Foreclosures spread to developers' vacant lots
Residents of Cooley Station North awoke Monday to 493 signs of more trouble for their half-empty subdivision.
Process servers had blanketed the Trend Homes community in east Gilbert with foreclosure notices, targeting 493 vacant lots owned by a Scottsdale "land bank," which has fallen behind on its loan payments.
The pending foreclosures are among many recent indications that communities on the fringes of suburban sprawl are likely to face more hardship before economic trends shift in their favor. Residents worry about the ghost-town effects of the half-built subdivision on their falling home values and what might happen if a developer were to come in with a new approach.
Cooley Station homeowner Krista Anderson said those empty lots, now scheduled for auction in late August, represent the future of her neighborhood, southeast of Higley and Warner roads.
"We're living in a subdivision that's half-full," Anderson said. "My main concern is what's going to happen to the subdivision."
The delinquent landowner is Taro Properties Arizona, a so-called land bank based in Scottsdale. Trend Homes had contracted with Taro Properties to purchase individual lots as needed for new-home construction.
When new-home sales in the area ground to a halt, Trend Homes no longer was able to meet its purchase schedule of lots from Taro Properties. In February, Trend Homes filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
Like many other land banks that had contracted with home builders during the real-estate boom, Taro was left with hundreds of vacant parcels.
"They ended up saddled with all these empty lots that nobody wanted," said Mesa real-estate analyst Zach Bowers of Ion Data.
Bowers said he believes more developers and land banks are approaching the brink of foreclosure. Home builder Randall Martin Homes walked away from its Higley Park subdivision in Gilbert in February because of stagnant business and plummeting home values.
Trend Homes did not fare any better during the market downturn that began in early 2006, though the builder recently emerged from bankruptcy proceedings and was purchased June 5 by Phoenix investment firm Najafi Cos.
Reed Porter, Trend Homes' chief executive officer, said his company is trying to work out a deal with Taro Properties to acquire the remaining Cooley Station lots.
"We're working cooperatively with Taro, although we haven't finalized an agreement," Porter said.
According to the foreclosure notice, also known as a notice of trustee sale, Taro Properties defaulted on a $31.2 million mortgage agreement with Bank of America to finance the land purchase.
Bowers said the land bank faces foreclosure on three separate land holdings, two in Gilbert and the other in Phoenix, totaling 1,251 parcels and $75.3 million in mortgage loans.
Ray Howe, a Taro Properties principal, said his company is negotiating on two fronts in its efforts to save the Cooley Station lots from foreclosure.
It is talking with Trend Homes about a possible purchase and with Bank of America to preserve a loan agreement.
"We are very concerned about the situation and are doing everything we can to rectify the situation with the bank," Howe said.
He said that discussions are in the early stages and that there are no guarantees.
"As to how that will turn out, I couldn't say and don't want to say," he said.
Bank of America attorney Craig Williams did not return calls seeking comment.
Land banks all over the country are struggling, Howe added, but said he still believes Taro Properties has the staying power to survive until property values recover.
"It's a matter of holding on," he said.
The foreclosure notices were the latest reminder that all is not well at Cooley Station, where owners say they are increasingly concerned that Trend Homes has abandoned the development.
Construction activity ceased suddenly early this year, and more than a half-dozen unfinished homes stand in various stages of completion, sun-faded and coated with dust. Weeds have reclaimed many of the graded dirt lots.
"They haven't done anything in months," Cooley Station resident Adam Hingley said.
Porter said Trend Homes was unable to finish the homes because, when it entered bankruptcy proceedings, its construction lender, Bank of America, stopped funding the projects.
"We are still trying to work out terms for Bank of America to move forward with completing these homes," Porter said.
Meanwhile, property owners looking to sell not only face a slumping market but questions about the community's future.
Gilbert resident Mark Voss, who has been trying for three months to sell his former home inside Cooley Station, said he bought a townhome there two years ago because Trend Homes was offering incentives that greatly reduced the first year's payments on his $262,000 purchase.
Now, Voss is asking for $199,000. He still hasn't received any offers.
"I'm probably going to take a $70,000 loss," he said.
No comments:
Post a Comment