Bondholders wrest control of residential building lots from SunTrust. Lender hadn’t paid CDD fees for the foreclosed development, leaving the CDD unable to meet its debt obligations.
Palm Coast, FL – April 25, 2014 – A recent settlement between the Deer Run Community Development District (CDD) at Grand Reserve in Bunnell, CDD bondholders and SunTrust Bank has hopefully cleared the way for residential development to move forward, welcome news to the six existing homeowners there. Bondholders gained ownership of the residential component of the development. SunTrust, through a related entity, will maintain ownership of the Grand Reserve Golf Course, a public-play course operated by St. Augustine-based Capstone Golf.
The Grand Reserve is a master planned residential community and golf course on Rt 1 north of Bunnell. It fell on hard times when the housing bubble burst. The public play golf course has remained in business since opening in 2008, but only six homes were built. SunTrust foreclosed on the development and took possession in September 2011. The bank also was assigned the rights and obligations of the Developer/Declarant.
There was once a homeowners association, responsible for administering the community’s Covenants, Conditions and Restrictions (CCRs). It’s now defunct. Violations of the CCRs (trailers, equipment and extra cars parked on adjacent vacant lots of a few houses) were clearly visible on a drive through the community yesterday, but the remaining homes were neatly kept and well maintained.
The community obtained bond financing for construction by forming Deer Run Community Development District. A CDD is much like a municipal government, but without police powers. Grand Haven and Hammock Dunes also have CDDs. CDDs are responsible for maintenance of common areas and to pay its debt obligations. CDDs get their revenue by assessing property owners within the district. The CDD finance bonds were separate from the mortgage the developer was granted by Suntrust.
In addition to letting the owners association wither, the lender also did not make its obligatory payments to the CDD, causing the CDD bonds to go into default. The CDD sought to foreclose on the bank. The bondholders also sued.
As a result of a Settlement Agreement, a Memorandum of which was filed February 13, 2014, the bondholders gained title to the residential component of the community. A SunTrust entity retained the golf course. Past due CDD accounts payable were brought current. For the first time in three years, qualifying homes are receiving irrigation water. Common area maintenance has resumed. Grand Reserve is starting to look good again.
The bondholders don't plan to hold onto the residential property. They have retained Tampa-based Lerner Real Estate Advisors to evaluate Grand Reserve with the goal of mapping out a disposition strategy. I assume the signs referencing a non-existent website, a disconnected phone number and a non-existent sales office will be replaced soon.
A drive through the prospering Hidden Lakes development on Old Kings Road will give one a feel for the potential of Grand Reserve.
The golf course appeared to be busy and in good shape yesterday. GoToby has heard that Capestone Golf is interested in purchasing the course but was unable to confirm this rumor prior to posting this article.