VOL. 124 | NO. 121 | Tuesday, June 23, 2009
Lamar Crossing Development Faces Foreclosure
By Eric Smith
Once a promising development in a blighted area, the $11.7 million Lamar Crossing Apartments has gone the way of so many other commercial properties in town – fenced in and foreclosed.
A chain-link fence surrounds the perimeter of the 7.13-acre property on Lamar Avenue just north of Interstate 240. Overgrown grass proves the property hasn’t been cared for and a phone number posted on a sign outside the apartments for leasing information has been disconnected.
The developer of the 120-unit multifamily complex is Horizon Financial Group, operating in the transaction as Lamar Crossing Apartments LP. The company has defaulted on an $8.1 million loan dated June 1, 2007, and the property will be sold at a substitute trustee’s sale July 16 at noon on the steps of the Shelby County Courthouse.
Calls to Horizon Financial Group were not returned, but Horizon senior partner Preston Byrd told The Daily News in 2007 that the company would retain ownership of the property once completed.
However, those plans fizzled in a sour economy. Lamar Crossing had multifamily housing revenue bonds under the Shelby County Health, Educational and Housing Facility Board, but the property is now mired in legal wrangling and financial woes.
John Baker, the HEHFB executive director, said the explanation behind Lamar Crossing’s demise is not simple.
“The project had cost overruns early on,” he said. “I don’t know that they were adequately understood and recorded and communicated. And then, later on, there appears to have been – I don’t know if it’s correct or not – a misstep by a bank in terms of releasing funds. At least that’s the claim in one of the suits. And the developer did not pass all the funds through, and a number of contractors and subcontractors didn’t get paid.”
Lamar Crossing is mired in liens and subordinate interests by companies that performed work on the complex.
Interested parties are Lawrence Abell doing business as Lawrence Abell, Architect; Patton & Taylor Enterprises LLC; Chris Barwick Roofing Inc.; Western Masonry Builder Services Group Inc. doing business as Quality Insulation; American Mechanical Contractors Inc.; BK Framing Inc.; L&W Supply Inc. doing business as River City Building Materials; Boston Capital Corporate Tax Credit Fund XXVI, a limited partnership; BCCC Inc.; Horizon Holding Co. LLC; and The Bank of New York Trust Company N.A., according to the attorneys’ notice.
‘Just standing there’
Donald Bourland and Lancelot Minor of Bourland, Heflin, Alvarez, Minor & Matthews PLC were appointed substitute trustees June 16. Bourland, acting as real estate counsel, said the deed is now owned by Arvest Bank of Oklahoma.
“Arvest Bank had issued a letter of credit in connection with the bond issue, upon which they funded under,” Bourland said. “Arvest Bank is standing as the bond holder. Arvest Bank is the one that dispersed funds under the bond issue.”
HEHFB helped arrange the original financing on the development – whose current appraisal is $3.2 million, according to the Shelby County Assessor of Property – but that collapsed.
“We had put a PILOT (payment-in-lieu-of-taxes) into place on the development and the developer defaulted on the terms of the PILOT,” Baker said. “So we went a ways with him hearing his appeals, but in the end we could find nothing else to do except, appropriately, withdraw the PILOT.”
Bourland estimated that the project was 85 percent completed, while Baker estimated the project was about 90 percent completed and figured the developer was “headed toward interior finish” before the financing fizzled.
“What a shame,” Baker said. “We don’t want to see something left just standing there. What we can do is limited, so we’ve tried to help in any way we could and tried to keep the thing alive when the previous group had it.”
Potential’s still there
Construction crews broke ground on Lamar Crossing in May 2007, before the economic crunch began wreaking havoc on real estate developments. The 120,000-square-foot complex, on the southeast side of Lamar and Dunn avenues, was slated to have five buildings and a leasing office.
While all the structures appear to have been built, it wasn’t immediately apparent how many, if any, of the apartment interiors were finished.
The complex was another feather in the cap for the stretch along Lamar north from Interstate 240. Aldi Inc. opened a store on 2.5 acres that serves as an outparcel of the apartment complex. A store manager said he had heard about the property’s foreclosure and hoped that a new owner would revive the construction process and get the place leased.
And across the street, a Chattanooga-based company called KRT Development redeveloped the vacant land at 2930 Lamar Ave. – formerly Cherokee Lanes bowling alley – into a retail strip center.
Adam Slovis, principal of Slovis Associates LLC, handles leasing for the Lamar Crossing retail center, now owned by a New York-based company. He said occupancy at the center has been solid.
“The lineup is very traditional for that kind of market, the soft-goods users and the Dollar Tree (type stores),” Slovis said. “Those are all good, solid neighborhood shopping center kind of tenants.”
Slovis said the center has just two vacancies, one bay at 2,500 square feet and one at 6,400 square feet. He said that if the apartments are finished and leased up, it would be a boon to the center.
“Anytime you can create new density in an area like that, you’re going to at least provide some need for the center across the street or anywhere within that proximity because people will walk across the street for certain goods,” he said
As for the fate of the Lamar Crossing apartments, Bourland said the trustee’s sale July 16 on the courthouse steps will determine that. The hope, of course, is that a new owner emerges and finishes the project.
“It’s an open question,” Bourland said. “If they get a suitable bidder, as with any lender, I think they would be very happy with that result.”