Greenbridge developers said they never thought they would make money on their 10-story condo-and-retail project on West Rosemary Street in Chapel Hill. "There will be no profit in this project," said Tim Toben, one of the development partners, a year ago during the final stages of construction of the 217,000-square-foot building.
Unfortunately Toben was right.
Bank of America, the lender for the project, plans to foreclose on the property June 27 unless the developers can secure other financing.
On Monday, the Orange County Superior Court is scheduled to hold a hearing to approve an independent company, known as a receiver, to collect rent from the tenants and maintain the property while the bank and developers negotiate.
Greenbridge owners are no longer speaking to the press for fear that it might hamper talks with the bank.
Along with Toben, Greenbridge developers Frank Phoenix, Tom Tucker, Richard Dlesk and Michael Cucchiara agreed to a $43 million three-year loan from Bank of America in July 2008, two months before the stock market collapsed.
Bank of America's foreclosure filings show that the developers did not make a $1.6 million equity deposit or pay interest from December to March. Under the terms of the loan, the developers owe $28.7 million in principal and $456,000 in interest, plus a late penalty of $3,400 per day after March 14.
"We increased the loan to finish the project, but they went over budget again, and that's when they refused to put in more equity," says Shirley Norton, a spokeswoman for Bank of America. "We remain hopeful of reaching a resolution with the borrowers."
The bank is appointing Liberty Solutions, a Charlotte firm, as the receiver.
The project has 13 liens on it, ranging from $6 million owed to general contractor Weaver Cooke to $17,811.82 due to Design Solutions of N.C. The liens prevent Greenbridge partners from selling new condos, and the inability to sell these units prevents them from raising money to pay the liens.
In addition, one of the Greenbridge managers is living in a condo he has under contract, yet has not paid rent or association dues, according to court documents filed by Bank of America. That person has also refused to close on the purchase of the condominium unit.
The bank would not reveal the name of the manager.
Inside the building, just 37 of the 97 units are occupied. The lack of homeowners to pay association dues means there isn't money to fix leaks in the roof and windows. Heating and air-conditioning units haven't been properly maintained. Filters and parts were taken from vacant units to replace those in occupied condos.
Those who purchased the 15 affordable units make up the bulk of the homeowners.
"No one has come to me freaking out, saying I wish I wouldn't have bought there," says Robert Dowling, executive director of the Community Home Trust, which owns the deeds to the reduced-price condos. "That hasn't happened. Not even close."
Dowling says that because the Home Trust owns the titles to the affordable units, those residents won't be subject to the foreclosure. But it's uncertain how the trust will fare without the 1 percent transfer tax; this requires revenue from each sale to be placed in a fund to subsidize homeowners association dues for those in the affordable units.
"We are a small piece of a very large project, and we cannot get our arms around it. It's really hard to manage the risks that these large developments entail," Dowling said. "We never thought about what happens if they go bankrupt. We didn't think of that. I will now."
The slogan—"Life in Greenbridge is the best life in town"—hinted at the renaissance proponents thought the project might bring to downtown Chapel Hill. It was forecast to generate $1 million annually in property taxes and even more from sales tax.
Toben said last year his vision for Greenbridge was as a model for environmentally friendly development. The condos included materials made from sustainably harvested wood, rooftop solar panels and solar-thermal heat pumps.
"The legs of the stool are—there's two big legs, which are social justice and environmental sensitivity. The economics leg of the stool is pretty short, but this is a prototype—you expect prototypes to be more costly."
But the economic leg was even shorter than predicted.
Just two dentists and the Southern Environmental Law Center occupy commercial space on the second floor. Derb Carter, the center's director, says its five-year renewable lease will remain in effect even if the building is foreclosed on.
On the retail side, LIGHT, an art and design shop owned by Greenbridge's interior designer, is the only business open. The other spaces appear untouched since the contractors left the site. Concrete is still visible on the floor, paint buckets sit in corners and the beams are bare and unfinished.
"We are just fighting to survive," LIGHT owner Cindy Spuria said as she set up for a private party and gallery debut.
Thinking positively, Spuria prefers to call her shop the "first" in Greenbridge rather than the "only" and says, "We're happy to be there, we just look forward to having some neighbors on the ground."
Spuria, who opened her doors in January, says almost the entire ground floor was planned to be full when she bought her space but that those businesses backed out when the economy crumbled. That Spuria owns the retail space means she is safe from foreclosure, but the legal proceedings are hampering business, she says.
"With that hanging over the building, other tenants can't move in and other homebuyers can't buy, so it's been a bit of a frozen place right now," she says. "The only way to generate traffic is to have events ... Until there are other restaurants or business on the ground floor, it's a little tricky."
Two doors down from Greenbridge, at Delaine's House of Beauty on Graham Street, the owner waits for a client, a graduating UNC student, to get her hair done for the commencement ceremony.
The salon's business suffered during two years of construction that curtailed parking and coated cars in dust. Appointments had to be cancelled when someone made a bomb threat to the project and when a water line was damaged, but Delaine Ingram said she was hopeful that once the business got over those hurdles, Greenbridge residents would be her new customers.
But that hasn't happened. Only one or two have come by, she said, and she doesn't see most residents because they park underground.
"The people in that building, I don't know them. You don't really see them," she said. "I have no idea who is in that building."
She wants the town to provide grant money for minority businesses and help them move into Greenbridge. That would actually activate the street, as the partners promised, and serve the longtime neighbors, she says.
"[Foreclosure] is a big loss to all the hard work they put into it, but they weren't trying to be successful for everyone," Ingram said, adding that the developers "targeted the wealthy." "Maybe if they had helped everybody they would have been successful."
Greenbridge ushered in new zoning that will allow the construction of other similar projects: 140 West, which is being financed largely by the town, and the UNC-run University Square redevelopment, which will be larger and taller than it could have been under the old rules.
The same businesspeople who hailed Greenbridge last year at its ribbon cutting are continuing to push the yet-to-materialize benefits. Jim Norton, executive director of the Downtown Partnership, still thinks the project is a "game-changer" for West Franklin Street.
"I view this financial problem as kind of an internal thing," he said. "For the general public, they don't care whether it's owned by Joe Blow or Bank of XYZ."
Chapel Hill-Carrboro Chamber of Commerce President Aaron Nelson said that he hopes the current "community-centric, passionate developers" continue to own Greenbridge and that they "deserve a huge thank-you from our community."
"They risked a lot to make our community a better place," he said. "I should be real clear how grateful the business community is for their investment and how hopeful I am. They are the right folks to own this project."
Will Raymond, a longtime resident and town council candidate, consistently told anyone who would listen that the location, which encroached on the historically African-American Northside neighborhood, was wrong for the project. He also has maintained that the affordable housing component needed more consideration.
"I think that the economy has been a useful scapegoat," Raymond says. "If you think about it, the same economic forces that made it harder to sell these units also made it cheaper to build."
However, Raymond thinks the project eventually will be successful. "Hopefully they will work it out themselves, but I imagine if it goes into default, someone is going to pick that building up," he said. "Five years from now it will be a full complement of people living there, unless there's some other surprise we don't know about ... The question is: Are we going to learn from it?