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Mar. 19, 2015 - The Domino Effect of the Collapse of J.T. Turner Construction

Category: News Features/Series

By Lou Phelps, Savannah Business Journal

March 19, 2015 – UPDATED 7:00 p.m. - The full impact of the collapse of J.T. Turner Construction Company, owned by Jim “J.T” Turner is deep, wide and is only beginning to surface.  The company announced last week that they were closing the firm's principal company, headquartered in Savannah. 

As each day goes by, more and more subcontractors and suppliers are digesting the full breadth of the impact of the collapse of one of the region's largest General Contractors to the construction industry here.

The company’s collapse also brings back into focus questions about the practices of local banks – once again.  A number of area banks made construction loans on projects where J.T. Turner Construction was the General Contractor, and made loans to the company.  

Included in those questions are whether loans made to Jim Turner, personally and to his company, were secure and being appropriately evaluated, in the opinion of bankers with knowledge of some of the loans – bankers who passed on commercial loan deals – and those whose clients are now facing loses and liens.  And what information was furnished between banks about the fact that his company was in trouble?

Turner’s personal and commercial debt to banks and his to contractors and vendors who have not been paid is now reported be in excess of $8 million.  But this is only part of the debt picture.

There is also the debt taken on by homeowners and developers building projects where he was the General Contractor - construction loans.  Projects are stalled, and those developers may have to try to raise or borrow more money.  Will banks lend more on projects that need to find a new General Contractor in order to get a project finished?

And, there is the money that subcontractors and vendors borrowed to cash flow until they were paid by Turner’s companies – mortgages on homes, or short-term personal notes.  

Will subs and material suppliers find their own operating loans - or short-term borrowing needs - in trouble because they had projects wrapped up with J.T. Turner projects?   "They'll be looking up our butts with a microscope," said one this week.

Further, there is the unknown amount of construction loans that banks hold, now thrown into the lurch on the reported 40 active projects of Turner Construction that have been halted. 

Property owners not only have construction loans to banks, but they are now getting hit with liens from unpaid suppliers and subcontractors, and no longer have clear title to their property – residential homes and commercial buildings - until those liens from unpaid subcontractors and vendors are paid off. 

Liens are just starting to be filed against J.T. Turner Construction and property owners, and are becoming public, including:   

- Troy Thomas Plumbing                   $ 39,500.00

- Robert’s Done Right, Inc.                  $ 1,794.00

- Bibler Masonry Contractors, Inc.   $ 125,536.00

- Savannah Millwork                          $ 57,632.00

Unless property owners had paid to bond their projects – in effect buying an insurance policy to protect them from just this kind of situation – they can be held responsible for the unpaid bills of contractors in many instances.

How did this happen?  

It’s important to understand the construction loan process, according to some of our city’s top lending executives.   When a construction loan is made, it is supposed to be based on a review by the lending institution of the projected costs by the General Contractor (GC),  the vendors and subcontractors to be used, and the anticipated schedule of when payments will be due to all of the subcontractors on a job. These include subs such as the company that clears the land, pours the concrete for the foundation, frames the structure, installs the plumbing, completes the electrical work and puts up the sheet rock and the roof.  

As each step is completed, the General Contractor contacts the bank to release payment to them for that phase, and states that they will be paying the subcontractor.  The bank is supposed to inspect the work and then get a ‘Mechanics Lien Release’ from the GC that the sub has in fact been paid.

According to local bankers and lending experts, there is the possibility that a lending bank that had construction loans was releasing money to J.T. Turner Construction without securing Mechanics Liens Releases OR someone was defrauding the bank by signing affidavits but not paying contractors.  There is no evidence yet that either of these scenarios took place is the case, however.  

Another broad issue that local contractors are raising is the circumstance of where a General Contractor signs an affidavit with their bank that the subs and the material men have been paid – but they haven’t.  It’s criminal fraud, but prosecutors “will never prosecute these cases for signing a false affidavit,” according to one subcontractor who has been burned over similar cases in Chatham County, who asked not to be identified.   There is no accusation that this was the case with J.T. Turner Construction Co., Inc.

First Chatham Bank was not a construction lender for J. T. Turner Construction, where Turner was a founder, according to Ken Farrell, Acting President of the bank. 

"We are in the same situation as others with debts, and we will pursue all remedies to protect the bank," he said.

Ameris Bank was a lending institution on recent projects, however, but they were not available for comment.     

Attempts to reach Jim LaHaise, executive vice president at Ameris, or Austen Carroll, Ameris Market President for Savannah, were unsuccessful.

As of 5:00 p.m. Thursday, there have been no filings for bankruptcy protection by J.T. Turner Construction Company, Inc. or any personal filings by principals.

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