Ramsey Town Center development's financiers postponed a foreclosure sale of nearly half the 322-acre project on the grounds that it's not financially viable.
With 2,800 homes and an assortment of shops, restaurants and businesses, the award-winning Town Center was supposed to be a $1.3 billion vision of how to build a suburban "downtown" from scratch in the Anoka County suburb off U.S. 10.
Instead, it's been plagued by delays, debt and the death of its developer. Its history has included questionable financing, Swiss bank accounts, federal and state investigations, and bankruptcy, all in the midst of a slumping real estate market.
On Monday, the bankers who initiated the scheduled sale of about 150 acres of Town Center didn't show up at an auction they had arranged at the Anoka County sheriff's office. Minnwest Corp. of Minnetonka holds the $35 million mortgage on the land. Developer Bruce Nedegaard defaulted on that mortgage last year. Minnwest forced Nedegaard into bankruptcy in November, and he died of cancer two days later.
Minnwest officials have said agreements inked between Nedegaard and the city in 2003 and 2004 are too restrictive to make Town Center work, but the majority of the City Council disagrees.
"We're (financially) protected, and we're on stable ground," Mayor Tom Gamec said before Tuesday's meeting. "We feel that the plan that we had is one that we agree with. That's it."
The Town Center's travails aren't the only obstacles facing Ramsey's hopes for new development. Also on Tuesday, the council unanimously abandoned its dreams for Ramsey Crossings, a 68-acre piece of land across the street from Town Center. Officials had hoped for Target or another large retailer to anchor the project, but no one wanted to build in the current market, said James Lasher, president of LSA Design, which was trying to put the development together.
Council Member Matt Look, elected [ ... last November] on a platform critical of Town Center, said Tuesday night that the city is setting itself on a fiscally perilous course, since much of its future budgets will rely on tax revenue from Town Center, which sits mostly vacant.
"We can't have blinders on right now to the reality," Look said as he walked into the council meeting, held in Ramsey's year-old City Hall, one of the only finished nonresidential structures on the Town Center site. "I guess if you get awards for a design and then you backtrack, you look stupid. There's a lot of ego at stake here."
Council Member David Elvig, one the staunchest supporters of Town Center since it was first seriously examined in 2000, said the original plan is crucial because it protects taxpayers from being left holding the bag if the next developer fails.
"In the (original plan), there's parklands, there's fees, there's all the arrangements that make the project great and protect the city," Elvig said Tuesday night. "And it should come as no surprise to the banks."
Minnwest plans to reschedule the auction for July 27. No purchaser has surfaced, but Gamec told the council, "We are hoping for a successful sale."
Tuesday's meeting also was the first gathering since the Pioneer Press published a three-part examination of the Town Center and its problems. The series reported that state regulators have shut down a company owned by Nedegaard, a convicted federal felon, and several executives of Community National Bank of North Branch, one of his initial financiers. Before he died, Nedegaard was again under federal investigation, and last month, investigators with the IRS and U.S. Postal Service executed a sealed search warrant on Community National, the newspaper revealed.
Although the Town Center was not on the council's Tuesday agenda and no formal discussion was conducted, interim City Administrator Heidi Nelson read a statement at the beginning of the meeting responding to the media coverage.
"It's important to reiterate that the business dealings reported ... are between the banks and the deceased developer's estate," Nelson said. "The city's interests are protected and our investments are in the ground."
The sale postponement is related to litigation between city and lender, with Nedegaard and Ramsey Town Center LLC out of the picture via bankruptcy; as Orrick further reports:
Roughly 150 acres of the 322-acre Ramsey Town Center project were to be sold at a voluntary foreclosure auction Monday morning at 10 a.m. However, representatives from Minnwest Corp. of Minnetonka, which holds the mortgage on the property, did not show up and Anoka county officials could not proceed with the sale.
The $1.3 billion Ramsey Town Center project has been at a near standstill for the past year and a half. In late 2005, the project's key developer, Bruce Nedegaard, defaulted on the $35 million loan he had taken out to get the project started. He was forced into bankruptcy in late November 2006 and died of cancer two days later.
Russ Bushman, chief credit officer for Minnwest, said the sale has been postponed in the wake of a recent lawsuit filed by the city of Ramsey against Minnwest that seeks to preserve the original plans for the project. The auction will now take place on Friday, July 27, Bushman said.
While no litigation is as simple as any three or four paragraph excerpt from a court filing might suggest, these two excerpts show an interesting twist [click on an image to enlarge it for reading, or right click to open an image in a new window]
While part of the 322 acres is Abstract property and part is Torrens property, each with its separate place for recording/registration in the Anoka County Courthouse - even on different floors at one time - that is only a complicating factor and not the gist of dispute.
It is not rocket science to see from the parallel excerpts that the lender's mortgage and its financing statement [never mind the intracies of why there are two separate items for the bank in each filing] are ahead, barely, of City-Developer master development agreement filings - something apparent by a mere looking at the recording/registration number sequences. Court papers indicate that the Torrens items all were filed "September 24, 2003, 2:30 p.m."
Was it a race to the courthouse steps and door? Pushing and jostling in line, approaching the people at the counter? Was it like the 1889 Oklahoma Land Rush, or that of 1893, boomer sooners and all, jumping the gun before the starting cannon was fired?
More likely, the sequence is as it is because someone, one person not yet identified in court papers, handed the items across a counter to be handled exactly that way - either with instructions from all parties, from some, or independent of instructions, if any, from parties.
It would be unusual for an escrow firm, in the normal course of business, to do any such thing in the absence of mutually agreed instructions. But the italicized text in the first quote relates to a firm called, while it existed, "Powerhouse Title Company" and possibly it acted abnormally, if it was the escrow holder for the city, the RTC LLC, and the bankers. That's unclear from court papers.
After a key recording of papers for a "1.3 billion dollar project," for a few hundred dollars any party could have purchased a follow-up title abstract from an independent title company [one other than the escrow holder] and seen the sequences. Had the city done that, which it might have, it could have then accepted the sequence as is or refused to proceed further without the lender expressly subordinating its position to the city's in a separate document, to also be recorded and registered. From court papers it appears no such subordination was arranged and put into the county land records. At that point in time, actually somewhat earlier, City officials indicated they were bringing in the Briggs & Morgan firm, on the city's behalf, for its expertise in negotiating and handling matters. Apparently, City Attorney Goodrich, James Norman, and the Council each gave approval for that firm to be retained for its expertise and abilities. There was a televised council vote to bring in the skilled hired guns, prior to the Master Development Agreement being negotiated and signed.
My understanding is that Minnwest has not yet responded to the City's lawsuit, nor is its response currently overdue. The suit may resolve itself where questions become moot; or if the bank prevails the City, to reestablish its rights, might have to buy them from the lender or buyer at sheriff's sale; or relinquish them. What price, etc., is where things could become really interesting.
However that turns out. Our rights "in the ground" does not, as Look pointed out, produce any immediate tax cash flow - now - as planned or needed. I know of at least one citizen who told me he would like to see the city "have to be run like a business," where a business must watch its expenses carefully, and earn the money it spends. A business cannot tax anyone for money however profigately it then chooses to spend it. A business cannot pull "Port Authority" trickery on its income base.
Ben the Ramsey taxpayer, wearing his taxpayer hat and not his consumer with a choice hat, suffers or faces that risk and indignity at the hands of city government - which most assuredly, now, is NOT an entity having "to be run like a business."
The interesting twist is the citizen who made that comment might, in 2008, be a candidate for one of the city seats that will then be up for election [the seats held by Gamec, Strommen, Jeffrey, and Olsen being the four involved].
My guess is there would be like-minded contestants for each of the seats.
Filing deadlines usually are mid-July of the election year. That is a year from now. It will be after some of the present uncertainties have run their course, and the real estate market for suburban shared-wall housing will or will not have appreciably rebounded.
That is when we see who is running for which open seat. Elvig, Look, and Dehen ran last cycle. Their seats do not re-open until 2010.
There reputedly is an old Chinese curse, "May you live in interesting times."