No exit: Has Hunter Craig created more unsellable land?
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The 1.23-acre parcel lies directly across the street from the current Martha Jefferson campus.photo by Hawes Spencer; file photo by Courteney Stuart
Last week's news about the overhaul of the old Martha Jefferson campus shines a spotlight on another piece of the hospital's portfolio, a property on a prominent downtown corner that recalls some of the big names in local history including Forrest Marshall and Hunter Craig.
How the land came into the arms of Martha Jefferson and why it may stay there– and potentially drain its parent company's coffers– is a tale of charity, timing, and quashed expectations.
The Hospital announced in February that it was selling its leftovers, 26 parcels surrounding the old campus. Among them: "High and Tenth," a 1.23-acre tract with more than 50 parking spaces and three buildings holding more than 10,000 square feet under roof. Asking price: $1.4 million.
The listing agent confirms that it didn't sell during the offering period, but she declines to confirm what a reliable source asserts, that one of the two offers came in $1,399,999 lower, at a single dollar.
So why?
The answer is simple. The place is encumbered by a lease that won't end until the 22nd Century and which requires any buyer to assume monthly lease payments of about $10,000 a month and climbing.
How that lease came into the hands of a non-profit medical center is a topic that raises questions about the true nature of charity and whether master deal-maker Hunter Craig earned another taxpayer-funded bail-out.
But let's go back to Forrest Marshall. In the late 1990s, Marshall was an Albemarle County Supervisor as well as the pharmacist who owned and operated the Medical Arts Pharmacy at 916 E. High Street. Having seen how Barnes & Noble wiped out small local bookstores, Marshall wanted to gird himself for competition from national drug chains such as Rite Aid and CVS. So he asked the City for permission to expand from 6,000 to 10,000 square feet, but the neighbors, and eventually the City government, said no to his bigger business.
As he was deciding to retire to his Scottsville-area farm, Marshall says, he was approached by Albemarle financier Hunter Craig with an offer to buy the old pharmacy building. Craig, who snapped up an adjacent medical building that same year, may have figured that controlling the corner across from the City's #1 private employer made a lot of sense.
The first trouble was Forrest Marshall didn't want to sell.
"If I'd have sold," Marshall explains today, "I'd have had to pay taxes on it."
So Craig adjusted his offer. He and his father-in-law, Wick McNeely, via their East High LLC, would begin paying Marshall about $9,000 a month on a 99-year lease beginning in 1999.
What Craig might not have realized was that the City's #1 private employer was making plans to flee. Hemmed in by historic houses and by an increasingly vocal Locust Avenue Neighborhood Association, Martha Jefferson stunned Charlottesville in July 2001 by announcing that it would leap to an office park on Pantops Mountain.
If Craig was surprised, he may have donned a poker face when he unloaded the property on the Hospital six years later.
In the past two years, the name Hunter Craig has become synonymous with a system that rewards the rich with lifebuoys unavailable to all but the most well-connected of ailing property owners. In what may go down in history as his most audacious move, Craig convinced the outgoing governor in late 2009 to buy his behind-on-its-mortgage Biscuit Run housing development and turn it into a state park.
Biscuit Run raised eyebrows not only as Virginia's most spectacular flopped subdivision (3,100 houses planned and not a single one built) but also for the questionable appraisal that triggered millions of dollars in taxpayer-funded credits for the pockets of Craig, Dave Matthews Band manager Coran Capshaw, and other well-heeled investors who claimed they were making a charitable gift.
What happened between Craig and Martha Jefferson would also involve a "charitable gift."
Even though the prospects for developing the High and Tenth parcels were beginning to dim and even though escalation clauses would raise the monthly rent, Craig convinced the Hospital in late 2007– over six years after announcing its departure– that it needed the place so badly that it would pay more rent than he paid, that it would pay more cash for the adjacent medical building than he paid, and that Craig's largesse was so large that he'd get credit for giving a "charitable gift."
The 2007 deed transferred the property to the Hospital for $749,000 plus the assumption of a fresh 99-year lease.
"Things are not the same as they once were," says the Hospital's top planner, Ron Cottrell, denying that he was duped by Craig. "We had some grand visions for the transformation of this part of town."
Indeed, when Martha Jefferson might have been downsizing, the Hospital board approved Craig's deal, Cottrell says, in the hopes of scoring a bookable donation for its $52 million capital campaign and creating an attractive land package for a national developer. A brochure drawn up as part of that effort shows a 75,000 square-foot condo/apartment block replacing all three existing buildings.
But no national developer ever arrived. On the eve of the announcement last fall that Sentara was acquiring the hospital, Martha Jefferson sold its eight-acre campus for just $6.5 million and waited until this year to sell the outparcels.
Cottrell says that Craig was offering a "good deal" because both sides of the transaction obtained appraisals that arrived in the same ballpark: about $2.8 million.
With only three quarters of a million changing hands, did Craig and his father-in-law attempt to gain a $2 million tax deduction? Craig declined to return phone messages, and Cottrell declines to speculate.
"What they ended up putting on their tax return is their business," says Cottrell.
Despite a five-plus-year vacancy on the corner building and despite the lease placing all responsibility for property taxes, insurance and maintenance– what commercial brokers call a "triple-net" lease– on the Hospital, Cottrell believes the combination of office rents and imputed rents for parking spaces probably makes the place "cash-flow positive but not a windfall."
A source who has viewed the lease says the only exits come in 2018 or with the death of Marshall, each event triggering an option to buy. Such a binding agreement makes financial analyst David Marotta wary.
"A 99-year-lease that you can't break," says Marotta, "is just a bad idea."
"I think the hospital's going to come out fine on it," says Chuck Rotgin, a developer unconnected to the project and a frequent user of 99-year leases.
The Hospital's Cottrell contends that if the parcel develops in the massive way now permitted by virtue of its prime location and an updated zoning code, any quibbles about the cost of the land will evaporate.
Any criticism is "Monday-morning quarterbacking," says Cottrell. "It's the old cliché: timing is everything."
25 comments
Tax credits, charitable gifts, powerful friends in the right places when you need to exit a deal gone bad, Hunter Craig has all this and more.
This is no longer government for the people- this is government for the wealthy.
As long as we keep electing politicians tied to developers, or politicians who are developers, we can expect more of the same, locally and nationally
Have I missed the new "Craig" children's cancer wing on the hospital, or "Craig" scholarship for first-generation college students, or other undeniably worthy local cause?
Or do these not exist?
What do Craig -- or Wendell Wood or Charlie Hurt -- do for the community that doesn't involve direct and immediate personal profit?
Charlottesville is what it is. Those guys are what they are.
Quit complaining or do something about it!
@SkipWith: exactly! In the old days, the very wealthy gave back to the community in the form of libraries, museums, hospitals, etc. Now they just hoard their wealth and seem to have no obligation to the people on whose backs they built their fortunes. Vandal Wood's ostentatious mansion on top of a mountain where everyone in town has to see it is just a billboard for unchecked greed.
Craig must be happy to see the Beyer family's son Paul vying for a seat on City Council. Bet Beyer wouldn't get many votes in Fry's Spring. Lots of discontent about his development at Huntley. If you elect a developer to City Council expect the same coming to a neighborhood near you. And he has been endorsed by another development friendly councilor wantabe - Kathy Galvin.
at CharlottesvilleTomorrow:
"Members of the Fry’s Spring Neighborhood Association pleaded with the commission to deny the request.
“When they received permission to build this giant development of in-fill housing, [Beyer] knew perfectly well that there was challenging topography,” said Andrea Weider. She added that the neighborhood fought hard to require that the trees be spared when the original rezoning was granted by City Council.
Weider argued that if the Commission granted the request, they would be fundamentally changing the parameters of the original PUD. "
Posted by: Martin Quarles | July 26, 2010 at 09:57 PM
Much of Huntley should not have been built on, and the city did things not normally allowed in order to keep the young professionals paying city taxes. The loss of a few trees is the least of it. Poor quality storm water and storm runoff is evident there, lack of retention measures are obvious, destruction of critical slope buffers, etc. If anybody remembers Jim Davis, the man formerly in charge of enforcement of these things, they long for the day of his stern visage. I see no enforcement nowadays. Wait till Huntley is fully built out, there will be little room for trees. Much of it looks a bit wasted now.
http://cvilletomorrow.typepad.com/charlottesville_tomorrow_/2010/07/hunt...
Re Beyer and Galvin, there's no earthly reason we should be voting in councilors who are seeking to win influence to increase their personal gain. They are both growth nuts with a vision for Charlottesville that would horrify most people if they bothered to take the time to look into it.
Both Galvin and Beyer are completely dismissive of any neighborhood that stands up for itself, and both consider neighborhood voices to be nothing more than special interests. Lord spare us from this new model of "small town architect as guru." Galvin's campaign launch speech was unbelievably pompous and grating.
Former county supervisor Forrest Marshall says that he didn't sell his office building to Hunter Craig because, "If I'd have sold, I'd have had to pay taxes on it."
Is Marshall suggesting that the lease income he now receives is tax free?
The notion that he shouldn't have to pay taxes illustrates why Forrest Marshal was such a poor supervisor. He was more concerned about himself than his constituents or the citizens of the county. Marshall owns two properties in the county, a twenty-acre parcel and a 93-acre one. Both are in the county's land use tax subsidy program. The larger property is worth more than a million dollars but, under land use "valuation, it is assessed at only $74,900 (not including improvements).
And Hunter Craig, the builder-developer with a 45-acre spread in Farmington? The entrepreneur with a B.A. in economics from Hampden-Sydney, the conservative all-male bastion that claims to form "good men" and "good citizens" who "demonstrate honesty" and promise "to treat each other... and everyone else they meet, as they would like to be treated themselves?" Hunter Craig, the strong believer in the "free" market?
As The Hook has pointed out, the Biscuit run property in which Craig was a major investor got caught up in the real estate bust. Craig and his cronies unloaded their property on the state for a park. But the potential tax credits were not enough for Craig, so he sought –– and got –– a highly-inflated appraisal of the Biscuit Run property, an appraisal that was worth more than twice what Craig and his pals paid for the land at the height of the real estate boom. Craig wants taxpayers to subsidize his failed investment; he wants no part of the "free" market.
The Hook wonders if Hunter Craig (and his father-in-law, Wick McNeely, who's also had an estate subsidized by county taxpayers) sought a tax deduction for the sale of their downtown property to Martha Jefferson.
That would be characteristic for Craig (and for McNeely too, who's given 97 percent of his political contributions in Virginia to Republicans over the last decade). Tout the "free" market, but seek bailouts and subsidies from taxpayers at every turn.
Exposing conservative hypocrisy and special-interest deals is very much a part of trying to better the community, at local, state and national levels.
Really, leaving aside unsubstantiated character judgements, where's the foul here? People seek profit. Some find personal fulfillment in this beyond basic needs, which is anathema to me but it's a free country (ok you have to buy influence but that's another topic).
Hasn't The Hook featured full page tobacco product advertising? This is not white knight role modeling either.
The value of this article is for people to see how the government has tilted regulations to favor the wealthy. So it matter who we elect and if they are developers or make their money from development .
But strictly within the context of the MJH area properties, what's not cricket here? All that's delineated here is shrewd real estate dealing. There's allusion to tax break chicanery but it isn't presented in factual, compelling detail. Do so and I'll grab a pitchfork too.
From the article:
"In the past two years, the name Hunter Craig has become synonymous with a system that rewards the rich with lifebuoys unavailable to all but the most well-connected of ailing property owners. In what may go down in history as his most audacious move, Craig convinced the outgoing governor in late 2009 to buy his behind-on-its-mortgage Biscuit Run housing development and turn it into a state park."
"Biscuit Run raised eyebrows not only as Virginia's most spectacular flopped subdivision (3,100 houses planned and not a single one built) but also for the questionable appraisal that triggered millions of dollars in taxpayer-funded credits for the pockets of Craig, Dave Matthews Band manager Coran Capshaw, and other well-heeled investors who claimed they were making a charitable gift."
"What happened between Craig and Martha Jefferson would also involve a 'charitable gift'."
Biff Diggerace says that " There's allusion to tax break chicanery but it isn't presented in factual, compelling detail."
That's true. The public may never really know about this particular deal. As I wrote earlier, though:
"The Hook wonders if Hunter Craig (and his father-in-law, Wick McNeely, who's also had an estate subsidized by county taxpayers) sought a tax deduction for the sale of their downtown property to Martha Jefferson."
"That would be characteristic for Craig (and for McNeely too, who's given 97 percent of his political contributions in Virginia to Republicans over the last decade). Tout the "free" market, but seek bailouts and subsidies from taxpayers at every turn."
"Exposing conservative hypocrisy and special-interest deals is very much a part of trying to better the community, at local, state and national levels."
Perhaps we'd all be better off, if, rather than trying to further self-interest, we sought to promote the general welfare of society. Each of us would end up being better off too.
Biff, I tend to agree with you re: the context of the MJH properties. I think what these sorts of deals bring to the surface, though, is general resentment of people gaming the system who already have so much money that "coloring within the lines," as it were, really wouldn't hurt them too much. I understand the desire for developers to make money--I get angry, though, when their gaming the system results in things like (1) the concerns of local residents who are affected by the development being ignored; (2) wholesale environmental destruction; (3) ability to get waivers for environmental regulations, like critical slopes requirements, that were instituted for good reason; (4) procedural sleight-of-hand to push an upopular, self-interested agenda through gatekeepers like the BOS and other review boards; and (5) rejection of common sense approaches, like transit-oriented development, which the city has tried to implement but the county has apparently rejected (wrongly) as inimical to free-market values. We live in a beautiful part of the world, and once land is developed, it is changed forever, and not generally for the better. I wish Craig, Wood, Hurt, and their friends would look beyond their bank accounts and start to think a little bit about what they are destroying.
Democracy says: "Perhaps we'd all be better off, if, rather than trying to further self-interest, we sought to promote the general welfare of society. Each of us would end up being better off too."
Dawg says "I wish Craig, Wood, Hurt, and their friends would look beyond their bank accounts and start to think a little bit about what they are destroying."
I say RIGHT ON. But the point is "doing good" is hard to figure out even when you wanna do it. Trying to live well instead of living large would be a good start for a lot of the local cocks of the walk, but Homeric ethics have been with us a long time, and some people can't shake them off.
My first post was intended to point out that for all the erstwhile good that may come out of Hawes Spencer's investigative journalism, he's willing to sell ad space to cigarette manufacturers for money. And the tobacco industry is just plain evil; a lot worse than good 'ol boy deals. So who's really fighting the good fight? If I reviewed the composition of my 401K more closely I might find I'm in with the devil too.
But if locals really care they might go about (1) finding an able and energetic researcher capable of digging out the graft and demonstrable wrongs that we sense in the Biscuit Run deal, (2) raising money to pay them, and (3) pursuing justice doggedly when fully exposed and documented.
Or skip that and focus on reforming campaign finance laws within Virginia.
Amen Dawg, " We live in a beautiful part of the world, and once land is developed, it is changed forever, and not generally for the better. I wish Craig, Wood, Hurt, and their friends would look beyond their bank accounts and start to think a little bit about what they are destroying."
Just come see Huntley off Stribling Ave. to see Paul Beyer and his father's handiwork, and he wants to represent the citizens of Charlottesville ?
There was a beautiful plan for this property which the neighborhood worked on for over a year ( with many meetings) and they trashed it and cut down all the largest most beautiful trees that the plan had sought to protect. So much for his Sustainability pledge on his palm card.
from cville.com:
Representing the Huntley project, developers Rick and Paul Beyer (a father-son duo) asked the Planning Commission to approve a steep-slopes waiver and design changes for a four acre portion of the site in order to improve both the project’s stormwater management and its aesthetics. Though 12 mature hardwood trees would be lost, Beyer promised 100 new trees to be planted throughout the four acres under discussion.
It all seemed straightforward, and city staff recommended approval. But several neighbors weren’t buying the explanation, in large part due to mistrust garnered from incidents several years ago. Following a storm, developers cut out a number of trees, drawing ire from neighbors and a stop-work order from the city. Though developers agreed to plant 40 additional trees,
neighbors accused them of inadequate erosion and sediment control measures that muddied Moore’s Creek.
http://www.c-ville.com/index.php?cat=141404064435450&ShowArticle_ID=1104...
Well Craig seems to know and use the available real estate laws to his advantage. However, it is everyone's right to do so and apparently he broke no laws. If you are against the tax laws why not try to change them? The real story is why the Hook publisher has his panties in a wad over Hunter Craig.
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The county is to blame for Biscuit Run. Hunter Craig appearance before the Board of Supervisors was unprecedented for him, when he usually lets his lawyer Steve Blaine do all the talking. He proffered everything that was asked of him. He knew the property was going under and he needed Biscuit Run approved to add some value to the property. The Board of Supervisors took it hook line and sinker. We now have Wendell Wood asking for his property south of town added to growth area. Not all of us can get bailed out of our finial woes and bad deals like Hunter Craig. I am sure if you borrowed money from his bank Virginia National and you hit a rough stretch in the road he would foreclose on you in a heart beat and not look back. "Thats just business". I am sure if his bank Virginia National was going under do to bad investments. He would not loose any sleep knowing that peoples life savings were going with it There was a time that you did business with some since of morals. Your GOOD NAME was attached. But that does not matter anymore in America. "I got mine, go get your own". rules the day. Stop complaining about them. If you do not like their business practices, then stop doing business with them.
The Jackal makes a valid point when he says "If you do not like their [i.e., Hunter Craig] business practices, then stop doing business with them." There are any number of banks one might borrow from. And nobody has to buy a house from Craig builders.
However, the issue of tax credits and tax deductions is something different. We, as individuals, do not get to make those choices for ourselves. The tax credits are issued by the state, and as The Hook has illustrated, it can be difficult to penetrate the veil that shields them from public scrutiny. Moreover, tax credits are based on how much property is "worth," and not everybody can afford to pay an "appraiser" to cough up an appraisal that is far in excess of a property's real value. And tax deductions are likely not available to the public...so that's a closed door. Yet, we, as the public, do subsidize the tax credits and deductions that people like Hunter Craig take.
That's why The Jackal's other piece of advice –– "Stop complaining" –– makes no sense. It's often through legitimate complaints that progress is made, and fairness attained. American history is a testament to that fact.
One does not have to overtly do "business" with people like Hunter Craig. But neither does one have to like it that people like Craig, who vote for and contribute to people and causes that undermine the general welfare of society and promote inequity, seek to get special monetary favors and treatment for themselves at the expense of everybody else.
That kind of hypocrisy and unfairness are worthy of public scorn...and they deserve to be rectified.
So what will become of that property? Will it just sit there? Will the hospital sell off the two house/offices on their own, assuming they are not a part of that lease?
Well the IRS has penalties for inflated appraisals on donated properties. The threshold is high, it use to be something like 200% of actual value, might be something like 150% now. If the appraisals used by Craig et al. for Biscuit Run and the MJ property were so bad they should have triggered an appraisal review by the IRS.
@Democracy: what does Craig Builders have to do with this? Sam Craig being the owner operator.
Good question, Real Question. It sounds like a perfect opportunity for some emiment domain action to take the property for a park and the city market/farmers market. Block off 10th street on those days and we have an ideal location with plenty of weekend parking. A park for the neighborhood at other times could be a beautiful space in an entrance corridor rather than the eye sore now or eye sore to come.
Who knows maybe the folks at the CFA, Octagon, or Sentara might pitch in as it being in their real estate or PR interests?
Good question, Real Question. It sounds like a perfect opportunity for some emiment domain action to take the property for a park and the city market/farmers market. Block off 10th street on those days and we have an ideal location with plenty of weekend parking. A park for the neighborhood at other times could be a beautiful space in an entrance corridor rather than the eye sore now or eye sore to come.
Who knows maybe the folks at the CFA, Octagon, or Sentara might pitch in as it being in their real estate or PR interests?
re:"Hemmed in by historic houses and by an increasingly vocal Locust Avenue Neighborhood Association, Martha Jefferson stunned Charlottesville in July 2001 by announcing that it would leap to an office park on Pantops Mountain."
There is no Locust Avenue Neighborhood Association. There is a Martha Jefferson Neighborhood Association, and a Little High Neighborhood Association though.....both of which have those pesky historic houses......
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