A large portion of Billy G. Jefferson Jr.’s Richmond real estate empire is headed for auction.
A foreclosure sale has been scheduled for July 31 to sell off 29 of the jailed local landlord’s apartment properties, encompassing 441 units clustered throughout the Fan, Museum District and Carytown.
The scheduled foreclosure comes after two pieces of Jefferson’s River City Renaissance operations defaulted on a pair of mortgages held by Wachovia, now part of Wells Fargo, and backed by the apartment buildings.
The first loan was for $30.35 million issued to Jefferson’s River City Renaissance LC in 2005. That note is backed by 23 scattered rental complexes and includes the River City Court complex near Carytown. The second loan is a $6.30 million mortgage issued to River City Renaissance III LC and backed by six apartment buildings near the Boulevard.
It is unclear what Jefferson owes on the two mortgages. The total assessed value of the River City Renaissance LC holdings is about $27.19 million, according to city records. River City Renaissance III LC’s holdings were most recently assessed at about $5.975 million.
The properties may be sold separately or packaged together at the foreclosure sale, which will be held on the steps of the Richmond Circuit Court building. Russell Drazin of Washington, D.C. law firm Pardo Drazin is handling the auction. He did not return a phone message by press time.
The properties are well-stocked with tenants. Carter Snipes of Snipes Properties said the sale could be the “most unique buying opportunity” in a decade.
“The properties on the Boulevard and Thompson (Street) and those in the Fan, those are prime locations,” Snipes said. “You can’t reproduce that kind of supply. You can’t build 85 new units in the Fan anywhere.”
Jefferson lost control over the management of the entire River City Renaissance portfolio in March when a judge ordered the properties transferred to third-party property receiver CompassRock Real Estate.
CompassRock’s receiver’s report for the month of May showed the portfolio’s 441 apartment units were about 93 percent occupied. They brought in $260,987 in total income for the month, which comes out to an average of $638 per occupied unit. May operating expenses totaled $27,493.
Duke Dodson, whose Dodson Property Management leases several Fan properties, said the auction could mean a profitable investment for a new owner if they can get the right price.
Dodson said the Fan is a strong rental market. And he said landlords are stepping up their game to keep their properties attractive to renters.
“In the last couple years, tenants are getting more and more selective. Amenities that they used to not really care about, now they care about,” Dodson said. “Landlords are making improvements, and it’s a more competitive market than ever.”
Jefferson is currently awaiting sentencing after pleading guilty to four charges related to his historic tax credit scheme and a subsequent plot to flee the country under a false identity late last year. He could face up to 37 years in prison.
Jefferson also owes about $9.6 million in federal restitution. Williams Mullen attorney Chuck James, who is representing Jefferson in his criminal proceedings, said Jefferson has paid more than $1 million toward restitution and special assessments so far.
The proceeds from a foreclosure sale likely would not help Jefferson pay down his restitution balance. Sands Anderson attorney Roy Terry said whatever funds the auction brings in would be distributed in the same manner as a normal foreclosure sale, and the federal government would not be able to cut in front of the lender.
Any delinquent real estate taxes and costs associated with the foreclosure sale would come first. The loan holder Wells Fargo – which acquired Wachovia – would get paid next. If anything is left over, that money would go to the River City Renaissance entities.
“The government is not going to come ahead of properly recorded deeds of trust,” Terry said. “Any bank with a recorded mortgage lien is going to come ahead of the government.”
Jefferson still owns Manchester apartment complexes the Tobacco Factory and the Parachute Factory, though both of those properties are also now managed by receivers as lenders push towards foreclosure.
Another Jefferson-held entity owns one Carytown commercial building, a Rear Grace Street parking lot and two plots of undeveloped land on Mulberry Street and Monument Avenue.