Apartments get new owners

The New York-based owners of a Red Bank apartment complex defaulted on a seven-figure loan, never kept up with electric bills and routinely distributed staff paychecks three weeks late, court witnesses said Wednesday.

Because of those problems — and also because the two men didn’t show up in court to defend themselves — a Hamilton County judge ruled Wednesday that the complex must be turned over to new management.

Hamilton County Chancellor Jeff Atherton ruled that a new management company must operate Red Bank’s Cambridge Park Apartments, leaving Syracuse, N.Y., residents John Gosnell and Patrick Phelan without one of their three Chattanooga-area property assets.

The men still own Red Bank’s Ridgemont and Chattanooga’s Mountain Brook apartment complexes.

No attorney represented either Gosnell or Phelan during the proceedings, and no residents from Cambridge Park showed up at the court hearing.

The new arrangement for Cambridge Park sets up Greensboro, N.C.-based Hawthorne Residential Partners as the management team for 226 apartment units on the south end of Red Bank.

Chattanooga attorney Nelwyn Inman argued for Wells Fargo Bank, the financier for Cambridge Park, and Atherton had to cut off one of her witnesses after testimony offered “enough” proof of neglect.

“I don’t know if the power’s off this morning or not,” Cambridge Park Property Manager Andy Williams testified. “And we got calls all summer asking if the pool would be up. We were told to say we were working on it, but, of course, it never happened.”

The financial problems date back to September 2009, when Gosnell made his last monthly loan payment to Wells Fargo, court documents show. The bank had loaned about $6 million to Gosnell and Phelan.

“We’re all sitting here today, not sure where all the money’s gone,” Inman said during her closing remarks.

J.E. Robert Co. Inc., a company in Alexandria, Va., was brought in by Wells Fargo once loan payments from Gosnell and Phelan stopped. JoAnne Rathbun, vice president for J.E. Robert, testified Wednesday that Gosnell asked to use her company’s reserve funds to finance his company’s payments to Wells Fargo.

“I was surprised [with one e-mail] because it looked like they knew what they were talking about,” she said.

J.E. Robert engineered the deal to hand over the complex to Hawthorne.

Ed Harrington, principal executive of Hawthorne, said his company specializes in distressed real estate and employs Chattanooga staff, “even one from Red Bank.”

Atherton inserted language into an order that defines Hawthorne’s responsibility for the complex’s most immediate needs, including mold repair and overdue electric bills.

Rathbun, who flew in from Alexandria for the hearing, said her company already had established “working capital to dig in quickly to this high level of emergency.”

She and Harrington took Wednesday afternoon to explore the property for a financial estimate for initial repairs.

“I’m very happy with the result,” said Red Bank Public Works Director Wayne Hamill. “[It] should be good for the citizens who live there.”