North Carolina Judge Blocks Wachovia Foreclosure in Lawsuit Involving Derivative Interest Rate Swap and Alleging Extortion, Fraud, Unfair and Deceptive Trade Practices

	
		    GREENSBORO, N.C., March 26 /PRNewswire/ -- A judge in Guilford County,
N.C., today entered a preliminary injunction preventing Wachovia Bank,
N.A., from foreclosing on a Greensboro shopping center owned by an
affiliate of Granite Development, LLC.

    The order by Superior Court Judge Richard W. Stone blocks Wachovia from
foreclosing on property developed by the Granite affiliate until a trial on
claims that Wachovia wrongfully terminated a derivative interest rate
"swap" agreement, over Granite's objection, which was designed to provide a
fixed interest rate for permanent financing. Wachovia has argued it is
entitled to a $5.48 million termination fee.

    The lawsuit, filed by Granite Development affiliates last month and
recently amended, asserts Wachovia has engaged in extortion, fraud, and
unfair and deceptive practices. It asks that the swap agreement be
rescinded or modified and the "contrived and unwarranted" termination fee
demanded by Wachovia be declared an unenforceable penalty.

    Judge Stone found that there are "serious issues" regarding Wachovia's
right to pursue foreclosure against its customer, and that the Granite
affiliate owning the center would suffer irreparable harm if the
foreclosure were not prohibited. He also ordered that Wachovia cease
efforts to collect rent from shopping center tenants.

    The purpose of the swap agreement was to protect Granite against an
increase in a permanent interest rate above 5.82 percent. Turmoil in the
financial markets has caused the swap to work in exactly the opposite
manner as intended by Wachovia and Granite. Wachovia's termination fee
would saddle Granite with a 10.9 percent effective interest rate, which
would be nearly double the rate promised in the swap agreement. Under the
swap agreement, Wachovia was to bear the risk of increased interest rates,
not Granite.

    A risk-management expert and finance professor at the University of
North Carolina's Kenan-Flagler Business School in Chapel Hill, Alexander T.
Arapoglou, has presented testimony that the swap agreement proposed by
Wachovia was "never an appropriate vehicle" to hedge against possible
higher interest rates for permanent financing. Professor Arapoglou further
testified that the claimed termination fee would be "an unconscionable
windfall" for Wachovia.

    "Far from protecting (the Granite affiliate) from the risk of rising
permanent mortgage interest rates, the swap agreement has compounded (the
Granite affiliate's) risk," states the amended complaint. "Not only must
(the Granite affiliate) now pay higher market rates than the fixed rate
specified in the swap agreement, but Wachovia actually contends that (the
Granite affiliate) owes Wachovia money on the termination of the swap
agreement, rather than other way around."

    In his testimony, Professor Arapoglou says if the termination fee is
calculated as provided in Wachovia's sales presentation and consistent with
the purpose of the swap agreement, the bank would owe Granite a termination
fee of about $2 million.

    "What should have been a vaccination has now turned out be a double
injection with the very disease against which we sought protection," said
Monty K. Venable, a principal in Granite Development.

    The lawsuit filed last month alleges Wachovia's actions were motivated
by the bank's financial distress and not by the financial condition of
Granite, which has never failed to make a payment on any project during a
21-year relationship with Wachovia. Moreover, the lawsuit says the
attempted imposition of the swap termination fee was designed to force
Granite to capitulate to unreasonable loan demands from Wachovia, including
a last-minute requirement that Granite principals sign a broad waiver of
claims against Wachovia and all subsidiaries dating "from the beginning of
the world."

    Granite, based in Mount Airy, N.C., develops, leases, manages and
operates retail, office and other property throughout the Southeastern U.S.

    The plaintiffs in the lawsuit include the principals in Granite/Horse
Pen Creek LLC, a limited liability company formed by Granite Development to
develop The Shoppes at Battleground Oaks, a shopping center anchored by a
Harris Teeter grocery store and occupied by a number of other tenants at
the intersection of Battleground Avenue and Horse Pen Creek Road in
Greensboro. It opened in 2007. Wachovia's actions, according to the
lawsuit, threaten to derail the completion of the project.

    About Granite Development, LLC

    Granite Development, LLC, with headquarters in Mount Airy, N.C.,
develops, leases, manages and operates retail, office, multi-family,
industrial and assisted-living facilities throughout the Southeastern U.S.
The company, founded in 1987, has grown by developing relationships with
key retailers, real estate brokerage firms, insurance companies, banks and
all other related real estate businesses. Over the past two decades,
Granite Development has developed and managed more than five million square
feet of property, ranging from Maryland to Florida.



    Contact:  S. Leigh ("Bo") Rodenbough IV
              Brooks, Pierce, McLendon, Humphrey & Leonard LLP
              336-271-3119

              Tonya Bunn Powell
              Granite Development, LLC
              919-268-4926