Biscuit backstory: Flips would have rewarded Craig's fees

In its first two years in the hands of speculators, doomed housing development Biscuit Run rang up over $7 million in expenses, including nearly a quarter million dollars paid to lead investor Hunter Craig. That's according to a court filing in the lawsuit in which Craig and company, already partially bailed out by taxpayers, are suing for nearly $20 million in additional public funds.

According to the filing at the Albemarle County Courthouse, the former owners concede they paid $240,000 to Craig Management LLC to oversee the property's rezoning in 2007. That's more than the group, organized just two years earlier, paid its environmental engineers, its traffic consultants, or to the civil engineers who designed the master plan for an intended 3,100-unit development on the nearly 1,200 acres southwest of Charlottesville.

Most expense categories, however, fall far short of what the group spent in its first two years on legal fees– over $700,000– and on the biggest expense of all: millions in interest on borrowed money that pushed their company, Forest Lodge LLC, to the brink of insolvency and so traumatized one of its lenders that it issued a special report to shareholders about the delinquent loan.

Much of the bleeding came to a halt on December 30, 2009, when Biscuit Run was sold to the Virginia Department of Conservation and Recreation as a state park, a deal heralded by the outgoing governor, Tim Kaine, as a "bargain." However, investigative reports later revealed that Virginia taxpayers shouldered a burden of $21.5 million in cash and credits, more than double the $9.8 million Kaine initially described as the price.

In their October 12 lawsuit, Craig and company demand nearly $20 million more, a move that, as reported last week, has drawn howls of protest from both sides of the political spectrum.

"I don't blame the developers; I blame the state," says independent Albemarle supervisor Dennis Rooker. "The state should not be talked into doing deals like that."

All of the investors with whom this reporter has spoken, several men who participated as so-called "limited partners," have indicated that they lost 100 percent of their investments– in some cases as much as $1.3 million– but that the damage to Craig and his father-in-law was much deeper. The investors portray Craig and father-in-law Wick McNeely as having made personal guarantees on a bank loan and are the only men now scrambling to lessen their losses. Each interviewed investor said he was not aware of the lawsuit until a reporter's phone call.

"I just didn't like being lumped in with someone who is driving this and using the system and his connections to get a bailout," one of the investors says in an email. "It sucks to be dragged into something and be labeled a bad guy when you are an investor being kept in the dark and have nothing to gain from what is being done."

Meanwhile, lawsuit exhibits unseen during the reporter's first courthouse visit shed further light on what was clearly planned as a flip, a quick sale to another company. If Craig were bragging to potential investors that then-Wall Street giant Lehman Brothers would fund his flip, he has mustered some evidence.

In February 2006, Pulte Homes, one of the nation's largest home builders and then an occasional Lehman partner, allegedly issued an offer to buy Biscuit Run, less than four months after Craig's team consummated its $46.2 million purchase. A Lehman-funded flip to Pulte would have covered all the proffers– about $40 million worth of gifts to Albemarle in exchange for the rezoning– and still have paid Craig's team $130.8 million, a handsome return on investment.

Additional interest emerged from Newland Communities. In September of 2006, that San Diego-based company issued a purchase contract, again offering to pay the proffers and sending Craig's team $101 million. (The court file also includes mention of a third potential flip, this one from an entity described as Entertainment Enterprises, whereabouts unknown and date unspecified, which allegedly wanted to pay $113 million.)

Curiously, the flips appear to pre-date the 2007 rezoning when Craig committed the property to an array of proffers, including land contributions such as a 12-acre school site, a 403-acre park, and another 564 acres of green spaces. The developer also committed to construct streets, sidewalks, curbs, and an extensive network of underground utilities. Proffers totaled $41 million, including construction of two new public roads, off-site traffic signals, and over $2 million for transit. Cash donations included $200,000 for park planning, $875,000 to Albemarle Fire & Rescue, and a million-dollar gift to Habitat for Humanity.

But like a Grand Canyon pack mule, Biscuit Run was suddenly saddled. A 2009 state-commissioned appraisal pegged the value of a rezoned Biscuit Run at just $12 million, but a prominent Albemarle developer, speaking anonymously, claims it wasn't worth as much as a dollar.

As the economy made abundantly clear, timing counts. In September 2008, in one of the nation's most spectacular business blow-ups, the real estate-dependent Lehman filed for Chapter 11 protection, the biggest bankruptcy in American history. And yet Craig's team found appraisers willing to claim that Biscuit Run– empty land in a busted market– was still worth as much as $87.7 million. Getting the state to accept such suspect appraisals, the grounds for additional tax credits, is the basis of their suit.

"I'm not an appraiser," says Supervisor Rooker, "but I can assume that if they could have been privately paid as much as they were paid in tax credits they would have taken it."

One media account asserts that a successful lawsuit could trim the loss to Craig's team– including his asset-shedding father-in-law, Wick McNeely, who sold a racehorse November 6 for $2.3 million– from $24 million to $5 million.

While Craig has declined all comment, the lawyer who submitted Craig's request for tax credits now serves on the Albemarle County Planning Commission. Also serving as a Commissioner during the 2007 Biscuit Run rezoning, Duane Zobrist was not in public office when he submitted the controversial paperwork, and he says there was nothing fishy about the documents or the people.

"I selected Pat by her experience," Zobrist says of Orange-based appraiser Patricia O'Grady-Filer. "I'll bet Pat's done 150 of these appraisals."

Zobrist says he also selected a Midlothian-based appraiser to pen a letter affirming O'Grady-Filer's nearly $88 million valuation.

"We're very conservative and careful," says Zobrist. "I'm not going to touch anything if I think it's going to be audited."

Noting that Virginia's conservation tax credits have been getting bad publicity, Zobrist contends that they are actually responsible for perpetually preserving hundreds of thousands of acres of land, and he says that he's never seen one of his tax credit packages receive so much scrutiny. Particularly troubling, Zobrist says, is that the tax department balked at issuing the full amount of requested credits.

No longer involved in Biscuit Run, Zobrist surmises that the suit will be settled with a compromise between the $11.68 million in issued credits and the total $31.16 million requested. The onus falls on Attorney General Ken Cuccinelli, whose spokesperson has promised to file a response by November 21. But the Hook's legal analyst, David Heilberg, says that the burden of proof lies with Craig's team to show that the tax department ruled improperly.

"It's going to depend on the fact-finding," says Heilberg, noting that this type of trial must go before a judge, not a jury.

As for Rooker, he was hoping Biscuit Run would have fulfilled its promise as a high-density development inside Albemarle's growth area, an effort representing decades of person-hours by County officials and one that would have provided a free 403-acre park as part of the package.

"This is not an appropriate use of the tax credit system, and I blame the state for that," says Rooker. "They should not be accepting donations of growth-area properties. It's undermining the whole basis for smart growth in Virginia, and it results in them paying exorbitant prices.

"And," Rooker adds, "as we've seen, the tax credit route can be an uncertain route."

This story is a part of the The Biscuit Run cash grab special.


i can not for the life of me figure out why these people think they deserve more money as far as i can see we need to just give them there land back and what ever happens with it happens you win some you loose some we the tax payers should not have to be involved with it at all and we should not have to pay anymore money there must have been some kind of agreement to the amount given for the land to become a park ,as you can see this is still a huge piece of property sitting empty

Concerned citizen should be more concerned about their lack of capital letters, punctuation and grammar.

Dennis Rooker can blame the State but The BOS are also to blame. They knew that this property was going to be flipped. The only way that we get to where we are today is because the BOS was so eager to rezone. Albemarle country did not need this development. They should of told Hunter Craig to develop what he can by right. The BOS are the ones to blame for the loss of the growth area. I won't be long now till they say yes to Wendall Woods request to add his land on the other side of RT. 20 to the growth area. We need for the BOS to think about the future of Albemarle County and its citizens. Not the wants and needs of the few select citizens. Whether we are talking about Albemarle Country, Richmond or DC. It is always the same, the middle class tax payers eventually pay the bill for their screw ups.

It's time for Creigh Deeds and the Va. legislature to eliminate this tax loop hole for the wealthy. Put it to a vote and let's see who represents the people and who represents the 1%.

"I don't blame the developers; I blame the state," says independent Albemarle supervisor Dennis Rooker. "The state should not be talked into doing deals like that."

Blame the state? Rooker and the other members of the BOS never met a developer they didn't kowtow to. Biscuit Run was in Land Use taxation for decades even though EVERYONE knew the owners were just waiting for the right time to sell. Land Use is supposed to protect rural areas from development, not finance carrying costs for would-be developers.

Also, take a look at how the BOS has kowtowed to developers like Frank Kessler, Wendel Wood, Charley Hurt, etc. over the years. It's pitiful.

Instead of blaming the state, Rooker needs to take a look in the mirror.

Betty, you have a good point. Land use taxation breaks are costing the taxpayers millions of dollars in lost revenue and I'll bet Biscuit Run isn't the only property that paid a lower tax rate until the right deal was put in front of them to develop. Why would any property in the growth area ( as this one was ) be allowed to qualify for land use taxation breaks ? And although I'm sure there is property that should be kept undeveloped or low density , this could be accomplished through zoning without losing income on property not in this category such as that of the owners of Biscuit Run.

I would like to know how much money the county lost before Biscuit Run was sold to developers by charging a lower tax rate.

@NancyDrew The Assessor should have what Land Use for Biscuit Run has cost this county on speed dial. Give him a ring!

Bisquit Run WAS paying 325k a year in taxes... now it is ZERO.

I suppose the next lawsuit will be a refund of the 5 year penalty that was paid when it was converted since technically it was never actually used for non agricultural/park use.

The REAL cost will be when the county has to build more infrastructure in ten different places because it lost Bisquit run and all the proffers, self contained green spaces, parks and school land that were part of the deal.

The property should have been passed on by the state and let go to auction. The new owners would have been obligated to the old proffers to keep the new zoning..

The procurment guy from the state says he "saved" the land. He didn't save ANYTHING he just spread those 3100 homes all over the coiunty (and they WILL be built) in 100 unit developments where it will bankrupt the county trying to widen roads, redistrict schools and provide other services that cannot be centrally located. If a developer builds "by right" the county can't demand anything. The Board of Supervisors should have raised the roof, but they have been curiously silent....

I wonder why.

Just curious Bill if they had not had lower taxes because of land use taxation rates what would they have been paying ?

What an incredible example of the worst kind of socialism: privatization of the benefits, while spreading the risk to the middle class and all taxpayers.

In this case the private benefits of hundreds of millions of dollars could not be realized, so of course, the risk when the deal fell through was "given" to the public.

Why is Hunter Craig still allowed on the Board of Visitors at UVA? It's a disgrace to that institution. A true example of the 1%!

Nancy the 325k was AFTER it was taken out of land use.


Here you are again, defending the abusive and indefensible. Come on, so what if its not paying taxes anymore. It belongs to the public for real, and gets used by the public. It also won't be needing all sorts of things being built like schools, and more fire departments, and traffic signals. The Biscuit Run deal was a classic piece of welfare for the wealthy and connected, which comes with huge costs. It was and is a fleecing of the state Taxpayer who otherwise can't qualify for the nice kickbacks, and works for a living.

BR failed because of pure market realities. That means the real demand for housing isn't there right now. You of all people should approve of that. And without the tax credits for donation, Hunter Craig and his cronies would be feeling the real bite of laissez-faire economics they should be. How about they get nuttin? But what the market will pay them for the value of that property when they foreclosed?

This is an opportunity for people to think if they really want to live in a piece of NoVA, like Chantilly. Why does Albemarle need growth areas anyways. Isn't there a City right in the center of it all? Hmmm...people want to live in the City with County tags. Gotcha.

The County doesn't need a growth area. The County needs to start being a County again, or simply let the high growth areas go to the City, and let them deal with the infratructure costs. if you don't need infrastructure, you can have low taxes.I am totally OK with that. Maybe you disagree, but that's hardly a reason for you to suddenly defend these abuses of the Taxpayer.

Kaine will pay a political price for this piece of cronyism for the rest of his career. The whole thing is crooked, and frankly it is a textbook example of everything that is wrong with our culture today.

Old Timer,
I don't think Bill was "defending" anyone. I think he was blaming the county for rolling over like a fat dog on Thanksgiving.