The developer and lenders of a bankrupt 1,300-acre development in Midlothian are headed into mediation to resolve their differences.
The judge overseeing the bankruptcy of Roseland, a massive stalled real estate project in Chesterfield, ordered the case to mediation to help the two sides find common ground on an ambitious reorganization plan that aims to repay the banks every cent owed and finally get the project out of the ground.
Mediation is slated for February, but no official date has been set.
Mediation was put on the table after the project’s lenders began asking for more numbers and details on how the reorganization plan would play out, according to Chip Bliley, an attorney with Williams Mullen representing Central Virginia Bank, one of the lenders in the case.
“The banks just really want to find out what [the developers] are doing, what the timing is and whether it’s feasible,” Bliley said.
But according to Bruce Arkema, an attorney with DurretteCrump who is representing the two bankrupt entities that make up Roseland, the developer must keep many of the details confidential because it is in various levels of negotiations with builders, lenders and other parties to get construction going.
“We can’t give all that because it hurts our competitive position,” Arkema said.
Overseeing the mediation will be Judge Frank Santoro, a well-known federal bankruptcy judge from Hampton Roads who recently helped a Western Henrico golf and country club work through a complicated and contentious bankruptcy.
“We said, ‘We don’t want to keep going around and around. Why don’t we get Judge Santoro to mediate this case to see if we can’t reach an agreement,’” Arkema said. “Judge [Kevin] Huennekens said, ‘Good idea.’”
Roseland’s future has been unclear since it was stopped in its tracks by the real estate bust. The two LLCs that own the bulk of Roseland’s land went into Chapter 11 bankruptcy last year when lenders didn’t renew certain loans, and the project was threatened with foreclosure.
Buddy Sowers, a longtime local developer and the brains behind Roseland, was also forced into personal bankruptcy because he personally guaranteed many of the loans.
At stake is $90 million worth of a land and tens of millions worth of loans to a handful of local banks that are itching to get some kind of return on the deal.
The developer submitted an ambitious reorganization plan in October. The plan mapped a fairly complicated route by which Roseland would get bulldozers dozing again at the development thanks to a $2 million investment from an unnamed national homebuilder.
That money, which would be paid over five years, would jumpstart the completion of infrastructure and lead to finished lots to sell.
The plan sets timelines for residential lots to be developed and sold in as little as two years and as far out as 2016. That would generate the necessary income to repay lenders all of what they are owed, plus 4 percent interest.
Money would also come from a proposed sale of hundreds of acres to Chesterfield County to be turned into a park and trail system.
In addition to more detail, the lenders also want some reassurance, Arkema said.
“My sense is that the banks would like to see Buddy Sowers, who is the expert, develop this property,” he said. “They want comfort that this is going to happen soon and that they are going to get some money out of this.”
Adding to the complexity of the case is the size of the land and the multiple lenders that have first liens on portions of the 1,300 acres.
Franklin Federal Savings Bank is owed about $20 million. Central Virginia Bank is owed about $6.2 million. Essex Bank is owed almost $6 million. BB Hunt LLC, an entity tied to developer HHHunt, is owed $5.5 million. Paragon Bank is owed $2 million. Virginia Commonwealth Bank is owed $1.7 million.
Despite those complexities, Arkema said the gap between the developer and lenders isn’t insurmountable.
“I’m optimistic we’ll get this worked out and that we’re not that far apart.”