Bald Head Island Ltd. is fighting back.
In the weeks following a state ruling that found its parking and barge operations should be regulated, the business has filed a notice to appeal the order.
Separately, the company has also filed a lawsuit against the village of Bald Head Island, seeking a court ruling to nullify a contested decades-old clause that is interfering with the sale of the business’s transportation assets to a private equity firm.
Raleigh-based SharpVue Capital entered into an asset purchase agreement
with Ltd. last year to purchase the Bald Head Island transportation system and other assets for a total cost of $67.2 million. The proposed acquisition includes the transfer of transportation silos (ferry, tram, barge and parking operations) for $56 million and some unrelated assets, including additional property, marina slips and real estate related to the golf cart rental operation for an added $11.2 million.
The sale of the assets is one of the last pieces the estate of island developer, the late George Mitchell, has left to divest. A plan to sell the transportation system to a public entity created in 2017, the Bald Head Island Transportation Authority, fell apart
Regulating parking and barge operations
On Dec. 20, the N.C. Utilities Commission ruled Ltd.’s unregulated parking and barge operations should fall under its purview
. (Ferry and tram operations have long been regulated by the commission, which caps a Ltd. subsidiary’s rate of return and must approve rate or fee increases.)
The island government filed a complaint last year requesting regulation
of the parking and barge systems in anticipation of the sale of the transportation assets to a third party, citing concerns about fee increases without oversight. In the recent ruling siding with the village, the commission found these operations were inextricably connected to the ferry and tram systems. The order also focused on the monopoly status of the enterprises.
In its notice of appeal, filed with the utilities commission on Jan. 27, Ltd. condemned the commission’s reliance on public sentiment (the order repeatedly refers to public opinion from island stakeholders who favor oversight of the business’s unregulated arms). “Regulation, however, is not a popularity contest,” Ltd. asserted in its notice to appeal the order. “Yet, in this case, the Commission improperly considered, and relied upon, popular opinion in making its jurisdictional determination.”
The filing asserts the commission exceeded its statutory authority by agreeing to regulate the private business activities.
Sam Watson, spokesperson for the N.C. Utilities Commission, said appeals of commission rulings are generally reviewed by the N.C. Court of Appeals. “Next steps would be for the parties to file a record on appeal and briefs with the North Carolina Court of Appeals, potentially followed by oral argument, and then the Court’s decision,” Watson said.
A 23-year-old agreement
A week prior to filing its notice to appeal the commission ruling, Ltd. filed a lawsuit against the village.
Filed on Jan. 19, the suit aims to eliminate complications presented by a 1999 right of first refusal agreement between a Ltd. subsidiary and the village. As it stands, the village’s effort to enforce the agreement is stalling the pending sale of assets to SharpVue, the suit claims.
In 1999, the village and the Ltd. subsidiary, Bald Head Island Transportation, entered into a right of first refusal agreement that purported to give the island government the option to match an offer from a third party to purchase the transportation system in 60 days. However, that agreement states it shall “become effective only upon approval” by the N.C. Utilities Commission – a step that appears to have never occurred. The commission informed Ltd. in 2021 it had no such record of any approval of this agreement.
Still, in September 2022, Ltd. shared its asset purchase agreement with SharpVue with the village “in the spirit of … cooperation,” Ltd. CEO Chad Paul wrote in a December letter to the village mayor.
Ltd. offered the village a 60-day window to purchase the system, but the village contested in response that it wasn’t provided the documentation necessary to conduct proper due diligence to analyze the acquisition. In turn, Ltd. asserts the village was provided more than enough materials, in excess of the stipulations of the 1999 agreement.
In a Dec. 28 letter, village Mayor Peter Quinn said the agreement “remains valid and binding” and that the community would defend its rights “through litigation if necessary.” Ltd. had requested the village relinquish its rights to the agreement in writing, considering the 60-day window had passed, a request the village did not acquiesce.
The village’s claims surrounding the agreement appear to be interrupting the sale to SharpVue. Though the firm has attempted to obtain title insurance to coincide with its purchase and financing of the assets, it has “been unable to secure such policy,” according to Ltd.’s complaint.
SharpVue can’t close on the sale without title insurance, the suit states. In a Dec. 19 letter, Ltd. threatened it would pursue litigation against the village if its deal with SharpVue fails to close.
Deal's still on?
Despite the obstacles surrounding the deal, SharpVue reasserted its intention to acquire the assets in a Jan. 24 amended application to the utilities commission to purchase the system.
SharpVue’s previous application pertained to the commission approving the transfer of the ferry and tram services, but the latest incorporates the state’s ruling by including the parking and barge operations as well. (Even so, the application does not concede those operations should be regulated.)
In the amended application, SharpVue pledges not to raise rates for at least a year “SharpVue has raised capital specifically for this opportunity from a group of primarily local investors,” the application states. “This collection of assets could be held for the long term.”
In a Feb. 3 filing with the utilities commission, the village asked to hold the asset transfer proceeding in abeyance. “Having chosen to challenge the Commission’s jurisdictional determination as to the parking and barge assets and operations, the Applicants should not be allowed to demand that the Commission make determinations in this docket which are intertwined with and impacted by the issues that Applicants are challenging on appeal,” the filing states.
As for the separate lawsuit, Village spokesperson Carin Faulkner said on Feb.1 the village hadn’t yet responded and that it has more time before an answer is due.
Update: This article has been updated to clarify the real estate assets related to the golf cart rental operation involved in the proposed sale.