A stalled real estate development in Midlothian has an ambitious plan to get out of bankruptcy and pay its creditors every cent owed.
In a plan submitted to the bankruptcy court, the developers of Roseland said it would repay its lenders 100 percent of what they’re owed, plus interest, and possibly create a new park in Chesterfield County — all while getting the 1,300-acre-project out of the ground.
But the plan hinges on an eventual turnaround of the real estate market and the cooperation of lenders, the county, builders and investors.
Bruce Arkema, an attorney with DurretteCrump who is representing the two bankrupt entities that comprise Roseland, said developers Buddy and Casey Sowers are confident that Roseland still has plenty of potential.
“Everybody has recognized that this parcel is probably the premier parcel in Central Virginia if not all of Virginia,” Arkema said. “Even the national builders recognize that when the market turns this will be hot property. They believe the demand for these lots will be there.”
In its initial stages, the reorganization plan, which was filed in federal bankruptcy court Oct. 11, involves a $2 million investment from an unnamed national homebuilder to get the bulldozers humming again.
That money, which would be paid over five years, would jumpstart the completion of infrastructure and lead to finished lots to sell.
“That would be the impetus to move the project forward,” Arkema said.
The unnamed builder would agree to buy at least 360 finished lots on approximately 60 acres at Roseland. Other regional builders would then step up and buy lots, according to the plan.
There has also been talk that some of the money for the infrastructure at Roseland might come from the county, Arkema said.
The plan sets timelines for residential lots to be developed and sold in as little as two years and as far out as 2016. That would then generate the necessary income to repay lenders all of what they are owed, plus 4 percent interest.
Money would also come from a proposed sale of hundreds of acres to Chesterfield County to be turned into a park and trail system.
“It’s something that I think both sides are very interested in doing,” Arkema said of the park concept.
A pledge of a full payback is rare among real estate related bankruptcies these days, Arkema said.
Another rarity these days: Roseland is not underwater. The land used as collateral by the two bankrupt Roseland entities is worth about $90 million, Arkema said. The two bankrupt entities combined owe $50 million to $60 million, Arkema said.
More specifically: Franklin Federal Savings Bank is owed about $20 million. Central Virginia Bank is owed about $6.2 million. Essex Bank is owed almost $6 million. BB Hunt LLC, an entity tied to developer HHHunt, is owed $5.5 million. Paragon Bank is owed $2 million. Virginia Commonwealth Bank is owed $1.7 million.
The county is owed hundreds of thousands in back taxes. That debt could be repaid from selling small amounts of timber from the Roseland parcels.
Roseland was conceived more than a decade ago, and its 1,300 acres were acquired over a nine-year period.
The two LLCs that own the bulk of Roseland’s land went into bankruptcy this year when lenders didn’t renew certain loans and the project was threatened with foreclosure.
The Sowers would still be in charge of developing the project, according to the plan, which must be approved by the court and by creditors. Several hearings will be held in the coming months leading toward a creditors vote as soon as December, although delays are possible.
Arkema said it is too soon to tell whether creditors will be in favor of the plan.
“I don’t have a sense yet of how the lenders feel about it,” Arkema said. “My gut tells me most lenders don’t want undeveloped land.”
Michael Schwartz is a BizSense reporter. Please send news tips to Michael@richmondbizsense.com.
So the county will rescue unsuccessful businessmen?
WHy should anyone bailing out these jokers. THey gambled, took a risk and lost. NO more bailouts to anyone ….. TImes are tough for everyone, tax payers. etc…. Are banking willing to bail out the average person ? no , not really so why should they bailout out these investors.
They took a risk and lost. That’s called free enterprise .
I don’t consider this a “bail out” since it is a reorganization plan. I consider a ‘bail out’ as what one would do in a sinking ship; jump out and let it sink. Claiming Chapter 7 Bankrupty, in my opinion, is a bail out. Assets are liquidated and creditors are stuck with a whole lot of unpaid receivables and therefore the ship sinks. Chapter 11 Reorganization, requires the captain to stay by a sinking boat and essentially anchored to all his creditors.
“Bail Outs” became an infamous term with the onset of our financial collapse and the pouring of tax payers’ money into our banking institutions. This current situation is not forcing the tax payers to purchase Roseland. It is quite the opposite. It is actually a business deal where one homebuilder is voluntarily investing $2 million and taking a risk with another homebuilder. As shocking as it may sound, this is how a capitalistic society works; risks and rewards. If the Sowers present a plan to their creditors with a realistic future of paying 100% of principle and interest, then I applaud them. Not only will all financial obligations be paid in full but jobs will be created with Roseland development.
There is such a stigma in today’s society with successful businesses and individuals. I understand a lot of this has been fueled by the Fannie and Freddie Mac’s of the world, but that does not constitute every successful person and business is a crooked one. The economy turned, it caught a lot of people ungaurded and has caused a lot of skinned knees. If the Sowers want to pay back their debt, then by all means, get out of their way. They skinned their knees but are brushing themselves off and ready to go at it again.
Free Enterprise relates to the supply and demand of a business NOT restrained by government interference. Congress and our President don’t understand the definition of free enterprise. Banks are calling loans at an accelerated rate due to the Fannie Mae and Freddie Mac convoluted backing of mortgages to people who had no business borrowing money. Small businesses and individuals are having their loans called because of the new regulations imposed on by our government. This is not free enterprise but a strangle hold.
There is a big picture we should all keep in mind before we start pointing fingers at the horrible wealthy people. It all trickles down from the top and as much as people hate to hear this, when the rich get poorer, the poor get poorer. It is the hard truth of Economics 101. It took a few years but everyone is feeling the effect. The people should be running the government, NOT the government running the people and that is exactly where we are today. Instead of taking your anger out on someone who is trying to pay their obligations back, take the frustration out at the polls.