Two Tacoma real estate developers once were so successful they paid almost a half-million dollars cash for two luxury cars.
By the end of this year, Tom Price and Hyun Um will have lost their jobs, sold their million-dollar homes and abandoned the company they founded 18 years ago.
Documents filed this week in federal bankruptcy court outline how a trustee for Price and Um plans to effectively liquidate their estates to repay a portion of the approximately $199 million the men together still owe.
Meanwhile, the holding company Price and Um formed to oversee their real estate empire is now in bankruptcy itself, put there last month by the trustee because it is essentially insolvent.
“We tried our darndest to get the creditors together” to avoid a Prium Cos. bankruptcy, Diana Carey, the attorney for trustee Eric Orse, said Thursday. It proved too complicated to slice up such a small asset pie without court assistance.
One year and two days ago, federal bankruptcy court Judge Paul Snyder appointed a trustee to oversee Price and Um’s estates. He ruled they were frauds who couldn’t be trusted to manage their affairs in the best interests of creditors. Just a few months earlier, a King County Superior Court judge ruled that Price and Um deliberately destroyed evidence in a lawsuit the men filed against a former business partner.
Accusations of theft and fraud have followed Price and Um for years. Their complicated business structure was made public in 2010 when they filed for personal bankruptcy after homebuilder Soundbuilt Northwest sent moving vans to the men’s homes to try to collect on a judgment it had won.
That judgment ultimately was overturned, but to stop Soundbuilt from taking their assets, the men sought refuge in bankruptcy court. There, a filing automatically stops all other legal action. They listed $350 million in debt.
The four years since have been marked by grinding legal arguments, most of which are rooted in the convoluted structure of Price and Um’s businesses. Over 15 years, Price and Um created a web of at least 60 limited liability companies. Many of those own real estate, such as an office building or an apartment building.
Some are wholly owned subsidiaries. Some are jointly owned with investors. Still others have minority silent partners.
“No one, really, has a full grasp of how this whole thing was organized,” trustee Orse said Thursday.
Price and Um paid themselves $20,000 monthly salaries to manage their business. Those salaries continued after Orse’s appointment, as the men worked under Orse’s direction. At the end of August, Orse “terminated the services of Hyun Um,” court documents show. Orse said Thursday that Price’s services now are on a month-to-month basis.
Part of Orse’s duties included taking over Queen High Full House, a company Price and Um created that owned their houses. The men then rented their million-dollar homes for $100 a month.
The homes have been on the market since early this year. Um moved out in early September, according to court documents. No buyer has emerged for his home on Wollochet Bay, listed at $1.8 million. Orse said a buyer is under contract for Price’s home in Gig Harbor’s Canterwood neighborhood. It was listed for just over $1 million.
There’s a legal difference between Price and Um’s estates and that of Prium Cos., though the debts for both were related to the real estate business. The distinction is relevant, however, because it appears part of the trustee’s liquidation plan may be to walk away from the men’s ownership interest in the company they founded.
Many of Prium’s subsidiaries have gone through their own bankruptcy reorganization after the recession gutted the real estate market and turned many properties upside down — the owners owed more than the property was worth.
Several subsidiaries reorganized and are making money. Others were sold for a profit. Chelsea Heights and Hanna Heights, both downtown apartment buildings, have new owners. The trustee expects the sale of the Winthrop hotel building to close next month.
Prium is the second-largest landlord for Washington state government, which has 40 separate leases for about 750,000 square feet. State officials said Thursday that since Orse was appointed, responsiveness to maintenance issues has improved. However, on average, Prium-owned offices require more work than others in the state’s portfolio.
Though many of Prium Cos. subsidiaries have value, Price and Um’s membership interest in Prium is worth nothing. Prium Cos.’s debt far exceeds the equity in all its subsidiaries put together. Its bankruptcy filing lists $7 million in assets and about $84 million in liabilities.
Carey said Orse “probably will abandon the Prium ownership interests because they’re worthless.”
ENDINGS AND BEGINNINGS
The trustee has filed a plan with the court on how it recommends handling the debts of Price and Um’s estates. If creditors approve the plan, the case could wind down in months.
Creditors will receive a fraction what they’re owed. Administrative costs come first, and they are steep. The men filed for bankruptcy four years ago, and the case has involved an army of lawyers and professionals. Almost $1 million already has been spent just on fees, with an estimated additional $1 million still to come.
The wrangling over Prium Cos. may be just beginning. The umbrella company’s creditors include big players in the Western Washington real estate market — Centrum Financial Services and the Sharon Graham Bingham trust — as well as another trustee of another notorious bankruptcy: that of Seattle real estate mogul Michael Mastro.