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From:                              Vidaver, Mary M. Bathory

Sent:                               Monday, May 02, 2011 11:09 PM

To:                                   Burton, Jim

Subject:                          CDA Status Snapshot

Here is a quick snapshot of the status of the CDA's in Virginia.  It's not complete, but should get you through tomorrow. 

 

There have been two new CDA's established since December 2009.

  • Last week, the Fairfax County BOS endorsed the issuance of $72 million in bonds by the Mosaic-Merrifield CDA.  $42 million will be paid back through tax increment financing (TIF).  The bond funds will pay for roads, sidewalks, parks, and parking garages in a mixed-use project that will contain 1,000 apartments, 125,000 sq.ft. of office space, a hotel, two parks, a movie theatre, and retail/restaurants.
  • In August 2010, the Roanoke County BOS approved (3-2) the South Peak CDA to issue $16 million in bonds to be repaid over 20 years with TIF -- 70% of the additional taxes created by the development (meaning that the County for that period only sees 30% of the additional revenue, the bondholders get the rest).  During the Public Hearning, one speaker (a Tea Partier) warned that the Board was setting the "dangerous precedent" of becoming the solution of last resort "for deverlopers who can't find private financing" and it wasn't fair to other developers.  The third vote had begun the 18 months of discussion by recusing herself (her landscaping business does work for the developer), but ended up voting to ensure the CDA's passage.

Bell Creek (Hanover County) -- Only $3.924 million of the $15.98 million bonds issued in 2003 remain outstanding.  All additional loans secured by the property and/or the Developer's personal guaranty have zero balances.  The last residential phase of the development has been sold to a builder.

 

Broad Street (Richmond) --In November 2010 the City "purchased" the CDA's assets for the price of the outstanding principal and interests on the bonds.  CDA defeases bonds with proceeds from the "sale."  In effect, the City bailed out the CDA and the bond holders.

 

Celebrate Virginia North (Stafford County) -- The Developer is in arrears on both CDA assessments and Real Estate taxes.  Bond payments being made with a combination of assessments and reserve fund (currently, at about half the value of what the LOM requires it to be).  Construction costs for the public improvements ran $9.5 million over budget -- a cost that agreements required be paid by the Developer.

Celebrate Virginia South (City of Fredricksburg) -- The Developer is in arrears on both Special Assessments and Real Estate taxes.  The March 2010, September 2010, and March 2011 bond payments being made with a combination of assessments, construction funds, and reserve funds.  The current deficit is over $3 million.  The anchor tenant (a water park) has still not found financing and remains unbuilt.  In February 2011 a local business man announced plans to open the area's first ever adult-oriented nightclub in Celebrate Virginia -- probably a sign of desperation on the part of the Developer's leasing agent. 

During this same period, the CDA was helping to finance a $400,000 Interchange Justification Report for a new interchange on Route 95 (into the Celebrate Virginia development), a toll road Route 3 bypass, two additional bridges over the Rappahannock River, and upgrades to Route 17.

 

Dulles Town Center (Loudoun County) -- Steady performance, little change.

 

Farms of New Kent/New Kent Vineyards (New Kent County) -- As of 12/31/2010, 12 sales to homebuyers out of 2,500 planned homes; work on retail and commercial phases has not commenced.  Construction work financed by the bonds suspended because ran out of funds.  In October 2010 Municap prepared projections for a proposed restructuring of the bonds.  The proposal is to use the Reserve Fund for the debt payments between 2011-2013 and then resume special assessments from the landowners thereafter (when economic conditions will presumably have improved).  In December 2010, the Developer paid neither real estate taxes nor the special assessment; reserve funds used for March 2011 debt payment.  Developer has since negotiated a 4-payment installment plan with the County.  Developer has also reports having initiated discussions to make "certain payment accomodations with the CDA investors."

 

H2O (City of Hampton) -- Developer in arrears on Real Estate taxes and special assessments for 2009 and 2010.  As a result, reserve funds used for March 2010, September 2010, and March 2011 bond payments.  Reserve funds can probably cover September 2011 and March 2012 payments.  On September 2, 2010, the City terminated the Developer's option to purchase additional land in the project.  News reports continue to track the financial hardships of the Developer (Tidewater's version of DC's Lerner Co.), who was said to owe $1 billion in bank loans in 2008.  An article in the Virginia Pilot (April 2010) states that the Developer owes $40 million in unpaid taxes to the five Tidewater cities.  Localities have called in construction bonds to finish projects, leading to a lawsuit by Travelers' Insurance against the Developer; banks have begun to foreclose on properties.

 

Heritage Hunt (Prince William County) -- On March 1, 2010, the bonds for the residential component were redeemed in full, leaving only $2.019 million in Series B bonds outstanding.  The Series B bonds are paid from special assessments on the commercial property.  The commercial developer (Buchanan) reported continued sales and leasing of office and retail space.  Special assessments of $250,000 were paid in 2010 and 2011 which covered the debt payments for those periods.

 

Lewistown Commerce Center (Hanover County) -- In March 2010, the Developer reported initiating conversations to restructure the bonds and "deferred" the June 2010 payment of the special assessment pending the outcome of those conversations.  In response, the County garnished the rental income from the single tenant (Bass Pro Shops), throwing the private construction loan into default, placed liens on the other properties in the CDA district, and sued the Developer for non-payment.  The Developer countersued.  The CDA used the Reserve fund for the September 2010 bond payment.  Bonds restructured on 3/23/2011:  bond maturity extended by two years; special assessments to be suspended and reserve and construction funds to be used for bond payments through 2014; sinking fund redememption schedule modified with higher installments to restore Reserve Fund after 2014; 75% TIF to be extended for an additional 7 years before reverting to 50% for the remainder of the bond's life; phasing of planned outlet center extended; additional retail building to be added.

 

Marquis (York County) -- CIT foreclosed in 2008, assigning ownership to a newly formed subsidiary.   It notifies the CDA that insufficient funds existed to complete the project and that a projected shortfall of approximately $1.5 to $2.5 million in funds available to service the CDA bonds would occur by September 1, 2010.  CIT refused to sign an assumption agreement with the CDA acknowledging responsibility for repayment of the bonds.  The CDA responded by withholding payments from the construction fund, saying that without an assumption agreement it was not required to reimburse CIT for work on the property.  CIT continued construction, paid vendors, and continued to submit claims for reimbursement totalling $1.6 million.  No rents being paid by current tenants due to Landlord's default.  CIT stops paying real estate taxes and special assessments and stops providing disclosure information as required by the LOM.  Reserve funds are used for March 1, 2010 bond payment.  In the Summer of 2009, efforts to resturcture the debt service on the bonds are requested by a potential property buyer.  In August 2010, the CDA and the Trustee signed a Supplemental Indenture of Trust to allow the following:  September 1, 2010 payments to be made from the reserve, construction, and revenue funds; principal payments scheduled to being on September 1, 2011 deferred until sufficient pledge revenues are available or a new payment schedule is unanimously approved by the bondholders.  As of April 2011, no buyer had been found for the property and CIT announced it would sell the property by public auction.

 

New Port (City of Portsmouth) -- In June 2010, the Developer brought its Real Estate tax and special assessment payments, which had been in arrears, up-to date.  Thus, sufficient funds were available for the September 2010 bond payment.  The Developer also reported having made some payments to several of the vendors who had filed mechanic's liens against the property.  The Developer also reported that all the construction funds raised had been expended, but that work on the infrastructure was not yet complete.  News reports continue to track the financial hardships of the Developer (Tidewater's version of DC's Lerner Co.), who was said to owe $1 billion in bank loans in 2008.  An article in the Virginia Pilot (April 2010) states that the Developer owes $40 million in unpaid taxes to the five Tidewater cities.  Localities have called in construction bonds to finish projects, leading to a lawsuit by Travelers' Insurance against the Developer; banks have begun to foreclose on properties.

 

Park Center (City of Manassas Park) -- Work on project completed in 2010, although neither leases nor sales reported by the Developer.  In June 2010, the Developer reported that recent appraisals suggested the property is incapable of being refinanced when the $49.9 million construction loan matures on 5/1/2011, but that restructuring discussions were underway with the lender.

 

Peninsula Town Center (City of Hampton) -- Delayed grand opening occurred in March 2010 with better than expected occupancy:  100% of apartments leased; 82% of non-residential leased.  Capitalized interest available for September 2010 debt service and so used.  The 2010 special assessment will be $5.25 million.  First installment paid in full; 2d installment due June 2011.  There is significant private debt secured by the land and the personal guaranty of the Developer's majority shareholder ($124.98 million) in addition to the $92.85 million CDA bonds.  Too soon to tell whether the project's success can outweigh the total debt load.

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Reynolds Crossing (Henrico County) -- In November 2009, the Developer tendered $755,000 in bonds to be used for the March 2010 principal payment plus an additional $745,000 in bonds in lieu of a cash special assessment for the March 2011 principal payment.  The current special assessment is $1.59 million.  While the portion of the development that is completed is relatively successful, a significant portion of the project remains on hold pending improved market conditions.  Outstanding loans with liens on the real estate ($87 million) remains worrisome. 

 

Russell 150 (Frederick County) -- No work, no payments of taxes or special assessments by the Developer and Landowner.  Total liability to the County and the CDA now stands at $3.7 million, plus an additional $94 million in private loans guaranteed by the land or some protion of it.  Sale of the property has been under discussion for two years.  A possible court-ordered sale could occur in December 2011, but it is unlikely to make the various parties whole.

 

Shops at White Oak Village (Henrico County) -- Leasing and TIF receipts not meeting forecasts and requiring the levying of special assessments in 2009 and 2010. 

 

Short Pump Town Center (Henrico County) -- Bonds paid off in 2009.

 

Virginia Gateway (Prince William County) -- In recognition of economic conditions, the Developer (Peterson) announced changes to the build-out plan:  (original) more than 1 million sq.ft. of retail and 2.5 million sq.ft of office/industrial); (revised) 1.4 million sq.ft. retail, 100,000 sq.ft. office, 500,000 sq.ft. industrial, 472 residential units (NVR).  As of 12/31/2010, 13 homes sold.  The originally proposed mixed-use Town Center placed on hold indefinitely.  On 6/15/2010, the landowner certified that the net worth of the Peterson Family is not less than $50 million.

 

Watkins Center (Chesterfield County) -- In July 2010 a mechanic's lien filed against the Developer and the CDA.  Plaintiff requests that the court sell off the real property to satisfy the claim.