Southbridge Innovation Center. File photo
The lender for a Southbridge hotel and conference center claims developer Chip Norton Jr. improperly transferred assets to other companies he owns, diverted rents and secretly struck a power purchase agreement at above-market rates with a company he controls.
The complaint submitted Feb. 27 in U.S. Bankruptcy Court in Boston asks the court to deny the discharge of debts related to the equity distributions, diverted rents and above-market power purchase payments, citing “multiple badges of fraud.”
Norton, whose Franklin Realty Advisors is best known for its Mercantile Center project in downtown Worcester, filed for Chapter 7 bankruptcy last year.
In November 2022, X-Caliber Rural Capital provided a $13.25 million loan to Southbridge Associates, owner of the Wellsworth Hotel at 14 Mechanic St. The property was previously known as the Southbridge Hotel & Conference Center.
The Irvington, New York-based lender alleges that Norton intentionally transferred assets to other entities he controls.
In January 2025, Norton submitted a letter to X-Caliber stating that the hotel’s 2024 revenues were “well below” projections and the property had a projected operating loss of $707,096. Norton requested a loan modification.
Despite the operating losses, Southbridge Associates made eight transfers in 2025 totaling over $1 million to other closely held entities, according to a U.S. Bankruptcy Court filing by attorney Micheal Trainor of Boston-based Blank Rome LLP.
“These distributions left borrower insolvent and without enough cash to pay its operating expenses,” the filing states.
John Christopher, personal counsel to Norton, said the complaint mischaracterizes the financial transactions.
“Transfers were made from the property’s operating sweep account to the holding company, which in turn used those funds to pay the property’s bills, including utilities, common area maintenance, and other necessary expenses. The accounting records will show that money was used to keep the hotel running, not to disadvantage lenders or other creditors,” Christopher, of New York-based Christopher & Christopher LLP, said in an email.
During a visit to the property, X-Caliber discovered that Southbridge Associates was not forwarding rent from at least two new tenants at the property, the complaint states.
The lender also alleges misconduct related to a Oct. 30, 2023 power purchase agreement with SBC Energy LLC, stating the entity is 98 percent owned by Norton.
The power purchase agreement includes above market rates and “crippled borrower’s finances and ability to pay its creditors while at the same time benefiting debtor and his closely held entity SBC Energy LLC,” X-Caliber alleges. The agreement diminished the value of the real estate, because any sale is encumbered by its above market terms, the complaint states.
Christopher also disputed the allegation that the power contract included above market rates.
“The pricing in the power agreement was established using the applicable commercial rate in Central Massachusetts, which is the standard published rate by the local supplier (National Grid) used for comparable commercial usage,” Christopher said in an email.
The hotel is part of the 1.2 million square-foot Southbridge Innovation Center, a former American Optical Company headquarters that was converted into commercial space.
Editor’s note: This report has been updated with a response from personal counsel to Chip Norton Jr.
