Two sprawling subdivisions a few miles apart in Hanover County serve as perfect symbols of the home-building business before the recession and now.
Mount Hermon Farms (pictured at right) is an immense, open field dotted with more vacant lots than actual houses and is now facing a slew of foreclosures in the wake of its ties to a convicted local Ponzi schemer.
Just up the road sits Hickory Hill, a 1,700-acre example of what deep-pocketed investors and a bit of confidence can do for developers.
“As much as the world is interested in foreclosures, I think they would like to hear about something good and growing,” said Mike Chenault, an investor in Hickory Hill and principal broker with Home Town Realty, which also marketed Mount Hermon Farms.
Mount Hermon Farms’ fate was entangled with that of Donald Lacey, a disgraced local businessman convicted last year of running a $10 million Ponzi scheme. The development was owned by Mount Hermon Farms II, LLC, an entity registered to Lacey that left Bank of America hanging on a $10.75 million tab.
Of the four dozen lots at Mount Hermon Farms, about a dozen have houses. The homes are colossal, $600,000 all-brick McMansions that were supposed to have many more neighbors. Now the remaining 30 lots are headed to a massive foreclosure auction today.
Mount Hermon is a quiet cleared field with not a bulldozer in sight. A few minutes away, construction equipment is clearing woodlands to bring Hickory Hill to life where its investors are confident in their plan and that the time is right.
“If our neighborhood were exactly like all other neighborhoods, we wouldn’t have put it on the ground,” Chenault said.
Some of the confidence comes from stable financial backers.
The team of investors began buying the land five years ago. They closed on the deal two years later.
They all believe in the plan and the design.
“We’re offering a product that some other people aren’t,” said Chenault.
The houses at Mount Hermon Farms are all well over 3,000 square feet, and the lots themselves were all selling for more than $200,000.
But it’s not 2006 anymore.
“If we’d started in 2006, we’d have done the same thing,” Chenault said. “That’s kind of what the world was gobbling up in 2006. There are not enough buyers for that product right now.”
The 277 lots at Hickory Hill run between $100,000 and $160,000. The houses that will be built there by RCI Builders, Royal Dominion and Eagle Construction will start at $350,000.
“We’ve had to come back to reality on where the houses need to be,” said Todd Rogers.
A big part of the Hickory Hill investors’ confidence also comes from something less tangible.
“Our neighborhood doesn’t have the black eye of all the foreclosures,” Chenault said.
Rogers said the sight of a new development amidst the doom and gloom is a much needed change for the construction industry.
“The reason that we’re starting off so well — and I know this sounds totally funny — psychologically, I think people like to see new things happening,” Rogers said.
The developers said that’s part of the reason why four houses have sold at Hickory Hill in just a few weeks since the development launched. And three model homes will soon be on their way up as well.
“We have seven houses coming out of the ground at one time,” Rogers said. “You have to drive around Richmond a long time right now to find that.”
Hickory Hill is in its first phase, which includes 70 lots. Chenault said the entire development will take at least five years to be completed, with the hope being to build about 50 houses a year or about four per month.
They won’t start developing the next phase until the first 30 lots are sold.