Loan woes? Banks expected to share Biscuit burden
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"