The bulk of Preston Lake subdivision (mostly undeveloped building lots) was foreclosed on in 2011, but last week was purchased by a neighboring land owner --- a developer from Maryland.

After some further research, here is what was conveyed:

• 82 platted single family home lots
• 109 platted rowhouse lots
• 43.5 acres that have not yet been platted, but are planned to include:
• 28 single family home lots
• 202 rowhouse lots

Thus, if we ignore the fact that roads, water and sewer need to be installed on those 43.5 acres (outlined above in red), this was essentially the purchase of:

• 110 single family home lots
• 311 rowhouse lots

And here is a bit of context on the purchase price:

• $20,500,000 = the amount of the loans that were foreclosed on in 2011
• $4,530,000 = the appraised value at the time of the foreclosure
• $3,500,000 = Wells Fargo's opening bid at the foreclosure sale
• $2,000,000 = last week's sales price to Preston Lake's new developer

So, how much was paid for each lot?  Well, let's assume that a single family home lots is worth twice as much as a rowhouse lot --- and that a finished lot (with infrastructure) is worth twice as much as a planned lot.  If that were all the case, this new developer essentially paid:

• $9,950 per platted single family home lot (82 in total)
• $4,975 per platted rowhouse lot (109 in total)
• $4,975 per planned single family home lot (28 in total)
• $2,488 per planned rownhouse lot (202 in total)

If you refer back to the amount of debt that was foreclosed on ($20M) and compare that to the new purchase price ($2M) we can assume that the previous developer's lot basis was 10 times higher ($100K for single family home lots, etc).

Hopefully, these low costs per lot listed above will allow the new developer to build products and offer finished homes at a price point that will allow the subdivision to start moving forward again.

Stay tuned!

UPDATE:  After further review of the deed transferring the property from Wells Fargo, I am now noticing that the new developer has agreed to pay a "Subsequent Fee" to Wells Fargo of 2% of the gross sales price of any of their newly acquired properties (building lots or lots where they have built homes) when it closes.  This only applies to transfers within the first five years.
  

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According to a letter from Brian D. Goldstein, Vice President if Development for NAI The Michael Companies, the residential property at Preston Lake has been sold by Wells Fargo to a new entity known as MLK Preston Lake, LLC.  A letter, excerpted below, was sent to current Preston Lake homeowners yesterday....

It is with great pleasure that I am writing this letter on behalf of MLK Preston Lake, LLC, the new owner of the Preston Lake Residential property.  Being already invested in and committed to the success and vitality of the area through ownership of a portion of the adjacent commercial property, we look forward to reinvigorating the Preston Lake Residential development with this acquisition.  We are confident that the existing homeowners in the neighborhood, Rockingham County officials, and the entire surrounding community will be very pleased with the quality and expertise that we will bring to Preston Lake.

We are looking forward to meeting all of the current homeowners in the community, and working with you to unveil our plans for the balance of the project.  We have teamed up with an award winning home builder and architect from Virginia on this project, and we all look forward to presenting our vision of the future of Preston Lake at a homeowners meeting on January 8th.

This excerpt from their web site speaks to the development background of the NAI Michael Companies, based in Lanham, MD....

Kenneth H. Michael, founder and Chairman of the Board of NAI Michael, created a Development Consulting Division to assist landowners and developers through the then increasingly complicated permit approval process. Over the years, as the approval process has become even more complex, time consuming, and technically demanding, NAI Michael's Development Consulting Division continues to stay abreast of the changes and requirements associated with the development process.

As the development consultant, NAI Michael has developed over 10,000 acres of land for various owners in the Washington DC Metropolitan Area. They developed or redevelop land in all zoning categories. NAI Michael has played the role of consultant in commercial and industrial projects in excess of eight million square feet of gross building area. In addition, their residential development activities have provided thousands of quality homes for families throughout our community. Their clients range from the small investment owner, to the most sophisticated, large corporate user. The finest testimony to their expertise is the high number of experienced builders and developers that rely heavily on the knowledge, experience, and advice of NAI Michael experts.

The Michael Companies also seems to be amidst the development of a $900 million, 382-acre, upscale mixed-use community in Prince George's County.

While The Michael Companies might be an out of town (out of state!) development company, they are no stranger to the Harrisonburg and Rockingham County area -- nor the general vicinity of Preston Lake.  Over the past several years they have purchased a variety properties surrounding Preston Lake including (but not limited to) those outlined on the map at the top of this post.

For a bit more context (and history) of Preston Lake, consider reading....

• Updates on Preston Lake Subdivision (Mar 2011)
   
  
• Preston Lake Foreclosure Finalized: Land Transfers To Wells Fargo, Homeowners Association (Feb 2011)
   
  
• Preston Lake Foreclosure Auction Results In $3.5M Sale To Wells Fargo (Feb 2011)
   
  
• Preston Lake Headed To Foreclosure? (Jan 2011)

And, if you're excited about the reinvigoration of Preston Lake, you might want to buy my parents' house in Preston Lake....

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If the development of Preston Lake had taken place just five years earlier, it might have been a much greater, faster, happier success story. 

Given its timing, however, Preston Lake was developed and constructed at a very slow rate, which recently reached a significant milestone when Wells Fargo foreclosed on the remaining developed lots at Preston Lake.  Why did it happen?  It could have been the decline in the housing market....or the decline in the national economy....or that the developer's bank (Wachovia) went out of business....or many other reasons. 

Regardless of the cause, the development and construction of Preston Lake was much slower than anticipated, and is now in a state of limbo.  Here's a re-cap of where things are at Preston Lake, with a few bits of new information:

Homeowners Association:  The Preston Lake Homeowners Association is still controlled by the developer, which is now effectively Wells Fargo.  For now, however, the on-the-ground association management is being handled by a Harrisonburg-based association management company, and thus far it does seem as if any services to residents will be interrupted, nor will dues increase.

Ownership of the Land:  The undeveloped residential lots all transferred to Wells Fargo (or REDUS VA HOUSING, LLC as it appears at the courthouse).  Read more.

Ownership of the 4 rowhouses:  Most people attending the foreclosure auction were surprised to hear the announcement that morning that separate from the auction of all of the undeveloped lots, the bank would be auctioning off four rowhouses at various states of completion.  Since potential bidders were not prepared to consider purchasing a rowhouse, all four of these properties were bought back by Wells Fargo.  Further details follow....

• Lot 9C:  This rowhouse is completely constructed, and was actually used as a temporary residence for a couple that then later bought a rowhouse at Preston Lake.  Wells Fargo contracted (at the trustee sale) to buy this rowhouse for $270,600 and it transferred to them as of late February.  Presumably, this property will soon be listed for sale with Wells Fargo as the seller.
   
  
• Lot 10B:  This rowhouse was framed, and the exterior shell was complete, but neither the insulation nor the rough mechanicals were installed.  Wells Fargo contracted (at the trustee sale) to buy this rowhouse for $39,960, however another party (Southern Classic Inc) later contracted to buy it instead, and closed on the purchase a few weeks ago (March 4th, 2011).
   
  
• Lot 11C: This rowhouse was complete through drywall, but had a variety of trimwork, flooring, and other finishing work yet to be completed.  Wells Fargo contracted  (at the trustee sale) to buy this rowhouse for $157,760, however another party (Southern Classic Inc) later contracted to buy it instead, and closed on the purchase a few weeks ago (March 4th, 2011).
   
  
• Lot 12C:  This rowhouse was complete through drywall, and rough mechanicals, and insulation, but the entire remainder of the townhouse was yet to be constructed.  Wells Fargo contracted (at the trustee sale) to buy this rowhouse for $79,080, however another party (Southern Classic Inc) later contracted to buy it instead, and closed on the purchase a few weeks ago (March 4th, 2011).

Southern Classic, Inc:  The company that purchased the three yet-to-be-finished rowhouses seems to be a company based out of Crozet/Charlottesville.  Presumably, Southern Classic will be finishing the rowhouses and offering them for sale.  Southern Classics is an Earthcraft certified builder, and is involved in developing several smaller communities including:

• Foxchase Landing (Charlottesville)
• Fair Hill Estates (Crozet)

Current Listings:  Three re-sale properties are currently on the market.  Click here for details.
  

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An early rendering of the intended Preston Lake community center

A variety of documents were filed at the Rockingham County Circuit Court on Wednesday, February 23, 2011 finalizing the Trustee Sale of Preston Lake subdivision. 

In Summary:  A trustee sale took place on February 3, 2011 on the steps of the Rockingham County Circuit Court, whereby Wells Fargo (as the only, and thus highest, bidder) contracted to buy back Preston Lake from its developer.  Now, the deeds have been recorded transferring the bulk of the subdivision to Wells Fargo and the common areas to the Homeowners Association.

The Value of 124+ Acres:  The consideration paid by Wells Fargo for the 124+ acres was $3,500,000, but the trustee's deed also indicates that the appraised value is/was $4,530,000.  Somewhat astonishingly, the two loans (notes) that were being foreclosed on appear to have been for a sum total of $20,500,000.

The New Owner of Preston Lake:  The grantee on the deed is listed as "REDUS VA HOUSING, LLC" -- an LLC registered in Deleware.  The grantee's address, however, is Wells Fargo Bank out of Jacksonville, Florida.

Value of the Common Areas:  Per the deed transferring the common areas to the Homeowners Association, the common areas have an assessed value of $323,700.



What Conveyed To The Homeowners Association:  The map above is based on an early engineering plan for Preston Lake.  I have deciphered (to the best of my ability) the deed, and recorded plats for Preston Lake to mark on the map (letters in circles) the areas that conveyed the the Homeowners Association.  Click on the map for a high resolution PDF, and scroll to the bottom of this post for the source files for the deed and plats.

Management of the Homeowners Association:  The Homeowners Association's mailing address is referenced in the deed as the same Jacksonville, Florida address for Wells Fargo.  Homeowners at Preston Lake have been informed that Wells Fargo will be hiring an association management company in the very near future to handle the business of the association. 

What's Next:  Now that the remaining land comprising Preston Lake is owned by Wells Fargo, my assumption is that:

• Wells Fargo will bring in an association management company to handle the association.
• Wells Fargo will market and attempt to sell the entire subdivision to a new developer.
• If the above is not successful, Wells Fargo may attempt to sell individual lots at Preston Lake.
  

Pertinent Documents:

• Recorded Trustee's Deed - 124+ Acres transferring to Wells Fargo
• Recorded Deed - Land transferring to Homeowners Association
• Partial Satisfaction - Liens against land transferring to HOA
  
• Amended and Restated Declaration for Preston Lake
  
• Recorded Section 1 Plat
  
• Recorded Section 2 Plat
• Recorded Section 3 Plat

Further Preston Lake reading:

• Jul 19, 2010:  Sales Updates at Preston Lake in Harrisonburg, VA
• Jan 19, 2011:  Preston Lake Headed To Foreclosure?
• Feb 3, 2011:  Preston Lake Foreclosure Auction Results In $3.5M Sale To Wells Fargo

 

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The Preston Lake Trustee Sale took place today (February 3, 2011) at noon, and drew quite a crowd of Preston Lake homeowners, developers, attorneys, Realtors, and neighboring landowners.  Here's an overview of where things stand....

Local History in the Making:  It's not necessarily the good type of history, but this was the first major subdivision --- and hopefully the last --- to be foreclosed on in the Harrisonburg area.  Many other areas across the country have seen multiple large subdivisions be foreclosed on, but until today, Harrisonburg had been unscathed.  The timing of the development of this subdivision is likely what led us to today's events, as the development began just as the housing market began to slow dramatically.

Only One Registered Bidder:  Only one individual registered as a potential bidder at the sale (by showing his deposit check to the Trustee, and providing his name), though he did bid during the auction, likely because of the opening bids from Wells Fargo.

Only One Actual Bidder:  There was only one actual bidder....Wells Fargo.

Surprise Rowhouse Auctions:  In addition to the 120+ acres of land at Preston Lake that were auctioned off today, four rowhouses were also auctioned separately.  This was not specifically advertised -- if it had been, I think we would have seen some actual bidding take place.  Each of these rowhouses are at a different stage of completion, but each at least has the shell completed.  The opening bids from Wells Fargo were as follows, and these are the prices at which they are taking back the properties:

• Lot 9C -- $270,600
• Lot 10B - $39,960
• Lot 11C - $157,760
• Lot 12C - $79,080

A Hefty Price For 120+ Acres:  It wasn't too surprising that there were not any bidders for the 120+ acres of Preston Lake, as Wells Fargo's opening bid was $3,500,000. 

The Common Areas:  The attorney representing Wells Fargo also indicated that the common areas would be deeded to the Property Owners Association.  The Association will still exist, and owners will still make payments to it to support the maintenance of the common areas and other common amenities of the neighborhood.

What Happens Next:  In theory, within 30 days, Wells Fargo will close on their purchase of the four individual rowhouses, and the 120+ acres of Preston Lake.  The attorney representing Wells Fargo commented to me afterward that he thinks there is a 90% chance that the sale will proceed to closing and that Wells Fargo will be the new owner.  After Wells Fargo owns the property, he indicated that they would sell the four rowhouses individually, and seek to sell the remaining 120+ acres to a new developer.  It is unclear what price they will ask for the remainder of the subdivision (likely lower than $3.5M), and it is unclear what price they will eventually take for the remainder of the subdivision (likely lower than $3.5M).  Wells Fargo's attorney also indicated that while they will attempt to sell the entire undeveloped section of Preston Lake as a whole to one developer, it is also possible that they would sell the property as individual lots or sections of lots.  Wells Fargo has done this with other subdivisions around the country that they have foreclosed on, though it is not their goal.

Wells Fargo is interested in money:  This should come as no surprise, but Wells Fargo's goal in being the new owner of the undeveloped areas of Preston Lake are to try to recoup as much as possible of the money that they have invested in the subdivision.  They won't, thus, try to unload the property for development into a mobile home park -- they will be marketing it and working to sell it for its highest and best use.  This does not mean that the development plan won't or can't change -- but they will be trying to recoup as much money as possible, and thus will be trying to sell it to a developer who has the a positive (and profitable) vision for it.

Those Pesky Lawsuits:  The developer of Preston Lake (Richard Hine) had filed a lawsuit against Wachovia (now Wells Fargo) --- and Wachovia had responded with a countersuit.  Per the attorney representing Wells Fargo, both of those lawsuits will go away once the sale closes, and the property is taken back by Wells Fargo.

A Community United:  If anything, the turmoil and uncertainty over the future of Preston Lake seems to have drawn its residents closer together as a community.  Most of the owners were in attendance at the sale, and then went as a group to Cally's afterward to have lunch.  There seems to be solidarity and general optimism (as much as is possible) amongst most (or all) of the owners.  They still seem to thoroughly enjoy their homes, and each other, which is a positive sign for the future of the community.

Have Questions?  If you have questions about Preston Lake or the foreclosure proceedings, I'm happy to try to answer them (540-578-0102, scott@HarrisonburgHousingToday.com), or you can contact Peter Barrett of Kutak Rock, LLP, who is the attorney representing Wells Fargo.  You can reach Mr. Barrett at 804-343-5237 or peter.barrett@kutackrock.com.

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Per a Trustee Sale advertised in today's Daily News Record (view ad), the bulk of the Preston Lake subdivision may be headed to foreclosure.  This doesn't necessarily mean that the foreclosure sale will take place, but this is a significant step in that direction.

Preston Lake is Harrisonburg and Rockingham County's first master planned community, intended to include nearly 500 townhomes and single family homes, a large section of retail stores with a main street appearance, and many amenities such as a community center, soccer fields, swimming pool, and more.


  The vision....


 Main Street renderings


 Amenities at Preston Lake

Now, however, all of those plans may be coming to an end, at least for now.  On February 3rd at 12:00 p.m., 124.693 acres of Preston Lake is scheduled to be auctioned at the Rockingham County Circuit Court.  Please note that an advertised trustee sale (all that has happened thus far) does not necessarily mean that the foreclosure process will take place. 

This wasn't the first sign of trouble for Preston Lake, as the developer of Preston Lake and its lender (Wachovia) have been in the midst of legal proceedings for almost a year now, as described in the Mar 2, 2010 article from the Daily News Record:


While it was happening quite slowly, residential construction at Preston Lake had been continuing even over the past year.  Since the first closing in 2008, there have been 37 sales at Preston Lake recorded in the HRAR MLS, ranging from $318k to $883k, with a median price of $421k.  Three of these sales took place as recently as the fourth quarter of 2010.

Today, only four properties are being marketed for sale at Preston Lake per the HRAR MLS -- three are resale properties, and one is being sold by the developer.  (view active listings at Preston Lake)

A few notes about the foreclosure sale:

• It appears that most (or all?) of the common areas (such as the Village Green) will not be sold at the foreclosure sale.
• It appears that the property being conveyed will still be bound by the covenants and restrictions already in place.  (view the HOA disclosure package as of October 2008)

What could happen from here?  These are my best guesses:

1. The foreclosure sale will not take place, construction and sales will continue, quite slowly.
2. The foreclosure sale will take place and the subdivision will be purchased by a new developer who will continue with the current vision, or adjust it and move forward with development, construction and sales.
3. The foreclosure sale will take place, but nobody will buy the subdivision, and thus the bank will become the owner.  They will then work to sell Preston Lake to a new developer through more traditional sales and marketing means.
4. Same as #3, but the bank will then try to sell the lots individually, instead of as an entire subdivision.

If you have questions about Preston Lake, feel free to call me at 540-578-0102 or e-mail me at scott@HarrisonburgHousingToday.com.

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 An early rendering of an estate home to be built at Preston Lake.


 An early rendering of the Charleston Rowhouses to be built at Preston Lake.

In the Beginning

The news of Preston Lake first broke in October 2005.  Here's an excerpt from the Oct 26, 2005 article from the Daily News Record:


Sales by the Numbers

Now, nearly five years later, progress is still being made at Preston Lake, but not at the pace that was originally anticipated.  Certainly, the enormous changes in the financial markets and the housing market over the past five years have played a large role in the change of pace at Preston Lake.  Let's take a look at residential sales at Preston Lake per the MLS...



Per the data in the MLS (reflected above) there have only been seven single family home sales, but I believe the count is actually closer to twelve when including custom contract builds that may not have shown up in the MLS .  It would seem that detached homes can be built at Preston Lake for anywhere between $350k and $900k.



Rowhouse sales have certainly slowed down in 2010, but over the past three years have been selling between $300k and $550k.

What's Available Now?

There are currently 14 active (or under contract) listings in the HRAR MLS, priced between $299k and $814k.  Five of these homes are under contract.

The Big Picture

Many developments of this scale (as close as Charlottesville) have failed over the past few years as housing markets faltered across the country.  It is remarkable, and notable, that Preston Lake (slowly) marches onward. 

Construction on the commercial parcels has not yet begun at Preston Lake, partly due to a sluggish retail market across the country, and partly because the layout of the commercial area at Preston Lake still may be in flux as a result of the yet-to-be-fully-funded South East Connector Road.

The developer of Preston Lake and its lender (Wachovia) are in the midst of legal proceedings, as described in the Mar 2, 2010 article from the Daily News Record:


Moving Forward

So, what's next for Preston Lake?  My best guess is that residential development will continue (slowly) and that commercial development will eventually take place.  The retail development, however, will likely not take place until the economy improves such that retail businesses (independent and franchises) are looking to expand once again.

If you have questions about Preston Lake, feel free to call (540-578-0102) or e-mail (scott@HarrisonburgHousingToday.com) me.  My parents live at Preston Lake -- they built a cottage home when they relocated to the Shenandoah Valley -- thus I'm in the neighborhood quite a bit.

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The exterior of your home could be built with so many different materials, for example: stucco, stone, wood, brick, aluminum, concrete, steel and fiber cement.  That last one, fiber cement, is a vague and mysterious siding choice also referred to as HardiePlank siding, which has been around since the 1980's.

So, what exactly is HardiePlank siding??  First, HardiePlank siding is a fiber cement, made out of sand, water, cellulose wood fibers and cement.  Its source materials and design provide it with a number of unique qualities that often interest homeowners....

• It resists flame spread, making it safer in the event of a fire.
• It is a very durable material that resists damage from impact.
• It not susceptible to rotting, or termites.
• The color is baked on, so you won't have to paint for 15 years!
  

Many home buyers in the Shenandoah Valley have not heard of HardiePlank siding, but as soon as they come to understand how it outperforms wood and vinyl products, they become very interested!

HardiePlank comes in all sorts of colors and styles, and you'll start to see it on some newly built homes in this area, for example on the Paired Homes at The Glen at Cross Keys, on this EarthCraft home on Cottage Circle, on most of the homes at Preston Lake, and on Urban Exchange.

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Yesterday, I accompanied my clients on a framing meeting at the home (pictured above) that is being built for them at Preston Lake.  One of the impressive aspects of Preston Lake construction is that every residence (single family homes as well as rowhouses) will be EarthCraft and EnergyStar certified.

Here's one small example of the difference you'll find in an EarthCraft home...

The average duct leakage on new construction homes is 28% --- that is to say that 28% of the heated or cooled air being pumped into the ductwork never makes it into the living areas of the house.  In contrast, an EarthCraft home MUST have 6% or less duct leakage --- which, as you can imagine, provides for a great deal of energy savings for a homeowner.

Thus far, I have been very impressed with the construction process, materials and quality at Preston Lake.  As the house moves further along, I'll post some additional photos showing some additional innovations found at Preston Lake.

Here are some other communities and houses incorporating green building practices, materials or philosophies:

• Urban Exchange
  
• The Glen at Cross Keys
• The Cottages at Stone Spring
• 1091 James Place (Sunset Heights)
• 1830 Manor Drive (Stone Spring Manor)
  

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My aforementioned clients have decided to proceed with building at Preston Lake, and they closed on their lot purchase this week.  We're aiming for completion by next May, and I and they are excited to see the building process get underway.

It's been a busy few weeks, making selections at Ferguson's and designing the kitchen with Shenandoah Millwork.  More details will be forthcoming as we move through the process. 

If you have questions about buying or building at Preston Lake, feel free to call me (540-578-0102) or e-mail me (scott@cbfunkhouser.com).

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Are you considering buying at Preston Lake?  Some of my clients are exploring the possibility of building a single family home at Preston Lake, and it's been an interesting process . . .



Access to the developer
We have been pleasantly surprised to have the opportunity to work directly with the developer, Richard Hine.  Rich is very invested in the Preston Lake project, is very knowledgeable about the building process, and has been immensely helpful as my clients have explored the possibility of building at Preston Lake.

A flexible design process
While Preston Lake offers a variety of standard floor plans (for rowhouses and single family homes), they are also willing to make almost any modifications you might desire.  We have now been through several different renditions of the floor plans for the "Cape Cod" style home, each time bringing the design a bit closer to what my clients' desires.

Organized communication
The building team at Preston Lake uses an online project management system to organize the design/build process, and to streamline communication.  Even only in these early stages of the process, the use of this tool has been extremely helpful.

Final Pricing, Building Process, Final Product
Still yet to discover --- will the pricing work for my clients, will the building process be as pleasant as the design process, and will the finished home be exactly what my clients envisioned.

Overall, the building process at Preston Lake (or the complemplation thereof) has been a relatively enjoyable and efficient process.  If you are considering buying at Preston Lake, and if you have any questions, please call (540-578-0102) or e-mail (scott@cbfunkhouser.com) me.  Otherwise, stay tuned, and I'll keep you informed on the continuation of this process.

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