Loan woes? Banks expected to share Biscuit burden
Part of a presentation to Albemarle planners. FOREST LODGE LLC
With at least part of its $34 million loan already declared in "early stage delinquency" by the lead lender, Biscuit Run's conversion to a state park may leave several banks with millions in losses.
In a November 6 federal filing, Bluefield-based First Community Bank notified its shareholders of the potentially massive problem but assured them that the loan was "adequately secured" by a "large tract of undeveloped land in Virginia."
What First Community may not have counted on was Governor Tim Kaine's eagerness to add new parkland or on the generosity of Biscuit Run owner Forest Lodge LLC, a consortium publicly headed by Hunter Craig.
Craig spent several years before County staff winning the right to eventually develop 3,100 homes on the 1,200-acre tract in southern Albemarle. On December 30, however, Craig's group sold the land to the Commonwealth of Virginia for the bargain basement price of $9.8 million–- about one-fifth of the reported $46.2 million the group paid for the property at the height of the real estate boom in 2005.
For Forest Lodge, that nearly 80 percent loss in value isn't quite as unfortunate as it first appears thanks to state tax credits of up to 40 percent of the appraised value for certain land donations. In a best-case scenario for Biscuit Run–- using an appraisal of $46.2 million–- that could amount to around $15 million in tax credits, which Forest Lodge owners could then sell for about 80 cents on the dollar–- bringing in an additional $12 million or so and boosting the total cash out from the deal to around $21 million. It's better than $9.8 million, but nowhere near the $34.3 million Forest Lodge had borrowed.
Who will absorb that massive loss– Forest Lodge or the banks?
First Community Bank spokesperson Robert Pettry declined comment on the status of the loan, citing privacy and "good business practice" of not commenting on customers. A spokesperson for Forest Lodge, however, suggests the bank won't be getting all of its money.
"In anticipation of making the gift," says publicist Susan Payne, "all parties were working on a settlement."
Realtor Roger Voisinet suspects the Biscuit Run transaction represents a commercial short sale–- in which a lender allows a property to be sold at less than appraised value in order to avoid greater expense. And he, for one, is glad to see the land transformed into a park rather than a town-sized development.
"I couldn't imagine the prospect of that many homes in that part of town without incredible congestion and negative environmental impact," says Voisinet.
Some details of the loan settlement between Forest Lodge and First Community Bank may be revealed in a January filing by the publicly held bank holding company, but the amount of tax credits eventually granted to Biscuit Run's backers may never become public unless the individuals choose to unveil them.
According to Ginny Slaughter, spokesperson for the Virginia Department of Taxation, such credits are considered confidential taxpayer information. Since 2000 in Albemarle County, she says, more than 44,000 acres have been placed under development restrictions to gain tax credits totaling $114 million.
Original story December 30 at 10:27pm: Biscuit Run, the 1,200 acre tract of land south of Charlottesville that was to become the County’s largest planned development, providing a location for 3,100 new homes, became a state park today. Rumors about the deal have been floating around all month, with Charlottesville Tomorrow reporting that developer Hunter Craig, who purchased the property under Forest Lodge LLC for a reported $46.2 million from the Breeden family in 2005, and later promised it would be "the gold standard for the neighborhood model plan," planned to donate the property to the state. But Gov. Tim Kaine announced today that the state had purchased the property. However, considering what Craig got for the land it probably feels like a donation. According to the Richmond Times-Dispatch, the state paid just $9.8 million for the property. However according to a recent DP story, tax credits Craig might receive could lessen the sting.
–story massively updated with all banking info at 3:39pm Thursday –original headline: "State buys Biscuit Run for park"
28 comments
Why are you worried about the banks???? THe TAXPAYERS are buying a park for 9.8 million PLUS another 10 or 15 million in tax cedits. We were already getting 400 acres as part of the proffers. We are paying 30 thousand an acre (24 million for 800 acres) when we dont need the park. If they wanted to spend 10 million on parks buy some land along the james or rivanna rivers (or both for that money.
Read the comments in the Daily proggress online for some intersting perspectives.
This smells like a three day old fish.
Reporter Courteney Stuart has updated this story with some interesting information about what this means for the $34.3 million loan on the property.--hawes spencer
Please, folks. This is a financial end-run of great magnitude. As the reporter states, the banks are going to get stuck with the loans. The original investors/buyers lose $10M; but the balance has been stuck to the state of Virginia (what was Kaine thinking?) and the taxpayers who subsidize these credits.
If you're concerned about awarding large contracts to out to town companies, you don't have to look just to the private sector. Our own taxpayer money is being spent by the Rivanna Water and Sewer Authority to do this. Tell me how this company can underbid all local and Virginia companies ? I hope someone is investigating their labor practices.
from the Hook's reporting of the last RWSA board meeting:
"The board also awarded a $10.8 construction contract to Little Falls, New Jersey-based Metra Industries for the Interceptor, a project cynically seen as enabling the construction of the Albemarle Place development but defended by the Authority as a necessary upgrade. According to an Authority memo, the low bid by Metra was literally half what the Authority was expecting to pay for the work."
http://readthehook.com/blog/index.php/2009/12/17/waste-authority-say...
Sometimes one person's distress is a whole community's gain; without the Governor's willingness to step in this would never have happened and I applaud him.
I don't disagree Mac, I was referring to traffic using the city as a by-pass between Rt29 and I64. If you look at a map that's what the Meadowcreek Parkway does, besides bringing workers and citizens to the city for work and entertainment. It's the by-pass function that I object too. Every route that has been studied and suggested, and even land purchased for, either to the West or East for a by-pass, has been rejected by the county. They are not doing their fair share to alleviate traffic in our community.
Is that 9.8M cash against cash?
Or is some tax stunt?
Another deal against the people?
I find it very hard to believe a developer would practically give land away... Something is up, what did Craig get in return... Good Samaritan.... FAT CHANCE!!
I hope the IRS carefully scrutinizes this deal.
A developer does this deal because it is the ONLY deal that they are able to do. Both the lenders and the investors that helped fund the original purchase and pay for the rezoning and entitlements want some of their money back. The property has been "for sale" for quite some time and there were no interested buyers, or buyers that were willing to pay the kind of money that Craig wanted/ needed to receive. So the best deal he could do for himself and his investors was to sell it and take an unspecified amount of tax credits and sell those on the market.
In the end of the day, this benefits Craig financially and ALL of us taxpayers need to dig deep into our pockets and realize that this park comes at a much larger price than just $9.8Million plus the tax credits. Think of all of the time that County officials (paid and elected) spent on reviewing the potential development up through its approval. A business venture such as Biscuit Run is one that involves both potential risks and rewards. In this case, the deal did not turn out as Craig had envisaged it might and accordingly he should have to deal with the associated losses. If it had turned out differently do you think he would share his reward with the taxpayers of Virginia? I don't think so. This is shameful.
His tax accounting should value the land at the 48 million... That's what he paid. Just like when someone bought Citigroup stock 2 years ago at $20 a share... sure its only worth $3.50 now (if that) but if you sell it, you lost money and you can write it off on your taxes. Its a business, you invest in land. if it goes up in value by the time you sell it, you pay taxes on the profit. If it goes down in value, you get a credit against your other income...
Give it away or pay the taxes pretty simple really? Try getting a loan to build and install utilities for a new community right now. I'd say this is a win win win. It ain't 2005 anymore.
For City and County residents, this park is the best Christmas present one could have ever hoped for.
County elected officials have been totally irresponsible about planning for roads to handle their development plans.
Biscuit Run would have been a disaster for the south side of Charlottesville . The Southern Connector, planned to handle this traffic, was a 30 year old dream, that might have never been built.
It's time that the City Fathers and Mothers wake up and realize, the City does not exist to serve the County. We are not here to pay for their sewer upgrades, their water expansions, or their roads !
If they want growth areas and more development, they cannot funnel the traffic through the city, as they are now hoping to do, through McIntire Park. The Meadowcreek Parkway should be stopped, not because the county doesn't need more roads, but, it cannot be the only road to handle county development, as they have intended; by killing the Western and Eastern By-Passes, and now, refusing to build interchanges at major intersections on RT29.
If county officials want to protect the rural areas, they first have to provide the needed infrastructure for their growth areas. Not zone for higher density and hope the state will build the roads, because they wouldn't; and, we can see how far the county gets in raising taxes to build their own roads.
Perhaps, it's time that the County listen to Albemarle Citizens for Sustainable Population and get realistic about how much growth this area can handle with the roads we have; unless, of course, they are willing to raise taxes to pay for the growth they want.
Who said dredging wouldn't provide enough water. Guess we wouldn't be needing a $200+ million dollar new dam and uphill pipeline. This is great news for all of us, and for the environment as well. Tens of thousands of beautiful mature trees will be saved at Ragged Mountain Natural Area, and tens of thousands more at Biscuit Run.
Thank you Mr. Craig, you just did more to improve the environment of our area and saved more trees, than a hundred year tree planting program could ever have provided.
Let's not forget that Mr. Craig bid two times higher than the next closest bid for this land, which was in the neighborhood of 24 million. I was in his office three days after this was announced and boy was he PISSED.
Don't worry, he has something coming his way in the form of a political favor or two. Is his tax accounting going to value the land at 2005 prices (48 million) or 2009 prices (33 million).
Tax wise, he unloaded a burden and can claim a loss. And some old growth forest gets saved.
Isn't it "funny" how the people with all that kind of money can make such ridiculously uninformed decisions? There were major signs in 2005 that the housing boom was already showing problems. Seriously, did EVERYONE think this 20% per year appreciation of real estate was going to last forever? More dollars than sense.
Overall, I'm glad he donated it, but he should not have rushed to buy it in the first place.
"If they want growth areas and more development, they cannot funnel the traffic through the city"
I agree with almost everything that Rational wrote, but the sentence above isn't particularly rational. The biggest reason, by far, that development in the county dumps more and more traffic into the city is that most of the people who live in the county's growth areas work in the city. All the infrastructure in the world isn't going to change that simple fact. I personally would love to have better ways to get around the city on certain trips that I make, and would be willing to pay my fair share of taxes to support those projects. But like almost everyone else who lives in the county, 90% of the driving I do on city streets is because I'm going to or coming from somewhere in the city.
Face it, we all live in suburbia now.
Sure, but if it's fair to say that the Meadowcreek Parkway won't solve the problem of through-traffic getting around Charlottesville, then we also have to admit that it won't increase through-traffic either. It will just re-route some of it. If you have to get from Route 29 North to I64, well you take the existing 250 bypass. If you're going west, very little of that trip is actually within the city limits. If you're going east, you do spend a bit more time in the city, and it is on an extremely congested road. And maybe you take East Rio Road to avoid a little bit of the Route 29 congestion. But the Meadowcreek Parkway won't put any more cars onto the 250 bypass between McIntire and Pantops, it will just change the way some of them get there, using the Parkway instead of either Rio Road/Park Street or a short stretch of Route 29 between Rio and Hydraulic. So I never have gotten that particular objection to the Parkway -- it's a red herring.
29 South intersects I64 before it reaches the city limits. If people coming north drive through the middle of Charlottesville instead of going around on I64 and/or the 250 bypass, it's either because they need to get somewhere in between or because they're dumb. County government can't solve either one of those problems.
I'm not sure what the county's "fair share to alleviate traffic" is supposed to be, and I'm not convinced that lopping off a hunk of Pen Park would be an improvement over lopping off a hunk of McIntire Park. And a western bypass won't do anything about all those people who live in Western Ridge or Forest Lakes and commute to Charlottesville every day either.
But it's all moot, at least for another five or ten years anyway. Nobody's got any money to build any roads right now, even if they did want to put them in the right places (wherever those are).
Hallelujah! Victory for the Bar-ba-Loots, Swommee Swans and Hummingfish.
If the supes are so concerned about tax dollars maybe they should look in their own pockets and pay their fair share of taxes for their luxury farms that they work so hard to protect. Go figure they wanted to see Biscuit Run developed because NONE of them live anywhere near that part of the county. God forbid development might impact them! After all, that's what the city is for.
I'd love to see The Hook do a story on which of our past and current supervisors voted for and supported tax breaks they then used. And while you're at it, see which ones are pushing a massive and unneeded water plan that they won't have to pay for either, because they live in protected rural zones that have wells. In fact, while we're asking let's see how many of the Albemarle County Service Authority Board members don't even get a water bill (hint 3/6=?) and how they are voting to put 100 millions of dollars of debt on the water rate payer.
We need representatives with vision, not those with a medieval lord-serf mentality.
"If it had turned out differently do you think he would share his reward with the taxpayers of Virginia?"
Actually, he would have. By paying taxes on his gains. Not to mention all of the proffers that were part of the rezoning deal.
This was a distress sale-- pure and simple. There is NO generosity involved and when Kaine comes to town to bill this as a great acquisition and much generosity, he should be laughed out of town.
Sure it was a distress sale, most properties in this price range are these days. So what? We get a kick ass state park right next to town instead of a sea of vinyl sided mcmansions. I think the state was pretty generous to buy this property given budget woes. I don't care if I have to chip in for the luxury of having a state park just outside of town. Beats another Belvedere Subdivision! Vinyl sided ovens with ten feet between them HA!
And think of all the traffic we've avoided--now they'll just be a few extra campers on the roads, how about them tourist dollars--what's not to like. I agree with Waldo :
"The conversion to parkland will save county and state government $222M, making this a sort of a financial windfall, insofar as it prevents us from spending a whole lot of money that we would have needed to spend had the planned housing development gone in.
http://www.cvillenews.com/2009/12/30/biscuit-run-official/
Biscuit Run was probably going to be an awful development, so we've really dodged a bullet there. While it's a boon to get a state park, let's not fool ourselves that this was done out of a sense of altruism.
As the dust settles, we'd all do well to rethink the big picture re development in the area. Eventually the economic picture will change for the better, and there will be another Biscuit Run looming on the horizon.
Different funds, but I agree, stupid move --bring back the rest areas.
glad to see the state has funds for a much needed park. now how about those rest areas for all the tourist on the way? Thats ok, we can just use the park!!
It takes courage to do what Mr. Craig and the Investment body did and certainly a great gain for the local area and state of Va.
Hunter Craig is a one of the few pioneers left in the county and the only negative towards him is his fascination with doing deals with Ryan Homes which does not contribute anything to the localities, they bring in all out of town sub-contractors and they do not buy materials locally. The whole power buying concept. Charlottesville needs to stick together instead of resourcing outside.
The Corner will be Mr. Craigs next project and how he wants to re-shape that part of the city
Stay- Tuned on that front since he is buying up everything in site up there
Al Groh sup, it took courage?? Hunter Craig is a front man for outsiders that is true. He buys some land, works his magic and sells an approved project for some big money to out of towners. That's smart business. But courage not so much. With all that out of town money his project are mostly OPM (other peoples money).
He seems to be a very smart guy and has made a whole pile of money for taking chances but I can't say I consider him brave- shrewed sure.
The banks were bailed out by the govment and now refuse to lend money so I could care less if they get stuck with the loans that is what they do.(Loan money, sometimes it gets repaid others not so much) And that leaves VA and it's taxpayers who get a kick ass state park right next to town. Kaine was probably thinking let's help out the original investors/buyer and conserve a huge chunk of land that was targeted for sprawl. Ya know>? Since the parkway is taking such a chunk out of McIntire Park did you ever consider that a lot of that chunk could be relocated to biscuit run?