I think this an interesting article. What it
doesn't say says a lot.
It wasn't just the economy, I believe it was some of the decisions of the developers and others that
really slowed down this once promising development...if not doomed it.
Investors rescue Waters development
Montgomery Advertiser
Author: Cosby Woodruff
Date: May 9, 2010
Residential development at The Waters, and many other projects, ground to a halt a couple of years ago, but a new financial lifeline means construction is likely to begin anew this quarter.
Birmingham-based ARK Real Estate Strategies bought out bank loans at the project in an equity-for-debt deal. The investors retained most of the original team from The Waters.
With the new financial standing, the stalled concept is finally ready to move ahead with a second residential phase, according to Nathan Norris, director of marketing and design.
Norris said The Waters had the worst possible timing in its development. It started a second phase by building streets and installing utilities, one of the most costly parts of any development.
Just when it was ready to start building homes at full speed, the recession pretty much put a halt to everything, Norris said. With no residential construction under way and no sales in the pipeline, The Waters soon faced financial strain.
Norris described the original bank loans as complicated and spread out among a number of lenders. With little cash to build and few customers, construction hit a standstill.
That opened the door for ARK, which includes an investment fund the company describes as designed to take advantage of distressed real estate projects.
Thomas H. Brigham, the company's chairman, said The Waters was such a bargain.
ARK bought out the bank debt at an undisclosed discount. The banks were willing to sell the loans at a discount because lenders generally do not wish to foreclose on development property.
James Barth, a finance professor at Auburn University, said such deals are not uncommon.
"It is designed to be a win-win for everybody," he said.
It also isn't uncommon for the investors to retain previous management in such a deal, especially if the financial troubles were caused by general market conditions, he said.
"They may think the builder and the project still has potential," he said. "They still need people to run this project."
Brigham said the deal was a great investment for his company, and officials at The Waters are pleased the investment will allow them to move forward with few changes to their original plan.
Ed Welch, one of the development's founders, said keeping the original vision led him to want to be a part of the new deal.
"That was one of the keys," he said. "We were looking for people who share the same vision that we had."
Brigham agreed.
"We think the original vision was the right vision for that community," he said.
"The characteristics of the development will be substantially the same."
That vision is one of concentrated clusters of residential areas separated by open space. All of it is centered around a lake, and each of the clusters was to contain a town-center area of mixed office and retail use.
Brigham said the fund was designed to buy up such struggling projects in what some call second-tier Southern markets. Many such investors look only at markets like Charlotte, N.C., or Atlanta, but he insisted bargains were available in smaller markets.
"We think Montgomery is a great market," he said. "Look at what you have in Hyundai, the state government and the Air Force base."
ARK was not interested in developments that appeared as if a builder simply bought land and started putting up houses.
"The assets have to all be high-quality assets," he said of the fund's investments.
"The Waters kept popping up. It was a well-conceived development."
He said his company found a project that had many good ideas, but simply too many bank loans to remain viable.
"We came in and made a substantial investment in The Waters," he said. "We believe in having little or no debt in anything we do."
That, Welch said, will be the key to making the project profitable.
ARK brings a much-needed financial stability, one that will allow construction to begin almost immediately.
"That is our plan," Welch said, noting the next housing starts should be within 60 days.
"We want to get sticks coming out of the ground because people want to be at The Waters."
Brigham said he expects to make only a few changes to The Waters original concept. One change that is in the works is a shift, at least in part, to a lower entry price for residents.
According to information provided by Norris, building lots in the second phase start at about $57,000 and cost up to $224,000. Houses in the first phase are listed between $270,000 and $415,000.
Prev
Linear Mode
