Two of the last pieces of Justin French’s crumbled empire are now in the hands of another of Richmond’s most well known developers.
Louis Salomonsky and his company Historic Housing LLC purchased two of French’s unfinished apartment projects in Scott’s Addition at a suspenseful foreclosure auction Tuesday.
Salomonsky made the winning bid of $2.66 million on 3031 and 3122 Norfolk St., historic tax credit rehab buildings French began working in 2007.
The final price was $2.9 million, including a 10 percent premium paid to Motley’s Auction and Realty Group, a far cry from the $15 million that Bank of Hampton Roads was owed by French.
Left hanging with unfinished real estate and with French serving a 16-year sentence in federal prison, the Norfolk-based bank foreclosed on the buildings this year, hoping to recover at least some of the money.
Bank of Hampton Roads says French borrowed money on the projects and lied about the progress of construction, using the funds elsewhere.
A local architect and another local developer were dragged into the mess, and two other banks have sued Bank of Hampton Roads as a result of the debacle.
As the new owner, Salomonsky has plans for 125 apartments between the two buildings with a development price of about $17 million, he said. Historic Housing, the development company Salomonsky owns with partner David White, paid cash at the auction and will finance the build-out.
But it’ll take some work to get there.
The former warehouse at 3122 Norfolk St. (also known as 1700 Summit Ave.) is 56,000 square feet on 1.29 acres. French planned 67 apartment units for the building. It was most recently assessed by the city at $2.58 million.
The building is a mostly gutted warehouse with a bit of framing done on the inside. Water leaks through the roof, piles of drywall, lumber and sacks of insulation lay collecting dust. Bank of Hampton Roads has alleged that the framing was put up haphazardly to have the appearance of progress on the site in order to get approval from the bank for more cash draws on the loan.
Kitty-corner across the street is 3031 Norfolk St., a 67,900-square-foot building on 1.38 acres where French had planned 85 apartment units. It was assessed at $2.7 million. It is about 60 percent complete.
Action at the auction block
As far as Richmond real estate auctions go, Tuesday’s was exciting.
The buildings were first auctioned separately and then as a package deal. Bidders played each other back and forth in the initial auctions but were clearly waiting for the buildings to be sold together.
As he usually does at the podium, Motley’s President Mark Motley did his best to motivate bidders.
“Don’t be a quitter, sir,” Motley said to one bidder who backed down for a moment during the action. “They don’t talk about second place.”
Salomonsky went head-to-head with an unidentified man wearing scrubs and a bidder in in California who dialed in via the Internet.
Salomonsky started the bidding for both buildings at $2.2 million.
With the bid at $2.55 million, Motley pushed Salomonsky to bite at $2.6 million.
“Sir, it’s $50,000. Skip lunch tomorrow,” Motley joked. “Sir, I’ll go in with you. Here, take my wallet.”
After the drop of the gavel, Salomonsky said it’s too soon to tell how sweet of a deal he got.
“We’ll know if it was a good price after we finish construction,” he said.
“I analyzed what I was willing to pay and feel comfortable with my development plans,” he said. “Three million dollars was my number.”
“Live enough years you get lucky once in a while,” Salomonsky said of the sales price.
A rocky past, and the road ahead
Salomonsky said that his company would pursue state and federal historic tax credits on the properties and that construction should start after the first of the year. Plans call for a more upscale design than French designed. That includes the addition of a courtyard and swimming pool and doing away with apartments that don’t have windows.
“We’re not in favor of window-less apartments,” he said. “I question their marketability.”
Its latest purchase shows Historic Housing is bullish on Scott’s Addition.
In addition to its acquisition Tuesday, the company recently bought half a city block on Clay Street between Belleville and Roseneath streets. It is planning 300 apartments on the property.
“I think it’s a wonderful location in the city, and the potential for Scott’s Addition will be greater than what we’ve experienced in Shockoe Bottom,” he said. “The Bottom is unique, but Scott’s Addition is centrally located.”
There is still lingering damage from the two Norfolk Street projects. French’s dealings on the properties led to at least three lawsuits in Richmond Circuit Court.
In August 2010, Bank of Hampton Roads sued local architect Todd Dykshorn for allegedly misrepresenting the projects’ progress.
Essex Bank and Lynchburg-based Select Bank sued Bank of Hampton Roads in December 2010 for $11 million, claiming that the bank failed in its duties as lead lender by allowing the alleged fraud to take place. That suit is set for trial in September.
And last month, Bank of Hampton Roads sued local contractor and developer David Gammino, whose company City and Guilds did the construction work on the Norfolk Street projects, alleging that he defrauded the bank by signing off on illegitimate cash draws. Gammino announced days later that he was dropping out of the race for Richmond City Council because of the suit. That case is pending.