also rejected a motion from Peterson’s lawyer, Charles Robinson, to dismiss the bankruptcy case, which would have led to a return to the status quo before the filing. That remained Peterson’s best hope of trying to gain control of the property, though it also might have allowed Capps to foreclose and obtain ownership.
Robinson cited a purchase option in the agreement between Peterson and Rogers that required Rogers to hand over the property if he wasn’t able to obtain a construction loan or start development within 18 months of the April 2006 closing. He said conversion to Chapter 7 seemed to be “a classic case of nothing to secure, trouble for the trustee.”
But Pappas said it was in the best interests of all the creditors to give the trustee an opportunity to get as much money out of the property as possible.