Updated Wednesday, Aug. 5, 2009, 1:58 p.m.
A key lender to the massive Augustalee mixed-use project off I-77 at Westmoreland Road has begun foreclosure proceedings against the developers, saying the project is in “technical default,” Cornelius officials said Tuesday. But those officials said they don’t think the news means the end of the project. Meanwhile, developer Cornelius Bromont LLC issued a statement Wednesday saying it is “in discussions” with its lenders over the matter.
Town officials said Tuesday Labor Management Fund Advisors, which represents labor pension fund and investor The Build Fund, had met with them last week to get an update on the project. On Monday, the fund notified Cornelius that it had begun the foreclosure action.
Cornelius Town Manager Anthony Roberts said Tuesday he thinks the news means the project time line could be pushed back. But it doesn’t necessarily mean it’s dead.
“I don’t know what it means financially for the project. It will probably slow it down from a timing standpoint, just like the economy is already doing,” Mr. Roberts told DavidsonNews.net.
Developer Cornelius Bromont, a partnership of Huntersville investors Carlsen Douglas Development and Arizona-based Bromont Investments, has proposed a $515 million development of shops, offices, luxury condos and two hotels on more than 100 acres off Statesville Road.
Cornelius Bromont announced in May 2008 that it had acquired land for the project for an undisclosed sum. It had said then it hoped to begin construction at the end of 2009. This spring, officials said they were still hoping to begin construction in the first quarter of 2010, and to begin opening in the fall of 2012.
IN DISCUSSIONS
On Wednesday the developer issued a statement acknowledging that it is “in discussions with lenders who have cited a ‘technical default.’”
Josh Rector
Josh Rector, senior vice president of Cornelius Bromont, said that VLN Beneficial Trust, the owner of the property, of which Cornelius Bromont is a beneficiary, is not in monetary default on the loan. “The BUILD Fund, Cornelius Bromont, and its senior lender, have invested millions in acquiring the land and making detailed plans for this project, so it is certainly in everyone’s best interest to continue to support the project.”
Mr. Roberts said developer Cornelius Bromont faces foreclosure from its mezzanine lender. “It’s their mezzanine financing that appears they’re going to foreclose,” he said. He said it’s not clear how the foreclosure might affect the project. “I just don’t know enough … about how much percentage the mezzanine financing is, and whether they can pay it off.”
He said that even apart from the news about the possible foreclosure, the project appears off schedule, and that means the developer, Cornelius Bromont, must come back to the Cornelius Town Board to get approval for revising the conditions agreed to when the project was approved in April 2008.
Cornelius Town Board member Jim Bensman said in a weekly email to constituents Tuesday that Cornelius Bromont is in “technical default.” That means it has been paying its debt service as required, but is not satisfying other requirements.
“There is a technical default, but not a financial one as all debt service has been paid,” Mr. Bensman wrote. “They did say that the credit markets were ‘locked up’ making financing a project of this size very difficult.”
Mr. Bensman said he’s still optimistic about the project. “This is a matter between the parties and the impact of this event will play out over time. We have every reason to believe the project will move forward.”
To win approval of the project last year, the developers promised about $90 million in road improvements near the site, including widening of I-77 and construction of a new Exit 27. The road projects appeared to be moving forward this spring, but Cornelius Bromont still faces the task of winning town and county approval for a complex financing package. Cornelius Bromont has proposed a combination of modified tax increment financing and county COPS (certificate of participation) bonds, which would be paid off with a portion of future tax revenue generated by the Augustalee project.
Cornelius officials said the project’s difficulties are not surprising, given the state of the economy.
“It doesn’t mean the project is dead. It’s probably like any project right now in this economy. Financing is tough,” Mr. Roberts said. “We pretty much figured that especially in the last couple of months with the economy, that they would probably come back to us sometime” seeking revision of their conditions.”
RELATED COVERAGE
CorneliusToday.com, “Technical default at Augustalee has officials looking for answers.”
How much shopping does one area need? Birkdale, Northcross, Langtree, Augustalee, and several other smaller centers already exist or are underway/proposed.
After having its collective head in the sand for about 34 years, Congress finally raised fuel-efficiency standards last year. But, all of the fuel savings that will result will be offset by increases in the miles we drive due to governments continuing to approve out of the way commercial and residential development (this per National Geographic).
Augustalee strikes me as another exercise in traffic increasement (I know that’s not a word). The developer states they want to draw shoppers from Charlotte. They pledge $90 million in road improvements, but not even 90 cents on mass transit projects.
Augustalee will allegedly bring thousands of jobs and miles of new roads to the area, so local governments are understandably salivating about it. But, this short-term gain I fear will bring long-term pain in the form of more traffic, more emissions, and dying downtowns that give way to our suburban mono-culture.
Tyson’s corner in DC realized the error of their over development and is now embarking on an ambitious 30 year project to correct their mistakes in favor of a more pedestrian and environmentally friendly model. This effort will not be cheap. We should take a cue and start this process before it is too late.
A report in this morning’s Charlotte Observer offers a few more details about the Augustalee foreclosure, among them: The developer’s lack of deals with any major tenants. A foreclosure sale is planned Aug. 27, though, as noted above, the developer is negotiating with the lender.
See Aug. 7, 2009, Charlotte Observer, “Lack of tenant led to Cornelius foreclosure.”