High-end condo developer files for bankruptcy protection

High-end condo developer files for bankruptcy protection

Credit: hagoodreserve.com

High-end condo developer files for bankruptcy protection

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by Kerry Singe / Charlotte Observer

WCNC.com

Posted on March 18, 2010 at 3:06 PM

CHARLOTTE, N.C. -- Hagood Reserve, envisioned as a luxury condo and townhome community in south Charlotte, has filed for Chapter 11 bankruptcy protection.

Hagood Reserve has been embroiled in various lawsuits since its lender sued last year saying it was owed money. Construction, which began in 2008, stopped last year without any of the planned 36 units being built.

First Horizon Home Loans in April sued Ray "Rip" Farris III, his wife, Blair, and Farris' Tuscan Development company, saying they owed $4.2 million in a missed mortgage payment, interest and penalties. The lender started foreclosure proceedings on the 9 acre project at Colony and Carmel Roads in January.

Farris, in turn, sued First Horizon and its parent company, First Tennessee Bank National Association, saying the companies acted in bad faith when they stopped paying on a $24.4 million loan.

Farris claimed the bank wanted out of the construction loan business so badly it paid loan officers incentives for "engineering 'defaults'" that increased borrowers' obligations, according to the lawsuit, filed in Mecklenburg County.

The bankruptcy petition, filed today in Charlotte, halts the foreclosure proceedings and civil lawsuits.

Hagood Reserve listed assets and liabilities ranging from $1 million to $10 million and less than 50 creditors. Creditors include Allen Tate & Associates, which is owed $500,000, and Mecklenburg County, which is owed $42,000.

A bank spokesman has told the Observer that bank policy prohibits the company from commenting on matters that are the subject of civil or criminal proceedings.

Farris' attorney, Gary Jackson, said his client wants a jury to decide whether the bank acted in bad faith. Farris is also seeking damages. An economist hired by Farris' legal team estimates the developer could have sold 22 of the planned 36 units and that the bank’s actions cost Farris about $6 million.

Weeds now grow on the property, which was to include a two-acre pond and 4.5 acres of woods and trails. When announcing the project five years ago, Farris envisioned three-bedroom, roughly 2,850-square-foot condos selling for about $800,000.

Jackson said the lender told the judge at a previous hearing that it felt the best use of the property was to tear down the existing, unfinished buildings.

Construction started January 2008. In fall 2008, a subcontractor filed a lien against the property, violating a loan covenant. First Horizon stopped paying advances when told of the lien and said funding would resume when the lien was removed, according to the lawsuit. Farris says he resolved the lien within months, yet First Horizon never resumed payments.

Because the bank cut off his funding, Farris later ran out of money and wasn't able to pay his general contractor, he says. Construction stopped last April.

Jackson said Farris still wants to build Hagood Reserve.

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