Hat tip to MB for sending this along, from the pressdemocrat.com:
The pilot who earned international acclaim for safely landing a stricken airliner in the icy waters of the Hudson River in 2009 is suing officials at the former Sonoma National Bank and others for fraud related to a real estate deal that included a Jiffy Lube franchise.
Chesley Sullenberger and his wife, Lorraine, claim that bank officials and a real estate broker duped the Danville couple into purchasing the property in the city of Paradise in Butte County for an over-inflated price of $935,000 in 2002.
The couple is seeking to have the original loan nullified and to be reimbursed for what they contend have been overpayments.
But the lawsuit has the Hero on the Hudson fending off accusations that he is trying to use his celebrity status to recoup financial losses that otherwise might be attributed to the collapse of California’s real estate market.
“I think it’s unfortunate that he’s taking advantage of his notoriety to try and pursue a lawsuit, when the building was leased and they were enjoying the benefits of an income stream,” said Cherie Huillade, a senior vice president for Grubb & Ellis who brokered the real estate deal and is named as a defendant in the lawsuit.
Sullenberger declined to be interviewed, but a public relations representative for the pilot called assertions that he is trying to benefit from his celebrity “absurd.”
The suit alleges the couple learned the property may have been over-valued in July 2008 when the Jiffy Lube tenant moved out and the Sullenbergers attempted to lease or sell the building. They hired their own appraiser, who concluded the value of the property in 2002 was no more than $720,000.
The analysis blamed a “lack of fiduciary responsibility on the part of the other real estate professionals involved in the transaction” for inflating the value of the property.
The financing was through Sonoma National, which had a lending office in Roseville. The bank obtained an appraisal showing the property to be worth $920,000 — $10,000 below the final purchase price. The bank loaned the Sullenbergers $850,000 to complete the deal, according to the suit.
The Sullenbergers allege that Huillade and Sonoma National officials “conspired and agreed to implement a scheme to defraud and victimize” the couple by “significantly overinflating and misrepresenting the fair market value” of the property and increase commissions based upon those inflated property values and purchase prices.
The suit seeks general and punitive damages for, among other things, fraud, negligence and civil conspiracy. The suit names Sterling Savings Bank, which purchased Sonoma National in 2007 for $345 million in cash and stock. The bank is now known as Sonoma Bank. Sterling lost $855.5 million in 2009 as it continued to incur massive losses from its residential and commercial construction loans.
Huillade, however, said the original appraisal done on the Paradise property in 2002 accurately reflected market conditions at the time. She said the couple were not coerced into buying the property and that they had ample time to research the deal.
“That was Lorraine Sullenberger’s home town,” she said. “They knew the market better than most. They knew the viability of the economy.” Huillade said the couple only regretted the deal after the Jiffy Lube tenant moved out and the Sullenbergers lost their investment income.
“Many people bought properties that were worth two or three times what they are,” she said. “Anyone can go back and argue that they overpaid because it’s hindsight.”
I never liked that guy!
While you’re into alliteration maybe it should read “Silly Sully Suing”?
Sorry Sully… no mulligans.
It makes his Hudson landing all that more heroic, considering that all he was thinking about was how he was getting screwed by Jiffy-Lube and some fast-talking Grubb and Ellis broad!
Must be some lawyers behind this. Sully, don’t
hang around them loser lawyers. Take the lost, like a man.
The risk of highly leveraged single tenant NNN real estate is much more than most people believe (and are told). Its an all-or-nothing scenario. Occupancy is either 100% or 0%…no middle ground.
Positive cash flow is a beautiful thing as long as you have a paying tenant. Sully,
Get in line with the rest of us that have empty buildings waiting to be filled with a good paying tenant.
Sorry your business value slipped so much, but that’s a slick idea to sue.
Wow, tough crowd here.
If there is anything more biased than the press rushing to judgment, is is people who read press accounts and then rush to judgment.
Maybe the suit is frivolous, maybe it has merit. Who knows? None of us were there and none of us know the facts and evidence that will be presented. Kinda silly to castigate the guy just because he filed a lawsuit.
Its a mess out there on the commercial side and the numbers are staggering. Even on the little deals.
We are buying a non-performing senior bank loan for $375k on a building purchased in 2007 for over $1.25mm…and we’re a bit nervous that we are overpaying!
Everything we see is no less than 50% off its peak value…minimum.
Seems like a kinda dumb investment for a non-professional from the start — specialized kind of building, single tenant. Reasonably foreseeable that if Jiffy Lube walked, the number of replacement tenants is not terribly high. Jiffy Lube is in somewhat of a monopsony position.
It’s not like it’s a generic office or retail space where there are a ton of potential companies that might move in (assuming it’s in a half-way decent locale and the market is half-way reasonable, which obviously is not true at the moment).
Enplaned – During the past 10 years, the rise of single tenant NNN buildings such as this were pitched to the ‘average’ investor (such as sully) as a very passive, ‘credit tenant’, no-brainer, yield investment.
Probably was clipping 7%+/- cash on cash with a 15 year lease. What could go wrong???
Usually these leases are written NOT to the credit corporation, but rather to the individual franchisee which is far from a ‘credit tenant’.
The rise of these buildings as a mainstream investment came as corporations (fast food restaurants, wal-greens, etc) realized that they could sell the bldg to a low yield seeking real estate investor for a lot of money, and redeploy that capital into their higher yielding business.
These are great cash flow investments if done right. The best way to participate is through a REIT such as our local Realty Income “O” which owns hundreds of these types of bldgs. Thus, when a few go vacant they still maintain a 95%+ occupancy rate…plus you are liquid and have no debt on your balance sheet like Cap’t Sully does.
I ask…how could they be DUPED? Didn’t they read the freaking contract?
Sully’s problem was that he put some of his own money in this commercial endeavor. Most pros let the bank take 100% of the risk.
I doubt he is concerned about losing his 80k downpayment if he walked away. He is probably worried about the bank coming after him for the deficiency. The lawsuit is most likely a preemptive strike so that they can reach a settlement and just say “you take your losses… I’ll take mine.”
I am gonna sue you because I signed a doc and there was a guarantee the value of my asset was supposed to go up! Now it goes down?! Free enterprise is a load of BS I tell ya!
Signed- Sully the Sullenbergerstein
OT ~ Word on the street! I don’t recommend bubbleinfo regulars move anywhere on the planet (See Jim’s 1/17/2011 “Potato Land” video entry) and then have your pos Dell computer die. I’ve been without bubbleinfo videos and JtR’s advice (and humor) for nearly 5 weeks.
I’ve suffered through severe withdrawal symptoms and have had to resort to my neighbor’s computer for an occasional bubbleinfo fix. Only a couple phone messages from Jim before 1/17 have kept me from flying back to CA and voluntarily checking myself into a pricey San Diego rehab center which specializes in folks who go cold turkey from JtR’s humor and common sense advice.
Ecstatically, I’m now typing on a new Apple desktop and can once again become Jim’s #1 groupie. *Chuckle* For the record, I do believe my Apple’s sweet 21? wide screen will make Jim even more handsome.
PS Clearfund: Everything you previously mentioned about your parents’/grandparents’ experiences when they moved up here, I’ve found to be true. *Grin* The only problem is my GPS can’t locate “Spud Beach” but curiously, has no problem with “Chicken Dinner Road” (Yep, it’s a real road)…
IIRC, one of the many discoveries of the bubble was appraisers cooking their estimates in collusion with real estate and loan brokers. This appears to be a case of dueling appraisers.
This is a case of a guy who had incredible luck trying to turn it into more money in his pocket. He has done nothing but try to leverage his lucky landing into money since the plane hit the water. Wanna bet he will show up in court in his “hero pilot” uniform? Get real Sully, you made a dumb investment and the market tanked. Your lawsuit has no merit.
He trusted a bank?
Silly man, you thought they knew jack shit about money? What were you thinking?