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Wachovia files foreclosure action against TPC Treviso Bay developer

By LAURA LAYDEN Updated Thursday, February 4, 2010 NAPLES — The developer of Treviso Bay is facing a new challenge – foreclosure.

Wachovia files foreclosure action against TPC Treviso Bay developer - By LAURA LAYDEN

Updated Thursday, February 4, 2010

NAPLES — The developer of Treviso Bay is facing a new challenge – foreclosure.

Wachovia Bank, a lead lender for the lavish golf course community in eastern Collier County, has filed a $75 million foreclosure lawsuit and wants a receiver to take over management of the project.

The lawsuit comes as the developer – V.K. Development Corp. headquartered in Brookfield, Wis. – is revisiting the plans for the project and searching for new money to keep it going.

The developer has identified a possible source for more financing and has worked for months to find a way to restructure its debt and recapitalize the project, said Sanjay Kuttemperoor, the company’s president.

“It’s going to take some hard work, but we feel good that we have someone at the table, especially in this environment,” he said.

With the potential for new investment, the developer is looking at how it can reshape the community to meet the current market trends and demands.

“We are operating the sales office as an information center at this point,” Kuttemperoor said.

Sales have been sluggish, like they have at many other new communities in Southwest Florida. Currently, there are no homes under construction, Kuttemperoor said.

The 1,050-acre resort community– off U.S. 41 East a mile east of St. Andrews Boulevard – has the only PGA Tour Tournament Players’ Club, or TPC, golf course in Southwest Florida. Club members at Treviso Bay have access to a national list of TPC clubs.

The golf course – designed by Arthur Hills, with Hal Sutton, a PGA championship winner, as a consultant – remains open. Even if the ownership of the development changes, it could still be part of the TPC, said Jim Triola, a senior vice president for business and legal affairs for PGA Tour Golf Course Properties.

“I don’t know how that will take shape,” he said. “I don’t know what the details of the receiver would be.”

Treviso Bay hosted the ACE Group Classic for the first time last year and there were hopes of keeping the golf tournament there.

But after the developer stopped construction of its clubhouse late last year, ACE organizers moved the ACE event to The Quarry in North Naples.

The clubhouse was not scheduled to be completed until late this year, but there had been talks of trying to speed it up to have it ready for the tournament this month.

The clubhouse was originally to span 74,000 square feet. Construction is still at a standstill.

Other lenders involved in the foreclosure lawsuit are BB&T as the successor to Colonial Bank, which was shut down by regulators last year, and M&I Bank.

A work-out on the loans is likely tougher because more than one bank is involved, said Ross McIntosh, a Naples real estate broker and housing expert. “People are just not on the same page when you have multiple lenders,” he said.

The developer has other debts, besides what’s owed to Wachovia and other lenders represented in the foreclosure lawsuit, which was filed Dec. 31 in Collier County Circuit Court.

Kuttemperoor declined to discuss those other debts or how much is still owed to other lenders and bondholders.

There are 35 defendants in the case including a handful of contractors who have filed liens against the property because they weren’t paid by the developer.

Named defendants include Adams Bros. Cabinetry Inc. in Punta Gorda; The Valentines LLC in Fort Myers; Otis Elevator Co. in Connecticut; Conditioned Air in Naples; DeAngelis Diamond Construction Inc. in Naples; and Davidson Engineering in Naples.

In the lawsuit, the lenders argue their debts would take priority over what’s owed to contractors and other vendors. They describe the property as going to “waste.”

According to the lawsuit, contracts for the TPC to manage the clubhouse have been terminated due to the developer’s failure to complete construction.

Treviso Bay has two community development districts, or CDDs, which are set up by developers to finance roads, utilities and clubhouses. The bondholders of those districts are owed more than $64 million, said Richard Lehmann, president of Income Securities Advisors in Miami.

He said the two districts went into default in April, but there has been no filing to foreclose.

Typically, developers make the initial CDD payments. As homes are purchased, buyers assume more of the responsibility. When homes don’t sell, the developer is left covering payments for unsold lots.

“The bonds are held by a small group of mutual funds. In this case, it’s mainly Oppenheimer funds. They own $41.63 million as of the last reporting date,” Lehmann said.

He’s looked at the plans for the project, which call for more than 1,000 homes. The last report filed by the community development districts showed only 19 had been built, sold and occupied, he said.

“There are 19 unfortunate souls living on a very big piece of property there,” Lehmann said. “It’s planned for 1,200.”

Treviso has offered a mix of homes: large estates, luxury coach homes, villas and condominiums.

The CDD bonds for the project were issued in 2006, Lehmann said. The financing from lenders was in place before that.

“Everybody thought that the good times would never end,” Lehmann said.

The community development districts are in first place to recover what they are owed. They come before Wachovia, BB&T and M&I because of the way CDDs are set up, McIntosh said.

“The sad news for everyone involved is that under current market conditions the entire project is not worth the outstanding community development district debt,” he said.

“People don’t get how bad this is and how out of whack things got,” McIntosh said.

The uncertainty hanging over the project has a devastating affect on home values, he said.

“Everybody’s investment is bad here,” McIntosh said. “Some people are going to get hurt much worse than others. At the end of the day, Wachovia and its lending partners stand to lose everything.”

“Nobody likes to hear it, but that’s the way it is,” he said.

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