VCB tries to force Roseland’s hand

As a massive stalled real estate project in Midlothian tries to work its way out of bankruptcy protection, one of the development’s lenders is eager for some cash.

Virginia Commonwealth Bank has asked federal bankruptcy court to force the developers of Roseland to either pay the bank interest while its Chapter 11 reorganization plan is worked out or allow the bank to foreclose on its share of the project’s 1,300 acres.

The Petersburg-based bank loaned Roseland $1.7 million in 2008. The loan is secured by 103 acres.

VCB filed a motion Nov. 15 arguing that Roseland’s recently filed reorganization plan doesn’t properly protect it as a creditor. 

That plan promised to pay all of Roseland’s lenders in full, plus interest, and eventually get the development out of the ground. But it would take years for the plan to come to fruition.

Specifically, VCB is calling into question the true value of its collateral and the effects that the plan would have on that land’s value over time.

The fair market value of the land as claimed by Roseland is $4.2 million, according to VCB’s court filing. Bankruptcy filings list an appraised value of about $2 million.

If the reorganization doesn’t go as planned, it lists the land as having a liquidation value, assuming it was sold separately from the rest of the 1,300 acres, of $1.5 million.

In the meantime, interest, taxes and late payments continue to pile on.

The bank is also worried that it would lose its lien position if Roseland seeks funds from another lender to pay for the infrastructure on the 103 acres, as would be allowed for in the plan.

VCB’s attorneys, Michael Mueller and James Donaldson of the law firm of Christian & Barton, did not return calls for comment

Bruce Arkema, an attorney with DurretteCrump who is representing the two bankrupt entities that make up Roseland, said there is plenty of equity to go around and that his clients are arguing in court that the VCB’s request should not be granted.

“My interpretation is that [VCB] doesn’t want to wait for what the plan provides,” Arkema said. “They would like to get a payment sooner.”

Arkema said that the fair market value of the 103 acres is between $4 million and $5 million and that the value has continued to increase.

“If anything, it has appreciated, not depreciated,” he said.

VCB has been under financial pressure recently.

It lost more than $2.4 million in 2011, according to reports filed with the FDIC. It lost $3.7 million in 2010.

The bank has also been battling a pot of troubled loans. It reported more than $30 million in past due and non-accrual loans as of the end of 2010. That number has since dropped to about $19 million.

The two LLCs that own the bulk of Roseland’s land went into bankruptcy this year when lenders didn’t renew certain loans and the project was threatened with foreclosure.

The project, which was conceived almost a decade ago, owes between $50 million and $60 million, but it is not underwater. The land used as collateral is worth about $90 million.

In addition to VCB, Roseland owes Franklin Federal Savings Bank about $20 million; Central Virginia Bank, about $6.2 million; Essex Bank, almost $6 million; BB Hunt LLC, an entity tied to developer HHHunt, $5.5 million; and Paragon Bank, $2 million.

Should the judge find in VCB’s favor and force Roseland to pay the bank interest while the plan is worked out, Arkema said the developers should be able to swing the payments.

“We believe we have other forms of lenders who may be willing to [buy VCB] out or loan us some money,” Arkema said.

Should the judge decide to let the bank foreclose on the property, Arkema said it won’t derail the entire reorganization plan.

“It would put a dent in what we’re trying to do, but this is a just a small portion of it.”

As a massive stalled real estate project in Midlothian tries to work its way out of bankruptcy protection, one of the development’s lenders is eager for some cash.

Virginia Commonwealth Bank has asked federal bankruptcy court to force the developers of Roseland to either pay the bank interest while its Chapter 11 reorganization plan is worked out or allow the bank to foreclose on its share of the project’s 1,300 acres.

The Petersburg-based bank loaned Roseland $1.7 million in 2008. The loan is secured by 103 acres.

VCB filed a motion Nov. 15 arguing that Roseland’s recently filed reorganization plan doesn’t properly protect it as a creditor. 

That plan promised to pay all of Roseland’s lenders in full, plus interest, and eventually get the development out of the ground. But it would take years for the plan to come to fruition.

Specifically, VCB is calling into question the true value of its collateral and the effects that the plan would have on that land’s value over time.

The fair market value of the land as claimed by Roseland is $4.2 million, according to VCB’s court filing. Bankruptcy filings list an appraised value of about $2 million.

If the reorganization doesn’t go as planned, it lists the land as having a liquidation value, assuming it was sold separately from the rest of the 1,300 acres, of $1.5 million.

In the meantime, interest, taxes and late payments continue to pile on.

The bank is also worried that it would lose its lien position if Roseland seeks funds from another lender to pay for the infrastructure on the 103 acres, as would be allowed for in the plan.

VCB’s attorneys, Michael Mueller and James Donaldson of the law firm of Christian & Barton, did not return calls for comment

Bruce Arkema, an attorney with DurretteCrump who is representing the two bankrupt entities that make up Roseland, said there is plenty of equity to go around and that his clients are arguing in court that the VCB’s request should not be granted.

“My interpretation is that [VCB] doesn’t want to wait for what the plan provides,” Arkema said. “They would like to get a payment sooner.”

Arkema said that the fair market value of the 103 acres is between $4 million and $5 million and that the value has continued to increase.

“If anything, it has appreciated, not depreciated,” he said.

VCB has been under financial pressure recently.

It lost more than $2.4 million in 2011, according to reports filed with the FDIC. It lost $3.7 million in 2010.

The bank has also been battling a pot of troubled loans. It reported more than $30 million in past due and non-accrual loans as of the end of 2010. That number has since dropped to about $19 million.

The two LLCs that own the bulk of Roseland’s land went into bankruptcy this year when lenders didn’t renew certain loans and the project was threatened with foreclosure.

The project, which was conceived almost a decade ago, owes between $50 million and $60 million, but it is not underwater. The land used as collateral is worth about $90 million.

In addition to VCB, Roseland owes Franklin Federal Savings Bank about $20 million; Central Virginia Bank, about $6.2 million; Essex Bank, almost $6 million; BB Hunt LLC, an entity tied to developer HHHunt, $5.5 million; and Paragon Bank, $2 million.

Should the judge find in VCB’s favor and force Roseland to pay the bank interest while the plan is worked out, Arkema said the developers should be able to swing the payments.

“We believe we have other forms of lenders who may be willing to [buy VCB] out or loan us some money,” Arkema said.

Should the judge decide to let the bank foreclose on the property, Arkema said it won’t derail the entire reorganization plan.

“It would put a dent in what we’re trying to do, but this is a just a small portion of it.”

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michael jenkins
michael jenkins
10 years ago

“If anything, it has appreciated, not depreciated,”….referring to the land at Roseland. This is COMPLETELY FALSE!

Homes as well as LAND are depreciating in this area of the county.

It makes me wonder why the banks are not trying to get all their money while they still can before the REAL recession/depression hits soon…

David W. Carper
David W. Carper
10 years ago

These banks do not have the ability to hold on to assets like land waiting for developers to recover, which may or may not happen. They need to recover what they can now and move on. Otherwise, the government will close the banks in question.