Builders fear slope rules aimed at safety could drive up costs

As Macon County closes in on a steep slope ordinance, some members of the building and real estate industry fear the new regulations will pose an unwanted barrier into a construction economy that is already hurting.

“No one so far has explained why we need this thing,” said Paul Higdon, a contractor who oversees sewer, water and septic projects. “Other than it’s just another level of bureaucracy that private landowners have to go through.”

But Lewis Penland, the planning board’s chair, has billed the ordinance as a way to protect lives and property from slope failures.

“We’ve got to have development,” said Penland. “All I ask is that when you build something above me, it doesn’t fall down on me.”

Penland, who works as a developer and grading contractor, also backs steep slope rules as a way to level the playing field between the contractors with scruples versus the ones who cut corners and can offer cheaper rates as a result.

“The way the system is set up now, you’re punishing the people who are doing it right,” Penland said.

Higdon is no stranger to regulation, having worked as Macon County’s environmental supervisor for 10 years. But he believes the county’s erosion control and subdivision ordinances already put enough restrictions on developers even though they don’t deal directly with mountainside construction.

“My concern is in a down economy –– a construction-based economy –– it will inhibit it that much more,” Higdon said.

Higdon also fears that landslide hazard maps, developed by the North Carolina Geological Survey, will become material facts that must be disclosed during land transactions, forcing Realtors to inform potential buyers if a house or lot lies in a landslide hazard area.

Higdon thinks the maps may open the door to more litigation on the one hand or lower property values on the other.

What role the newly created landslide hazard maps should play in steep slope regulations has proved controversial. The maps were created in the wake of the Peek’s Creek landslide that killed five people in Macon County in 2005.

“We’ve got to educate people on the maps,” Penland said.

But advocates of the slope rules aren’t stopping there.

The planning board has launched an education campaign in which its members will travel to communities around the county to educate people about the proposed regulations.

Some citizens have already joined the discussion. Last month, 12 people came to a planning board meeting to voice their reservations.

Bill Vernon, a retired developer who created the Featherstone subdivision in 2002, is another critic of the proposed elements of the ordinance. He thinks the engineering fees the ordinance requires in certain cases would prohibit development.

“The big issue I see is what will it will do to construction,” Vernon said.

He disputes the planning board’s estimates that engineering fees could range from $500 to $8,000 for projects that occur on slopes of a 30 percent grade or more, estimating instead that costs could climb to $20,000 on a house.

“If you’re going to add $8,000 to the cost of a building in this economic environment, I’m against it,” Vernon said. “I’m against it if it’s $20.”

Steep slope committee member Reggie Holland is president of the Macon County Homebuilders Association. Holland doesn’t think the steep slope ordinance will hurt his trade.

“I really don’t think this is going to be so significant an expense that it would cause people not to buy here,” Holland said, adding most buyers would want their home to comply with the cut and fill and soil compaction requirements.

For Holland, who changed his mind about the regulations during a year of slope committee meetings, the ordinance speaks for itself.

“When I was first on this committee, I felt similarly to Paul and Bill, thinking we didn’t need another government program to intervene in the work we’re doing,” Holland said. “The more I investigated it and thought about some jobs in the past where there were failures, I really thought there needed to be some standards.”

Penland said the development of the actual ordinance will take some time and he doubted if the commissioners would take the issue up before the November election. Between now and then, he hopes to turn doubters into supporters through a series of community meetings.

Holland doesn’t think the sell job will be a tough one.

“I think most people who are against the ordinance –– not all of them –– are people who haven’t really read it,” Holland said.

The Macon County Planning Board will hold its next meeting at 5 p.m. on Thursday, July 15, at the Pine Grove Community Center.

 

Macon slope rules in the works

 

In April, the Macon County Board of Commissioners charged the planning board with the job of drafting an ordinance that would regulate development on steep slopes. The directive came after the planning board’s steep slope committee had spent the better part of a year creating a set of guiding principles for the ordinance.

Below are the key elements of the committee’s recommendations.

For any development on slopes over 30 percent grade:

  • Cut slopes over 8 feet in vertical height cannot be steeper than a 1.5:1 ratio.
  • Fill slopes over 5 feet in vertical height cannot be steeper than 2:1.
  • No cut-and-fill slope can exceed 30 vertical feet.
  • Fill must be compacted and cannot contain stumps and logs.
  • 30-foot setback from streams.

On slopes greater than 40 percent, developer must hire an engineer or design professional to create a slope plan. An engineer is also required on slopes greater than 30 percent if they lie in high or moderate landslide hazard areas.

For development on slopes between 30 and 40 percent grade, an engineer is not required, but a site plan, showing the areas to be graded, cut and fill heights, and a drainage plan, is required.

The ordinance applies only to the portion of a tract that exceeds the slope threshold, not the entire tract.

Foundering developers create vested rights dilemma

As developers grapple with financial woes forcing them to sell off holdings or succumb to foreclosure, environmental groups in Jackson County want to rein in vested rights previously doled out for those tracts.

A whopping 238 subdivisions were exempt from Jackson County’s new development regulations two years ago. The so-called vested rights were intended to protect developers caught mid-stream by the new regulations, but were ultimately granted to developers merely in the planning stages. The question now is what happens to the vested rights held by developers who sell out to someone else.

“We do not know what these new owners will do — whether they will continue to pursue the original development plans and, thus, make use of the vested rights; or whether they will decide to do something else entirely with the land,” Julie Mayfield, director of WNC Alliance, told Jackson County commissioners last month.

The county was too liberal in granting developers a free pass, according to several community groups that have repeatedly protested the methodology. A coalition of citizens appeared before the county commissioners last month to air their lingering concerns.

The citizens claim the county acted too hastily and failed to figure out which developers indeed qualified. The county now has a golden opportunity to take back some of those vested rights as the original developers go under, Mayfield said.

Mayfield recognized Jackson County as “a regional leader in managing growth.” She praised rules that limit the number of trees that can be cut down on a mountainside lot, curb housing density on steep slopes and mandate open space within subdivisions — naming just a few of the more salient measures that sets Jackson County’s ordinance apart.

“We now ask you to sustain that courage, be firm in the face of the changes in land ownership occurring in our county, look for every occasion to ensure future development occurs in compliance with the county’s 2007 ordinances and does not needlessly destroy our important natural resources,” Mayfield said.

Mayfield read aloud from a letter signed by several community groups: the Watershed Association of the Tuckaseigee River, United Neighbors of Tuckasegee, Jackson-Macon Conservation Alliance, Canary Coalition and Tuckasegee Community Alliance, a local chapter of WNC Alliance.

Commissioner Tom Massie told those in attendance that he understood the concern and had himself sought advice on the issue from the county’s special attorney on development matters.

County Manager Ken Westmoreland suggested bringing in an expert on the issue to give a talk for the public, possibly from the Institute of Government at UNC-Chapel Hill.

“It is a pretty complex subject,” Westmoreland said. “It may well be for clarity and impartiality we should bring in an outside consultant to provide a complete discussion on that subject.”

State statute requires local governments to make allowances for vested rights. Vested rights eventually expire if not utilized, but the exact time frame Jackson County must honor is not clear.

Developers have plans for sites near Wal-Mart

A local developer has purchased a key parcel alongside Super Wal-Mart in Waynesville, potentially kick-starting long-awaited commercial redevelopment along the South Main Street corridor.

The coming of Super Wal-Mart was heralded as an instant recipe for growth around it. But by the time Wal-Mart opened its doors a year ago, the recession was in full swing. Not only has a South Main boom failed to materialize, but Home Depot killed plans to open a store there.

But Brian Noland, a Waynesville developer and Realtor, is drafting plans for a retail strip sporting six storefronts along South Main Street with hopes of attracting national franchises.

“I put myself in their shoes, and if I am looking to go somewhere, that is definitely a hot spot,” Noland said, citing traffic volume from Wal-Mart and the easy access off the U.S. 23-74 bypass.

Noland closed on the two-acre parcel this month for $600,000. The total project will cost several million dollars, he said. Noland hopes to have the building completed and occupied by early summer.

Mark Clasby, the Haywood County Economic Development Director, said he is glad to see movement in the area. While Waynesville has the consumer demand to support many of the national franchises Noland is likely courting, scouts often look solely at population data, Clasby said.

“But we know there are more people than that because of tourists and the second-home market. They just don’t necessarily show up,” Clasby said. “It will take some salesmanship to convince [retailers] from a demographic standpoint that ‘You need to be here.’”

Noland has a national franchise broker working to line up leases. Noland said he was “a very small fish in a big sea,” but believes if he builds it, they will come.

Meanwhile, a second so-called “outparcel” in the Super Wal-Mart complex has also sold. A 1.8-acre tract behind Hardees sold for $550,000. The developer of the site, Donald Holland, has submitted site plans to the town for a car wash and oil change business and an additional commercial building for an unidentified tenant. The site is located along the Waynesville Commons entrance drive off South Main Street.

While Noland has not yet locked in leases, he already has the project underway with the building design. The attractive architecture will sport stacked stone and stucco with varying rooflines and pronounced eaves. It’s a good thing, since a run-of-the-mill, monotonous, low-slung strip mall wouldn’t pass muster with the town’s design standards. Noland has yet to submit his plans to the town for approval, but believes the town will like the look.

The development of the Super Wal-Mart outparcels were considered key to the appearance of South Main. Town leaders hoped attractive developments fronting South Main would visually shield the sprawling Wal-Mart parking lot set further back on the site.

Noland is a Realtor with Remax Creekside Realty. He is currently developing a 46-unit affordable townhouse development in the Clyde area. His first foray into development was in the mini-storage unit business 14 years ago. He has also built and operated three car wash and lube locations in Haywood County.

“I love developing. I really do,” Noland said. “Hopefully, the whole shopping center itself will be a one-stop shop.”

Noland has had the property under contract for 10 months. He purchased it from Cedarwood Development, a national firm that developed the complex known as Waynesville Commons and leases the site to Super Wal-Mart.

Several property owners along the corridor have had their property on the market since the coming of Super Wal-Mart, even booting out current tenants in anticipation of hot demand by national chains seeking proximity to the retail giant. So far, these property owners have failed to find takers.

Best Buy and a Verizon Wireless store are the only two major retailers that have set up shop around Wal-Mart so far.

The 12-acre site immediately beside Wal-Mart that was once slated for a Home Depot does not appear to have a taker yet. Home Depot, which had already purchased the site and even designed a building before backing out, still owns the site and is actively marketing it.

“The economy has obviously had an impact on that,” Clasby said. “It’s not an easy market, there is no question about it.”

Investor in Jonathan Creek project claims he was wronged

A Tennessee man claims he was defrauded of $328,000 by the players behind Cataloochee Wilderness Resorts, a planned mega development in Haywood County that is in the preliminary conceptual stages.

Plans for Cataloochee Wilderness Resorts call for a 4,500-acre development in Jonathan Creek. Five years into the project, however, the developers still do not own any land.

They have neither secured financing for the project nor lease agreements from retailers to occupy a massive shopping center. The project remains controversial due to its scale. Locals have expressed skepticism about it ever coming to fruition.

The lawsuit alleges that Dean Moses, a consultant for the project, got an investor to put up money for down payments on land but then diverted the money to other uses, including the personal gain of Moses and his wife, who live in Clyde. It’s not the first time Moses has courted investors for a speculative development in Haywood County. (see “Lawsuit echoes of past business dealings.”)

John Thornton, a developer from Chattanooga, is suing Moses for fraud, conspiracy, and breach of contract for diverting money earmarked for property purchases to other uses.

Thornton was courted by Moses to invest in the project in 2005. He was first introduced to Moses by a Knoxville attorney, Robert Worthington. Worthington was aiding Moses in the pursuit of Cataloochee Resorts and encouraged Thornton to invest in the project. After their introduction, Thornton met with Moses several times in Knoxville to structure the terms of a joint venture agreement.

The two forged a partnership, creating a corporate vehicle to acquire land for the development. Thornton put up $328,000 to be used for down payments on land, stipulating in the joint venture agreement that if the land deals didn’t go through, Thornton would get his money back, according to Thornton’s suit. The money was held in escrow by a title insurance agency, Investors Title.

After putting up the money, Thornton was told in 2005 that the purchase of property was “imminent.”

“Moses continually represented to Thornton that property was being acquired, that loans were being arranged, that contractors were being contacted, that the projects were moving along,” the suit alleges. But nearly a year later, land had still not been purchased.

In June and July of 2006, Moses arranged two separate transfers of Thornton’s money out of escrow and into a new account.

Moses failed to tell Thornton about the transfers, according to the lawsuit. When Thornton learned of the money transfer, Moses refused to tell Thornton how his money had been used, the suit alleges.

Thornton’s money was transferred into an account held by an entity called Cataloochee Companies. The original entity created by Thornton and Moses had been called Cataloochee Corporation.

Thornton claims the creation of a new entity constitutes another violation of the joint venture agreement. To protect his financial stake, Thornton had stipulated that no additional shares could be awarded that would dilute his 50 percent stake in the development, according to the suit. Moses denies agreeing to such a stipulation.

Along with the $328,000 earmarked for land purchases, Thornton loaned another $275,000 to cover operating expenses for the project. The expenditure of those funds are not contested in the lawsuit.

Arms length

Frank Wood, president of Cataloochee Companies, the entity currently pursuing the development, distanced himself from the lawsuit and from Moses.

“We have absolutely nothing to do with that,” Wood said. “I am not a party to it and absolutely don’t care about it.”

Wood said that Moses is “strictly a consultant” on the project.

In his lawsuit, Thornton objects to the characterization of Moses as merely a consultant, as he considers Moses a major player.

Meanwhile, Moses referred to himself as a “manager” of Cataloochee with the “authority to conduct, manage, and control the affairs and business of the company,” according to Moses’s response to the lawsuit. He also described himself as the primary agent for negotiating deals with property owners, arranging leases with retailers, and securing financing.

Wood said that the company Thornton originally invested in is no longer the developer of Cataloochee Resorts.

“That’s an entity that died,” Wood said.

However, Moses’s response to the suit described Cataloochee Companies as the successor to the original entity created by himself and Thornton, Cataloochee Corporation.

Moses responds

In response to the lawsuit, Moses claims that Thornton isn’t entitled to get his money back because the property deals are still pending. Just because the deals haven’t taken place doesn’t mean they fell through; therefore, there is no reason to refund the money.

At one point, Cataloochee developers had property options on just a few tracts. But those have since expired.

Moses claims that Thornton understood the speculative nature of his investment.

“Thornton was aware that Cataloochee owned no real estate and has no assets other than a business plan and the development plan,” Moses’ reply to the lawsuit states. Thornton “was fully aware of the status, nature, and risks associated with the proposed development.”

Further, Moses points out that Thornton’s loans were to be repaid out of excess funds available — of which there aren’t any.

Moses claims he didn’t need Thornton’s permission nor was it necessary to notify him if his money was transferred out of escrow into another account. He states that the funds were used appropriately “to pay debts and obligations of Cataloochee.”

“Moses denies any fraud or deceit in connection with such transfer,” Moses stated in his reply to the suit.

Moses points out the money in escrow was not actually Thornton’s, but belonged to Cataloochee and had merely been placed in escrow to facilitate property deals. Thornton’s original loan was funneled through Cataloochee on its way to escrow, so when it was no longer needed in escrow, it was appropriate to transfer it back to Cataloochee rather than back to Thornton.

Moses has countersued Thornton for breach of contract. Moses alleges Thornton hamstrung the project by failing to put up more money. Thornton also refused to use his personal credit to help guarantee loans or to help raise additional capital, Moses complained.

Moses described Thornton as “unavailable” and “uncooperative” in advancing the project.

“Moses was left with the task of running the day-to-day operations, as well as arranging for and obtaining loan commitments and all other tasks involved in trying to advance the project’s development,” Moses wrote in his countersuit.

Moses also sued Thornton for defamation for a comment made to the Knoxville newspaper about the suit.

Personal gain?

Thornton is also suing Moses’s wife, Colleen. The suit alleges that Colleen withdrew $52,000 of Thornton’s money from the Cataloochee account and deposited it into a personal savings account in her name at a Blue Ridge Savings Bank.

Colleen was listed as a signatory on the Cataloochee account in Knoxville. Thornton discovered that Colleen was writing checks out of the account and depositing them into her personal bank account, thanks to bank records obtained through his lawsuit.

“Substantial other funds were removed from such account for the personal living expenses of Colleen Moses and Dean Moses,” the lawsuit alleges.

Bankruptcy in the midst

Meanwhile, another player in the Cataloochee Wilderness Resorts development has filed for bankruptcy in Knoxville. Robert Worthington, the Knoxville attorney who introduced Thornton to Moses, has accumulated more than $75,000 in credit card debt and a $240,000 bank loan tied to Moses and Cataloochee Companies, according to bankruptcy filings.

Worthington listed more than $75,000 in debt on six credit cards that he claims were jointly used by Moses, who is listed as a co-debtor for the six cards. Worthington is disputing debt on those cards, with a citation in the filing that they were “used by Cataloochee.”

Moses is also listed as a co-debtor on a $240,000 loan from BB&T. Worthington used his name to guarantee the loan for Cataloochee Corporation.

Fraud lawsuit echoes of past business dealings

Does the name Dean Moses, the subject of a financial fraud lawsuit by an investor in Cataloochee Wilderness Resorts, ring a bell?

It should. Moses was the figurehead behind a string of failed business proposals for the closed-down Dayco factory in Waynesville — a saga that spanned several years and eventually ended in bankruptcy court.

Moses and his business partners created one company after another with plans to develop the dormant industrial site. They solicited capital from private investors and lending institutions, racking up debts on company credit cards in the meantime.

When one company hit a financial dead-end, it was dissolved and a new one created.

The third company in the chain actually landed in bankruptcy court. Undeterred, Moses and his partners created yet a fourth company touting an all-too-familiar development plan. They hoped to leave their debt behind in bankruptcy court while walking away with the property intact and trying again under a new entity.

The bankruptcy court balked and instead ended the cycle by foreclosing on the property. The Dayco site eventually became the property of the Haywood Advancement Corporation and is now a shopping center anchored by Super Wal-Mart.

Big developer in foreclosure as lenders call their loans

A mega developer in Jackson County has landed in foreclosure due to sluggish lot sales in the down real estate economy.

Legasus development company saw a portion of its massive land holdings auctioned off on the courthouse steps last week. The company’s business plan is not uncommon among developers: borrowing money to buy the land, market lots and build roads, meanwhile banking on revenue from lot sales to pay the debt. But lots sales haven’t been forthcoming, and the company couldn’t make its payments.

Over-extended developers have been on the rise, according to Rick Boyd, the trustee handling the sale.

Just five years ago, Boyd did an average of three to five foreclosures a month. Now, he may see as many as 40.

The day of the Legasus’ sales last week, Boyd had 20 foreclosures in one day, dashing from Haywood to Jackson to Macon counties all before lunchtime to read out lists of foreclosure notices on the courthouse steps.

While most are single homes and lots, developers with large tracts have been turning up in the mix as well.

“I have done quite a few of the developers that have over-built and got caught,” said Boyd, a real estate broker with Beverly Hanks in Waynesville. “They needed to sell so many lots per quarter to maintain their payments, and when those slowed down they didn’t have the reserves to keep up with the payments. People never foresaw they would build four or five spec homes and have them sit on the market for over two years.”

The foreclosure proceedings against Legasus are for two large tracts: a 368-acre tract on Cullowhee Mountain that’s part of the River Rock development and a 630-acre tract in Whittier called High Grove. They are two of the largest tracts Boyd has seen go into foreclosure.

In both cases, the opening bids were made by Macon Bank, the lender that initiated the foreclosure. Bidding on the tracts can, and likely will, continue for weeks. Buyers have 10 days to submit an upset bid through the court. An upset bid has to be at least 5 percent more than the previous bid.

Phone calls to Legasus’ president, Legasus’ project developer and Legasus’ primary owner were not returned.

Bidding war ahead

Few large tracts of this magnitude have changed hands since the housing boom tapered off two years ago.

The final selling price could be a sign of whether investor confidence has returned in the real estate market, according to Todd Baucom, a real estate broker with Western Carolina Properties in Cullowhee.

“This will be a big signal,” Baucom said. “The question will be how high it goes.”

Baucom predicts the current bid of roughly $5,300 an acre for the Cullowhee Mountain tract could approach $7,000 an acre by the time bidding tops out.

As for the Whittier tract, the rock bottom opening bid of $357 an acre could make for a wild ride.

“That is going to upset and upset and upset. It could go through upsets for the next year,” Baucom said. “It will be very interesting to see what plays out with that.”

It is highly unusual to see an opening bid that is so low compared to the assessed value of the property. Typically, the opening bid is put down by the bank or lender that initiated the foreclosure — in essence buying up their own debt to protect their investment.

What makes the foreclosure unusual is that Macon Bank was owed so little — only $305,000 — on a tract worth millions. Macon Bank’s initial loan to Legasus was for $400,000 in 2004 to fund development activity on the tract. Legasus had paid off some of it, leaving a debt of just $305,000.

Given the small sum that was actually owed, it seems Legasus would try hard to come up with the money and hang on to the land. Baucom surmised Legasus wanted to divest themselves of the tract anyway and therefore didn’t fight to save it.

There’s another possible explanation: more outstanding debt associated with the High Grove tract. Even if Legasus got out from under its small debt to Macon Bank, there was a much larger lender waiting in the wings: a lender of last resort known as Kennedy Funding.

Legasus had borrowed $9.5 million against the property from Kennedy Funding last April. It’s not known exactly how much of the $9.5 million Legasus ever saw, however. Kennedy only made a portion of the full loan available through draw downs. Legasus apparently never realized the full amount of the loan promised by Kennedy.

Whatever Kennedy is still owed will come out of the final sale price.

Collateral for loans

Until recently Legasus owned more than 4,000 acres in Jackson County. The majority of the holdings were in the Tuckasegee and Glenville area, where plans called for 1,800 lots in five separate gated communities spanning 3,500 acres.

In addition to the foreclosures last week, Legasus sold off 300 acres to a private investor for $10.1 million two weeks ago.

The first sign of financial trouble for Legasus appeared in late 2007 when Legasus sold off 850 acres to a private investor for $16 million.

A few months later, the company sought financing from hard-money lender Kennedy Funding for $30 million: $9.5 million using the High Grove development in Whittier as collateral and $20.5 million using a portion of River Rock as collateral.

Legasus has been adept at using its land holdings to leverage financing. Legasus has used various parcels as collateral for more than 50 loans from at least two dozen different banks and lenders to finance property, according to a search with the Jackson County Register of Deeds Office.

It is difficult to figure out just how much outstanding debt Legasus has on all its property. For starters, the loans aren’t all in Legasus’ name. Legasus sometimes created subsidiaries to run the loans through, making it impossible to search for all of them unless you know the names of the subsidiaries.

In addition, there is no way to tell from the deeds of trust how much Legasus has paid back versus how much it still owes on each loan.

Aside from the two big tracts under foreclosure, Legasus is facing foreclosure on a few small lots as well. Last week, two lots of two acres each in the Water Dance development between Tuckasegee and Glenville were sold at foreclosure. The two lots went for a total of $325,000, purchased by Macon Bank, who was doing the foreclosing. Legasus still owed on a $423,000 loan made by Macon Bank in 2006.

There are pending foreclosures against five additional lots in Water Dance.

Jackson planners propose exempting existing lots from steep slope rules

For the second week in a row, the Jackson County planning board watered down proposed development regulations following rounds of public comment.

Moratorium opponents suffer setback

A group of Realtors and developers challenging the legality of Jackson County’s five-month moratorium on new subdivisions lost the first round in court Thursday (May 24.)

Nantahala developer, paddlers at odds – again

Updated 1/22/20: The lawsuits between Mystic Lands landowners and developer Ami Shinitzky have since been resolved. Progess had been made on amenties and lots are still for sale. 

A conflict between river outfittters and a developer in the Nantahala Gorge has resurfaced, this time over a footbridge the developer hopes to build over part of the river to a private island.

Jackson planners consider open space for new developments

Developers in Jackson County could be asked to designate 25 percent of new developments as conserved open space under a provision the Jackson County planning board is weighing.

Developers haven’t earned a break from the rules

They didn’t show up. That alone signals, or maybe “symbolizes” is the proper word, a shift in citizen attitudes that would have seemed unimaginable just a couple of years ago.

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