It was only a $20 million note, chicken feed for Charlotte, NC-based Mountain Real Estate Capital (MREC). But it saved developer Donald Williams' prime Southcliff residential development overlooking North Carolina's Blue Ridge Mountains.
The 400-acre unfinished development with 276 planned luxury wooded home sites is minutes from historic Asheville, NC.
For Mountain Real Estate Capital, buying the note held by a bank group led by Regions Bank is only the group's recent deal in a lengthy line of transactions involving bank-owned real estate, according to the company's website news release.
MREC is organized to invest $1 billion in bank REO/NPL with a focus on residential development loans/projects to be either acquired or restructured or recapitalized for existing borrowers.
MREC's homebuilder joint venture program is based out of its Minneapolis office. The national origination team has additional offices in Atlanta, Los Angeles, Richmond and Newport Beach.
MREC is well qualified to compete in this often esoteric field of mortgage-note buying because most members of the group are former bank REO managers. They were formerly responsible for the management and disposition of 46,000 lots and homes valued at over $2 billion.
In the last 10 months, MREC acquired over $630 million of loans from 20 different banks.
These NPL/REO acquisitions totaled about 8,000 lots plus another 7,500 acres of developable land. Its nationwide team of investment managers and local development and builder partners enabled MREC to close each of these REO/NPL transactions within 30 days from agreement, according to the company's statement.
In the Southcliff deal, MREC says it will work with the current developer, Southcliff Mountain Partners, to restructure the debt and allow for a smooth transition of ownership.
The firm will also infuse a substantial investment of new capital for additional amenities and site improvements. MREC plans to reposition sections of the exclusive gated community and accelerate development and sales to qualified homebuilders.
Amenities include six miles of walking trails through protected woodlands, several parks, an expansive children's playground, two grill areas and more amenities to be announced shortly.
Nearly 100 home sites in the community have been purchased by homeowners, and regional builders including Biltmore Farms, Sulaski Tinsley Fine Homes, Towery Builders, Beverly-Grant and Goforth Builders, according to MREC.
The homes being built by these builders all feature premier mountain architecture and design.
Asheville, NC map
"Southcliff was one of three large residential assets in North Carolina that we acquired from banks in December," states MREC's chief executive officer, Peter Fioretti.
"Southcliff complements our other two acquisitions we acquired from banks - a waterfront community in Wilmington and an infill project in Charlotte.
"These three projects contain approximately 1,000 lots, which we will sell to or venture with select large private and public homebuilders over the next five years.
"Additionally, we have since closed on two more sizable developments in the Northeast and California. Projected sales of these recent five acquisitions are approximately $160 million."
MREC had worked for several months to structure this acquisition with Southcliff Mountain Partners, and with the bank group led by Regions Bank.
Once structured with the bank group, MREC closed the note purchase within 30 days. The restructure provided the developer relief on its note obligations in exchange for the developer's cooperation in MREC's effort to invest new capital and accelerate the development and homebuilding in the project.
"Our group is extremely proud to have developed this truly unique community, and we are very pleased that MREC is committing substantial capital to continue and enhance the development," says Donald Williams, Southcliff Mountain Partners principal.
"We are very impressed by the depth and experience of the regional builder community and their desire to acquire home sites in Southcliff," says MREC's Chief Investment Officer Arthur Nevid, who heads the company's bank portfolio acquisition program based in Charlotte.