One point of contention in the lawsuit filed against Daimler AG by Chrysler's creditors is the alleged undervaluation of the automaker's Auburn Hills-based Chrysler Complex. According to the creditors, if Daimler had sold the real estate to Cerberus Capital Management back in 2007 at more than just 20 percent of its original cost, there might have been more assets left behind for the creditors, who are seeking millions owed to them.
The Chrysler Complex, comprised of the $1-billion Chrysler Tech Center and $600-million Chrysler World Head Quarters, was built in Auburn Hills, Michigan, between 1989 and 1996. Eleven years later, after Daimler gave up on its attempt to merge its Mercedes-Benz brand with Chrysler's divisions, the German company sold the complex to private equity firm Cerberus Capital Management for just $325 million.
The Chrysler Complex is one of Michigan's most valued real estate properties. The World Headquarters office tower and the sprawling Tech Center grounds sit on 504 acres and provide 5.3 million square feet of space. The site includes a climate test center, an emissions lab, a wind-tunnel facility, a powertrain test center, an electromagnetic-compatibility facility, a noise, vibration and harshness lab, offices, a health-activity center, a health clinic, two dining facilities, two sundry shops, two hair salons, an education center, outdoor athletic facilities, and walking trails.
After purchasing the complex, Cerberus pledged it for collateral for a $225-million mortgage from Citicorp. After exiting bankruptcy, "new" Chrysler reacquired its headquarters from the "old" Chrysler subject to Citicorp's mortgage. Chrysler made a partial payment of the mortgage principal and agreed to a higher interest rate.
Tax assessments from the City of Auburn Hills show Daimler did sell the Chrysler Complex for far less than it was worth in 2007. According to Victor Bennett, a tax assessor for Auburn Hills, the site was assessed at $339.1 million in 2007. Assessed values are 50 percent of the estimated market value, putting the property's worth at something close to $680 million.
Chrysler's creditors officially filed their suit on Monday, after winning approval to sue Daimler last week from bankruptcy judge Arthur Gonzalez. A Daimler spokeswoman said the suit is baseless, and the company will vigorously contest it.
Source: The Detroit Free Press