A big piece of Billy Jefferson’s real estate empire has changed hands.
New York-based True North Management took ownership of the former Tobacco Factory Lofts at 700 Stockton St. from Jefferson at a foreclosure auction on Tuesday. It’s the first of the imprisoned developer’s real estate holdings to be foreclosed on since his historic tax credit scam began to unravel more than a year ago.
True North had previously purchased the $25 million mortgage backed by the Manchester apartment complex from U.S. Bank in September. It initiated the foreclosure and took the property back with its own starting bid of $15.5 million.
It is unclear how much True North paid for the Tobacco Factory note or what it plans to do with the building moving forward. Company representatives did not reply to a phone message by Tuesday evening.
True North’s purchase includes the 329,000-square-foot apartment complex and an adjacent parking lot. Jefferson, along with former business partner Justin French, converted the former Philip Morris building into apartments after buying it from the tobacco giant in 2003.
The Tobacco Factory, now leasing under the brand Lofts at Commerce, has 225 apartments. It was 58 percent occupied as of Oct. 8. The building’s website lists one-bedroom apartments for $649 a month and two-bedroom units are advertised for $799.
Jefferson was sentenced to 20 years in federal prison last month after pleading guilty to a historic tax credit scheme that involved the Tobacco Factory. Jefferson and French wildly inflated the expenses they incurred while renovating the building, claiming millions in fraudulent tax credits.
French is currently serving a 16-year prison sentence for his own tax credit fraud. Jefferson is appealing his 20-year sentence.
Several of Jefferson’s business entities still own more than 500 apartments around Richmond, including the Parachute Factory on Stockton Street and the River City Court complex in the Museum District. All of those properties are currently being managed by court-appointed receiver CompassRock Real Estate.
A lender on the Parachute Factory has indicated it would seek foreclosure on that property as well. Jefferson-owned businesses River City Renaissance and River City Renaissance III, which own about 400 apartments including River City Court, retreated into bankruptcy last summer to stall a foreclosure attempt.
Jefferson’s criminal defense team and U.S. attorneys prosecuting his tax fraud case have said the value in the River City Renaissance properties is crucial to paying down the more than $9 million Jefferson will owe in restitution.
The Parachute Factory and Tobacco Factory, both underwater on eight-figure mortgages, were not expected to drum up any money for restitution.
Perhaps the new teamcan turn this property around and bring it back to respectability. Its important to Manchester that they succeed.