High-rise faces forced sale
Posted on Thursday, July 24, 2008
URL: http://www.nwanews.com/adg/National/232165/
A Springdale developer and members of his family have 10 days to repay more than $ 18. 72 million or a Fayetteville high-rise will be put on the auction block to comply with a consent decision filed Wednesday.
Attorneys for Legacy National Bank, development group Lynnkohn LLC, and individual guarantors Brandon Barber; his wife, Keri Barber; her sister Laura Kaffka; and Kaffka’s husband, Seth Kaffka, signed the consent document filed in Washington County Circuit Court in Fayetteville.
The four guarantors are members of Lynnkohn, the company that built The Legacy Building at 401 Watson St. and signed the mortgage with Legacy National Bank in December 2005. The seven-story structure sits a block north of Dickson Street.
Legacy National Bank filed a foreclosure suit in January, claiming the luxury condominium complex in payment for outstanding mortgages.
The Springdale-based bank filed a countersuit Jan. 4 in a foreclosure case filed by EWI Inc. of Fayetteville in September for mechanics liens against the building. Eight other construction suppliers were named and had liens against the property.
Rogers attorney Marshall Ney of Mitchell, Williams, Selig, Gates & Woodyard partnership filed Legacy Bank’s foreclosure request. The liens and other claims against the property were cleared before the consent decree, Ney said.
Lawyers for Lynnkohn and Brandon Barber and for Laura Kaffka, Seth Kaffka and Keri Barber did not return phones call seeking comment Wednesday.
“The debtors have 10 days to pay the balance of the debt. If it isn’t paid, the building will be sold to the highest bidder, likely within 30 days,” Ney said Wednesday.
Don Gibson, Legacy Bank’s chief executive officer, referred all questions to Ney as the bank’s attorney.
Telephone calls made to Brandon Barber at The Barber Group office and his personal phone seeking comment were not returned Wednesday.
The listed telephone number for Seth Kaffka and Laura Kaffka is not an operating number.
Lynnkohn received two loans on The Legacy Building: a mortgage issued Dec. 15, 2005, for $ 16. 7 million and a secondary mortgage on March 29, 2007, for $ 2. 7 million.
Exhibits filed with Legacy National Bank’s claim show that only seven of the 37 luxury condominiums were sold between the time the building’s construction began in April 2005 and Dec. 31 of that year. In November 2006, The Legacy Building’s Web site claimed 26 units were sold or under contract.
The ownership of those seven condos was not changed by the foreclosure, Ney said. The average price for the condos was more than $ 348 a square foot, supporting court documents state.
The nearest competitor to The Legacy Building is the Lofts at Underwood Plaza under construction in Fayetteville by a group of investors that includes Bill Underwood. The nine-story Lofts building, three blocks southwest of The Legacy Building, is expected to be completed by the end of August, Underwood said.
He does not consider The Legacy Building a threat to the future success of The Lofts.
“We have not felt any complication to our project because of The Legacy Building,” he said Wednesday from his adjacent jewelry store on Dickson Street. “There has been a cloud over it [The Legacy Building ]. Anyone looking at it has been reluctant to buy because of that legal cloud.”
Kathy Deck, executive director of the Center for Business and Economic Research at the University of Arkansas at Fayetteville, said the potential sale of The Legacy Building will have some influence on other Northwest Arkansas condominium projects.
“These units are likely to be priced lower in an effort to move them and fill them up,” Deck said. “That will affect the market, particularly as comparison properties for appraisals.”
The price of comparable units is not the only influence the building will have on real estate, Deck said.
“When you see projects that are not successful, that makes it tougher to find investors willing to put money into similar projects,” she said.
It might be difficult to find a buyer for The Legacy Building, commercial real estate broker Ramsay Ball of Colliers International of Bentonville said Wednesday.
“There are a number of foreclosures in Benton and Washington counties. Who is going to pop out of the woodwork and buy this property ? That is the $ 18 million question.” he said.
At most foreclosure auctions, banks will put in a minimum bid to cover their costs on the property, which is likely to include the unpaid loan balance plus fees and interest, Ball said. If there are no other bidders, the bank buys the property.
Banks do not want to be in the property-owning or -selling business — they are in the lending business, Ball said.
“Unfortunately, the circumstances are such that there is a blending of lending and owning for banks right now,” Ball said. Gaines Dittrich, president of Dittrich and Associates banking management group of Missouri, said selling the building for the entire amount may not be possible. “Today’s market value of that property in a quick sale does not approach the debt against it,” Dittrich said Wednesday. “And financing would be a major consideration. No one is going to go in with 100 percent equity on this building. They will want some bank to leverage it. And it will be tough to find financing, if financing is even out there at all.” Ney confirmed that, should The Legacy Building sell for less than the debt owed, the bank can seek the balance from the guarantors. Brandon Barber and Keri Barber are the guarantors on both mortgages. Seth Kaffka and Laura Kaffka are guarantors on the first mortgage only, Ney said. All four must file financial statements within 45 days according to state law, Ney said.
To contact this reporter: sroberts@arkansasonline. com Timeline for The Legacy Building Aug. 16, 2005: The Barber Group hosts groundbreaking ceremony at 401 Watson St., site of the former Shulertown Building. Dec. 15, 2005: Mortgage agreement between Legacy National Bank and Lynnkohn LLC. February 2006: Precept Builders of Dallas takes over site from Flintco Construction after insurance dispute with The Barber Group. April 21, 2006: Topping out ceremony at site to signal the end of steel work on the building. Nov. 10, 2006: Preview party hosted on building’s first floor. Web site states 26 condos sold or under contract. September 2007: EWI Inc. files foreclosure petition against the building in Washington County Circuit Court. Jan. 2, 2008: Legacy National Bank files counterclaim and foreclosure petition against the building. July 23, 2008: Consent decree for foreclosure filed in Washington County Circuit Court granting Legacy National Bank $ 18. 72 million payable within 10 days or the bank has the right to sell The Legacy Building within 30 days.
Arkansas Democrat-Gazette