A trio of investors have filed suit against the Navy Yard at Noisette LLC, developers of what for years hailed as the very model for sustainable urban revitalization on the Charleston, S.C. peninsula, claiming it defaulted on $23.8 million in loans it receive two years ago.
The plaintiff private equity firms have asked the court to place properties upon which the loans were secured under receivership, and that a sale be arranged to liquidate the assets.
Attorney James Pulliam, of the Charlotte, N.C. firm of Kilpatrick Stockton, filed the lawsuit June 2 in the in Charleston County Court of Common Pleas.
According to the complaint, the Navy Yard at Noisette LLC obtained the $23.8 million commercial mortgage loan on August 1, 2006, and executed a series of promissory notes to the three individual lenders involved in the transaction.
These included a $12.9 million note delivered to an entity called SPG CDE Subfund A, a limited liability company registered in Delaware, LLC; a $6.9 million note delivered to the Urban Development Fund II, another limited liability company registered in Delaware; and a $4 million note delivered to Capmark Finance Inc., a California corporation.
The loans were to be repaid, with interest, by August 9, 2008, but to date repayment in full has not been forthcoming. The total amount now due, not including interest and penalties written into the contract, is just under $23.2 million.
The Noisette Co. released a statement Monday saying the lawsuit involves 240 of the 340 acres of the Navy Yard project. The unsigned statement said the company has been searching for substitute financing since learning that its existing lenders were unwilling to extend the support after the note matured last August.
“In this economy, however, finding an institution to refinance a multi-million loan has been difficult,” the statement said.
Nevertheless, the company said “Despite the filing, Noisette is continuing to pursue various options to obtain the funding necessary to refinance the Capmark debt and believes that can still occur prior to a final disposition in the foreclosure proceeding.”
The Noisette Company originally entered into a $9.6 million deal financed by the City of North Charleston in 2003, intent on transforming a 300-acre industrial expanse at the north end of the former Charleston Naval Base into a mixed-use, sustainable urban district defined by new office, commercial, academic, retail and residential development.
The Navy base was closed in 1996, and with a projected build-out of more than 20 years, the Navy Yard at Noisette was to be the herald of the creation of the “New American City.”
Published reports in the late summer of 2006, said that about $4.2 million of the Capmark Finance loan was used to pay off the outstanding balance of Noisette’s indebtedness to the City. An unspecified amount of the money was expected to be used for design and infrastructure studies, as well as the initial development of roads and other infrastructure on some 125 acres of the site.
Since then, the project has the full and unwavering support of the city, something that’s manifested itself in recent weeks in regard to the fight between North Charleston mayor Keith Summey and state officials, over whether double-stacked freight trains should be allowed to depart from the north side of a new cargo container terminal, which is being built to the south of the Noisette project.
The Charleston peninsula is transected by two major east-west rail lines, both owned and operated by CSX Transportation and a shorter line owned by Norfolk Southern which winds its way through the Noisette development site in North Charleston and extends into the north end of the old navy base.
Summey signed a memorandum of understanding with the S.C. State Ports Authority to forestall the freight activity from that end of the terminal, but in recent weeks, state lawmakers and others have been maneuvering to allow just that, as well as the creation of an intermodal rail facility at the north end of the terminal.
The mayor has responded by waging a loud and persistent public relations campaign against the proposal, charging the state is reneging on the deal he has with the ports authority, a quasi-state entity, and asserting the rail activity would destroy the sustainable “green’ communities that are being developed in and around the Noisette property.
While most locals think of Noisette in broad terms, it is actually two distinct entities with different ownership structures. First, there is a 3,000-acre master planned community that encompasses guidelines for sustainable redevelopment, and then there’s the 340-acre, mixed-use urban revitalization called the Navy Yard at Noisette, which is owned by the Noisette Company, LLC.
The only project outside the Navy Yard that Noisette manages, through a contract with the City of North Charleston, is Oak Terrace Preserve, a “green” neighborhood that has received numerous accolades from groups involved in the sustainability movement. The Company does not own any land outside the Navy Yard.
The lawsuit does not make reference to the larger master planned community nor to Noisette’s contract related to the Oak Terrace Preserve.
Other private “sustainable” projects in the area include the Beach Company’s Garco Park, and I’on Group’s Mixson, are in the early stages of redeveloping formerly blighted neighborhoods in the City.