Wednesday, October 05, 2005

Bank Sells Lagoon Valley Parcel for $6.6 Million

From the August 8, 2005 print edition

Bank sells Lagoon Valley parcel for $6.6 Million
Mark Anderson

River City Bank has sold 223 acres in Lagoon Valley along Interstate 80 in Vacaville for $6.6 million.

A Seattle developer, Triad Development Inc., has been working on developing a golf course, housing and commercial space on the site for three years.

Various environmental and conservation groups have been fighting development of the land for even longer. Vacaville's approval of Triad's plans is being challenged in a hearing Aug. 25 in Solano County Superior Court.

Friends of Lagoon Valley still hope to halt the construction of the current plans, which call for more than 1,000 homes, about 700,000 square feet of offices within an 11-acre town center and a 54-acre business park, and a 240-acre golf course.

Some of the animosity stems from the city's actions to intensively develop the area 15 years ago "when people weren't paying attention," said Stuart Flashman, an attorney representing Friends of Lagoon Valley.

Those old plans included space for Bank of America, a Kaiser Permanente hospital and more than 700 homes. The proposal called for 3 million square feet of commercial development.

At the end of 2004, Triad won city approval to develop a 1,025-home community around a golf course designed by pro golfer Tom Kite, said Fred Grimm, head of Triad. He expects to begin construction next spring.

The land now consists of open space, row crops and a complex of greenhouses.

Triad negotiated its price for the land in January 2002, and had been extending its options with River City since then.

River City took the land back following the bankruptcy of a partnership led by Sacramento developer Peter McCuen in the mid-1990s.

In the early 1990s, McCuen had been preparing to develop the land into a back-office center for Bank of America and other companies with a total more than 3 million square feet of office space.

McCuen was one of the first developers to build offices in Rancho Cordova, and he was starting to apply that experience to locations closer to the Bay Area.

Unfortunately, the economy turned dramatically against him.

Also, Bank of America bought Security Pacific Bank, and it suddenly had too much office space. Bank of America didn't need the back-office operation and the momentum propelling Lagoon Valley stalled overnight.

McCuen held onto the land for as long as he could, eventually putting the property partnership into bankruptcy protection, and subsequently losing it to River City in foreclosure.

The property had an assessed value of $11.3 million in June 1994, but a credit crunch and a stunted real estate market dropped the assessed value to $2 million two years later. For accounting purposes, a $1.6 million Mello-Roos bond on the property furthered reduced the value of the property to just $600,000.

The reversal in Lagoon Valley, and at other properties, caused River City Bank to restate its 1995 earnings to a loss of $3.2 million, down from a gain of more than a $1 million for that year.

River City basically wrote the loan down to no value on its books and held onto the land for a decade. River City isn't saying what the value of the original loan it had on the land was.

Anderson is a reporter for the Sacramento Business Journal.

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