The Business Journal has news about the impact of the Nedegaard bankruptcy, and likelihoods. Here's an excerpt [without the articles hotlinks]:
Bankruptcy plagues Ramsey Town Center
May 4, 2007
Two days before he died of colon cancer last November, Bruce Nedegaard was forced into bankruptcy by the bank that gambled on his dream.
A new buyer would either have to take up Nedegaard's development agreement with the city or negotiate a new one.
Nedegaard owned a number of construction and development-related businesses in the Twin Cities, among them a limited liability company called Ramsey Town Center LLC (RTCLLC) that was the master developer of the project with the same name.
Nedegaard launched the Ramsey Town Center project in 2003, and the 322-acre, mixed-used village was hailed [by some] as innovative and a model for high-density suburban development [... but there were skeptics from the very beginning].
By late 2006, with 125 developable acres left under his control, RTCLLC was in default on a $35 million loan for the project with Minnwest Bank. Nedegaard had a personal stake in the deal, so he was on the hook, too.
On Nov. 28, [i.e., within weeks after the 2006 city council election] Minnwest filed a petition to force Nedegaard into involuntary bankruptcy.
Nedegaard's interest in RTCLLC is not worth the $42.3 million in debt it owes to Minnwest Bank and a slew of other creditors, so the U.S. Bankruptcy Court-appointed trustee overseeing Nedegaard's bankruptcy has opted to abandon his interest in RTCLLC.
Minnwest Bank has taken preliminary steps to foreclose on its loan covering the RTCLLC real estate, said Frederick Dudderer Jr., Minnwest's attorney.
Minnwest can decide whether it will chop the 125 acres up into parcels or sell it as a whole. Whoever buys the land will have to assume Nedegaard's agreements with the city to pay for tens of millions of dollars for parks and infrastructure.
If the new developer wants to renegotiate those agreements, it could be an uphill battle as a majority of City Council members want to keep the plan as is.
However, Matt Look, a new council member, thinks the project will have to be changed to lure developers. "The project has to be completed," he said. "If that means we need to change the plan when the bankruptcy is resolved, I'd be in favor of making a more financially feasible plan."
At least some of Ramsey Town Center's woes can be tied to a slumping housing market. Some observers say that the project will be well-positioned for a quick rebound when the market picks up.
Of the 2,400 proposed residential units, only 250 have been built.
Bill Oelkers, a real estate agent with Re/Max Results in Plymouth, is trying to market 12 townhomes in Ramsey Town Center. Even after dropping the price of the homes by $50,000 per unit (they now range between $159,000 and $240,000 per unit), none have sold. Other builders in the development, K. Hovnanian Homes and DR Horton, also cut their prices.
Whatever the feeling, many observers will be watching closely for clues about where Ramsey Town Center will wind up.
$42.3 million owed, with the main mortgage position at $35 million. 125 acres remain of a 322 acre total. Looking at the vast empty spaces, it appears a larger percentage than 39% of the land still remains vacant. I suppose the planned "parks" and other reserved land is a part of the present vacant appearance. But what's been promised was promised, and should the promise change? Let's put that question off for a moment, as the second of two big questions.
The First Big Question: Actually there's a bunch of related questions. Where's the city's security position in a bankruptcy foreclosere sale? Foreclosed, or in front of the lender's action as an assessment against the land? [I have an email inquiry sent to the city attorney and can expect a prompt reply for an update posting] And what amount of city debt exactly must be serviced via taxation in the interim [and later into the more distant future] for about how long of an interim basis before the thing sorts out? That depends upon when and how much the housing market for that shared-wall suburban sector rebounds; and how aggressive the Metropolitan Council is in wanting to sell flushes in Ramsey, ASAP. They have a say on the city's 2008 Comprehensive Plan, the one we all have hypothetically discussed and wondered over, and more than a say, they hold a hammer. With the Guv having political ambitions and the summer GOP dog and pony show in town [aka the "convention"] possibly Met Council might be more restrained than they were with Lake Elmo. Natalie Steffen has yet to shed any public light on things other than to say it is unlikely "any radical change" will be accepted [i.e., retrenchment is unlikely within the total growth quotas and expected build-out rates Met Council imposes (they say "recommends" but that appears to be false terminology when they can simply disapprove anything not fitting their staff's starting, announced quota package, three-to-five units on average per buildable residential acre - per non-wetland, non-road, non-commercial, non-park, acre; and let's start giving them three on average, as within "three-to-five")]. The "three-to-five units per acre on average" quote was stated by Steffen and Met Council staff and reported within April 2004 city council worksession minutes.
The Second Big Question - Stay the course, be patient as "a majority" of the council is said to favor; or do as Matt Look says, cave in, cut-and-run to lessen the most immediate tax impact but possibly have a worse ultimate citizen subsidization worry?
Hey, I agree with my friends. Don't we all?
Actually, here, I think that patience and prudence is the best course. Do not renegotiate - and give that notice clearly up front before the bankruptcy sale. That way, you guard your turf, and if the primary lender and the participants get a lesser foreclosure sale price because notice has been given, that's how Capitalism works, and it's best that any potential buyer will have notice and no cause to say, "Well, I paid thinking it was a clean slate ...".
Giving notice before the foreclosure sale is the important thing. It is fairness to potential buyers; fairness and transparency in the market. Making things clear to those who the city will have to work with in the future. Let the bankers accept it if that's what the city wants. Do not let anyone's potential future dealings with the same lender, if at all a factor, poison what is objectively seen as best for the citizen-taxpayers.
It would be wrong to waffle. My call, and it's a guess, it would be wrong to act as if there's a "distress sale" mentality. It the entire thing sits for years, ultimately, then the market teaches its lesson.
But do not let Met Council cash flow needs or other extraneous factors cause the original deal, as unfavorable to the citizens as it is, worsen and become even less favorable. A bad deal up front should not get worse because the land speculators reaped a big profit and the risk-taking entrepreneurial developer-interest lost on a market downturn and a liquidity trap. That's the nature of entrepreneurial risk.
Next batter up, take your swings, hit a home run or strike out.