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RESIDENTIAL FREEZE

by Gus Lubin

What will happen to new homes?

Past the stone gate of Chandler Point, Burnside Street rises into the pastoral hills of Rural Hall. It is joined by other roads with bucolic names like Aurora Glen Drive and Whisperwood Street to make the groundwork of a model suburban community. There are sidewalks, streetlights, walking trails and, below ground, sewers and wires. The only things missing are homes. Except for a cluster of 10 houses at the northwest corner of the development, Chandler Point is a ghost town. The 400-acre property has lain fallow since the July foreclosure of its builder, Pierce Homes of Greensboro. As the property shuffled between banks and developers — most recently to the

Danville, Va.-based American National Bank & Trust — the land and its few residents have been neglected. Vacant lots grow tall with grass and mud runoff fills the streets. Graffiti and empty beer cans are evidence that delinquents have been gathering at the unfinished 11 th house. Residents fear that their home values will be undermined by the area’s neglect, or worse, by future development of low-quality homes. But with little communication from the varying owners of Chandler Point and scarce acknowledgement from the town of Rural Hall, the residents remain disappointed, frustrated and bewildered. “I just kept thinking it wasn’t right,” said Sandy Robertson, who purchased her home at Chandler

Point in March 2008. Although initially impressed with the development, Robertson became concerned as construction slowed over the summer. Then it stopped. One day a carpenter who was repairing her bathroom floor left mid-job after receiving a phone call. Soon afterwards there was a letter from Pierce Homes announcing the foreclosure and apologizing for any inconvenience. Since July Robertson has had to pay out of pocket for repairs to her home, which was under a oneyear warranty. And she is still waiting for the completion of planned community amenities like hiking trails and a swimming pool.

“Now I’m just like,whatever. It’s not like I can up and move,” Robertson said. “No matterwhat I still have to pay the mortgage.” The six families ofChandler Point (four of the houses are vacant) are stuck in residentiallimbo, a strange phenomenon born from recent hard times. As with manynew neighborhoods, the homes do not exist on Google Maps, nor onForsyth County’s Geo Data software. This posed a problem when residentstried to alert police about vandalism to some of the vacant homes. “I had to go out and show them where we were. The police didn’t even know we were here,” said Jim Barclift, who relocated from New Jerseylast year. A retiree, Barclift devotes his time to looking after theneighborhood. He walks around the development daily in an effort toprotect against theft and vandalism. He also shares with otherresidents whatever information he can find about Chandler Point. He hasuncovered blueprints and contractor records, but so far little aboutthe development’s future.

ChandlerPoint is caught in the gears of a rapidly decelerating real-estateindustry. New residential construction is on hold across the country,as realtors work through a surplus of new and foreclosed homes, andbanks withhold risky loans from buyers and builders. With little demandfor new homes, the proprietor of Chandler Point has scarce reason tobuild. Therefore it may be months or years before anyone completes theroads of Chandler Point, roads which end in piles of gravel, or mowsthe lots of chesthigh grass, or ever converts the chasmic concrete pitinto a swimming pool. Fortunately, the case of Chandler Point is anextreme in the Triad. Foreclosed developments are more typical ofsupercharged markets like Phoenix, Ariz.; Tampa, Fla. and evenCharlotte, where there was a higher surplus of homes and a greaterdecline in property values. But throughout the Triad there is evidenceof a floundering industry. While plans for new projects haveevaporated, developments which began recently now languish. To avoidbankruptcy or foreclosure, builders and developers have no choice but to keep building — slowly — and hope that the market will rebound. Onesite of slow construction is at the Staffordshire Townhomes on NewGarden Road in Greensboro, which began development last year. When thereal estate market crashed, local builder Dalton Worthington quicklyscaled back the pace of construction. “I didn’t have anythingfinished, thank God, because a finished home just sits there costingmoney daily,” Worthington said. “Now we really haven’t been in ahurry.” Construction continues on one of the Staffordshiretownhomes, which will be used as a model home. The rest of thelake-side development is inactive — nothing but roads and empty lots.Billboards at the front of the neighborhood seem either optimistic ordesperate. One reads: “Don’t Miss The Opportunity To Customize YourHome!” Another celebrates Staffordshire’s first — and only — tworesidents, Mildred and Maribell, which are two swans that live in thelake. Although Worthington will lose money from the “ticking interestpayments” on the development, he is confident that his company,Worth-Reitt Associates LLC, can hold onto the property. It helps thathis company has few houses on the ground, as houses incur much highertaxes than vacant lots. It also helps that his company has money inreserve and a manageable amount of land holdings. But he’s stillpraying for a market rebound. “We’re going to finish one modelhome in sixty to ninety days. If there aren’t any buyers in aboutninety days, I’ll be a little more concerned,” Worthington said. Twomore delayed developments sit by the old Grandview Golf Course inPfafftown. One of them, Grandview, is in construction on the site ofthe golf course, which was sold to Jade Associates in the summer of2007. Since demolishing the course, however, the local company has madefew improvements to the property beyond several segments of road andpiping. Otherwise, the old golf course is a wasteland, scattered withsleeping bulldozers. “If someone were ready to buy lots, wecould have them ready really quickly,” said Jade Associates partnerAllan Jones. “But we don’t expect that to happen until spring.” Jones’s estimate is far behind the timetable he gave in an interview with The Business Journal inJuly of 2007, in which he spoke of having homes on the ground by springof 2008. On the other side of the road at Grandview Crossing,construction is a few stages further along. The 71-lot development xxx waspurchased by Salem Ventures LLC in the spring of 2007. It has roads,piping and streetlights, but only a few homes are under construction. Therest of the development looks like a bizarre go-kart track. Ironically,many of its street names reference the now-absent golf course, such asFairway Run Drive. Here, too, developers offer a revisedtimetable. “[Grandview Crossing] would take four to five years in agood market,” said Prudential branch manager Butch Ray. “Now it couldbe more in the range of six to seven years before it’s totally builtout.” While some developers face delays, others have consolidated losesby selling property. Sellers include regional and national buildersthat are quitting the Triad area, like CP Morgan and Centex. Theirunfinished neighborhoods have been purchased at discounted rates bybuilders with financial backing. In many cases they have been bought bylocal builders, such as Wade Jurney Homes, Arvista Homes LLC and D.Stone Builders Inc. Because of this trend, the long-term effect of thereal estate slump may be beneficial to the area. After all, land andhomes will eventually be valuable for whoever can hold them. Propertyvalue can be jeopardized, however, by foreclosure. Case in point is atChandler Point, where the development has been entangled in foreclosureproceedings for many months. The property was also hamstrung with liensplaced by unpaid contractors — part of more than 80 lawsuits againstPierce Homes. Another development which faced a disastrousforeclosure was Park Ridge Pointe off Country Club Road inWinston-Salem. An innovative project for a tight cluster of luxuryeco-villas, the unfinished cul de sac has long been a jumble ofcobblestones and construction equipment, European-style balconies andtorn-up lawns. The centerpiece is an incomplete brick water fountain,and on the road beside it is a permanent 12-foot puddle due to impropergrading. “I’ve lived in a construction site for over a yearnow,” said Tracy Murphy, who closed on her home in November 2007. Sincethe foreclosure of developer Green Pointe Properties LLC last winter,the property remains unfinished and many contractors have not beenpaid. Residents and workers have had few opportunities for recoveringlost money, beyond levying new lawsuits against the developer. Meanwhile,at the time of foreclosure, Green Pointe President Jim Jackson wasalready in jail on unrelated felony charges of passing bad checks. Itis not surprising that homeowners should resent the foreclosure oftheir developer. But at Park Ridge Pointe there is a litany ofcomplaints that go far beyond economic mismanagement. Many complaintsare against Jackson personally, who masterminded the start-up companythrough which people, businesses and banks lost money. No one is moreresentful than Jackson’s former partner, Patrick Kinney, and Kinney’sgirlfriend, Judy Barbour, an early investor. Since their legalseparation from the company in 2007, Kinney and Barbour have devotedlong hours to investigating and tracking Jackson. Kinney and Barbourhave contacted lawyers and prosecutors in the hopes of bringing Jacksonto court for what they call decades of shady dealings and scam artistry— mostly involving realestate developments. As Kinneydescribes it, the story of Green Pointe Properties LLC is a scandal inthe veins of investment-scammer Bernard Madoff. Kinney claims that bycharming investors and throwing around money Jackson was able togenerate interest and investments in Park Ridge Pointe. This included amulti-million dollar loan from Bank of Granite. Investments and loanscontinued to pour into the development, despite a limping pace ofconstruction. Then all of a sudden, Green Point Properties LLCran out of money.

Jim Jackson was unavailable for comment.

Blamemanagement or blame the economy. But whatever Jackson’s intentions, hisextraordinary success and later failure expose the reckless optimism ofan industry. For a time there was near limitless money available fornew developments, especially those involving buzz phrases like “greenarchitecture.” Even Kinney admits that Park Ridge Pointe was awinning idea. “Bank of Granite saw the possibility of the project. Andit was a good project,” he said.

Since last spring’s auction of ParkRidge Pointe to local developer Randy Duggins, residents are hopefulthat the development will finally be finished. “I want to seethe new developer be successful, because if he is successful with theproject we are all successful,” Murphy said.

Despite widespreadeconomic trouble, production continues at a moderate rate on manydevelopments. The success of these projects depends on cooperationbetween all levels of the real estate industry. Banks, builders anddevelopers are writing and revising contracts to prevent any leg oftheir development from breaking. Cooperation has been central to progress at the Brookberry Farms neighborhood off Meadowlark Road in Winston-Salem. DeveloperJim McChesney is working with 20 builders in the production of nearly athousand mid-range to luxury homes at the 800-acre development.Recently, McChesney has allowed some builders to take down fewer lotsthan required by contract. The developer’s leniency helps keep buildersout of bankruptcy — an act of goodwill, but also of business acumen. “Theworst thing we could do is to push to put too many houses on themarket, and then the builder has to compromise quality,” McChesneysaid.

Brookberry Farms also benefits from a graduated development dealwith the landowner, Wachovia Bank and Trust for Bowman Gray Family.Rather than purchase 800 acres at once, McChesney arranged to buy landin four phases. “We structured the deal knowing there would bechanges in the market over the fifteen- to eighteen-year period,”McChesney said. “That kept us from getting way, way in debt.”

McChesneypredicted that it would be a long time before developers attempt newneighborhoods on the scale of Brookberry Farms. “First themarkets must stabilize, and then there will be a period of slowlygetting back in the game,” McChesney said. “That will impact the sizeof deals. It also means that some more businesses willprobably get in trouble or fail.”

“But we’re already seeingimprovement,” McChesney continued. “Development in Winston-Salem andGreensboro has always been relatively conservative. That helps getthrough times like this.”

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