The Bank of Tennessee was the only bidder on the footsteps of the Washington County Courthouse in Jonesborough Tuesday when it quietly bought back a 3.6-acre lot off West State of Franklin Road from Carnegie Development Group at a foreclosure sale for $987,000.
The CDG’s mortgage was recorded with the bank on Sept. 6, 2007. The group had an agreement with Johnson City’s Public Building Authority to build a 60,000-square-foot office tower on Millennium Park’s Lot 1, but the deal lost traction nearly two years ago and the group defaulted on their promissory note.
As of 11 a.m. Tuesday, the foreclosure was in place as William C. Argabrite, Bank of Tennessee’s substitute trustee, read aloud a formal statement and opened the bidding with no minimum price as a starting spot.
There was perhaps 20 seconds of silence.
“The Bank of Tennessee bids $987,000,” sounded Stacey Rabun, the bank’s special assets manager.
End of story — for now.
The bank has foreclosed on the CDG, which now owes the Public Building Authority hundreds of thousands of dollars in per diem charges incurred by the group for not meeting development deadlines as spelled out in their agreement. The question of how that money will be recouped is not specifically known at this time.
Robert Bradley, Bank of Tennessee senior credit officer, said following the extremely brief auction that three companies with investments in the proposed development through efforts with preliminary design and planning would receive money owed by the CDG from the bank.
These include Ahler & Young LLC, Vaughn & Melton and Ken Ross Architects.
“We made a loan on this to the CDG for the property, but they defaulted,” Bradley said. “We do hope to sell the property in as short a time as possible, and we do currently have several parties that are interested.”
The PBA was not listed as having a lien against the company, but they are owed a large chunk of money. The building authority, which was set up by Johnson City with the mission of properly placing developments to generate tax revenues for the city, deeded the property to the CDG on Aug. 27, 2007.
“We’ve tried to be accommodating,” said Charles Edwards, PBA chairman, “We’ll be falling back on our legal counsel now to see where we go from here. If at all possible, it’s our job to continue to make development possible and to help create tax revenue.”
Edwards, who said he did not know exactly how much the group owed the PBA, referred the Johnson City Press to Johnson City Associate Legal Counsel James Epps IV for that information. Epps suggested asking the PBA.
With the loan default and foreclosure, East Tennessee State University has been snubbed as the heir apparent to that lot.
“We’ve been ready with the money in hand since March of last year,” said David Collins, ETSU vice president of finance and administration. “We had been approved by the Tennessee Building Commission to purchase that lot for $1.1 million based on an independent appraisal. And, we’re certainly willing to discuss our interest with the Bank of Tennessee.”
Last April, the PBA agreed to lift restrictions for the development of the lot pending payment by the CDG. Those restrictions, which now will be back in place, are basically aimed at making sure office space and/or a similar structure is built on the lot.
“Carnegie never straightened things out with them,” Collins said. “We are willing to work with them (PBA) again. But this is nearly a year later. The price likely will not be the same, and, as a state entity, we’ll have to go back through the state Building Commission.”
Collins said ETSU and Johnson City officials had discussed the possibility of a joint venture that would create a new arts center at the location.
At one time, the university had offered to swap a wooded section of land near the southeast corner of campus in exchange for Lot 1. This wooded area, which contains hiking and bike trails, would have been available for housing construction to the recipients. That deal fell through and was not pursued.