Attorneys representing First Savings Bank of Arkansas again have mailed notices of their intent to foreclose on the financially troubled Hillandale town house development on Reservoir Road in Northwest Washington. The auction tentatively has been scheduled for Jan. 3 at the National Press Building.
Attorney Philip Gorelick, acting as trustee for the Arkansas institution, said this week that the notices were mailed in accordance with rulings by federal bankruptcy court Judge George Francis Bason. In September, Bason gave Hillandale Development Corp. 60 days to find a rescuer for the Hillandale project after the developer asked the court for the right to reorganize under Chapter 11 provisions of the bankruptcy code.
First Savings Bank of Arkansas holds a $25 million first trust on the partially completed Hillandale development, which sits on land surrounding and including the Archbold Mansion, once one of Washington's most elegant. The project is on Reservoir Road across from Georgetown Hospital.
The project's financial problems have been dragging on for months. First Savings Bank tried to sell the undeveloped portions of the 42-acre package in July at a foreclosure auction at a Georgetown hotel. But Saudi European Bank, holder of a $4.3 million second trust, went to court to force the development company into involuntary bankruptcy. That action halted foreclosure minutes before the auction was to start. Soon after, Hillandale Development Corp. joined the bankruptcy action and asked the court for protection under Chapter 11.
In September, Bason rejected a motion by the Arkansas bank to lift his stay and gave Hillandale Development, a Nevada-based corporation operating out of Dallas, 60 days to find joint venture partners or a purchaser for the project. Hillandale Development Corp. is a part of the once-powerful financial empire of Texas oil and real estate executive Clint Murchison. Several of Murchison's other real estate projects allegedly are in financial trouble in various parts of the country.
Attorneys for the development company reportedly have told the bankruptcy court here that they still are negotiating with interested parties. But no rescuer has come forth, and time is running out.
In September, the judge told attorneys for First Savings Bank that they could mail out notices of intent to foreclose after 30 days in an effort to cut the delay should Hillandale Development fail to come up with a rescuer.
The tentative Jan. 3 auction date depends on either removal of the stay or approval by the judge.
Gorelick said the rules would postpone the sale until Feb. 2 without requiring new letters of intent.
"In anticipation of the stay being lifted and foreclosure being allowed to proceed, the auction has been set for 10 a.m. in the ballroom at the National Press Building," Gorelick said.
"If the stay has not been lifted, then we can delay the auction," he said. The auction will be conducted by Michael Fox Auctioneers of Baltimore.
The foreclosure package includes the old Archbold Mansion and some adjacent grounds, 151 town house lots, 28 developed but not subdivided single-family lots, the original gatehouse, which has been used as a residence, and 13 finished town houses. However, seven of those 13 have been sold in recent months, and some are being lived in under pre-settlement agreements. In mid-November, the judge cleared the way for the units that have been sold to go to settlement, so long as the dollars generated from those sales are placed in an escrow account.
Saudi European Bank had been holding up some of those settlements prior to First Savings Bank's foreclosure action in an attempt to protect its second trust. But attorneys for First Savings Bank, the developer and Saudi Bank all agreed recently to let those units go to settlement.
First Savings Bank has agreed to spend up to $25,000 on work that needs to be done either at units that already have been sold or on units that remain unsold and on general maintenance.
"We had some disruptions," Gorelick said. "But the trash is now being picked up again, and the guards are back in place. We want the project. We intend to take it over and keep it up."
In late August, Judge Bason heard testimony that Hillandale, as it stands, is possibly worth only $19 million. That is $6 million less than First Savings Bank's first trust. Attorney Daniel Litt, who also represents First Savings Bank, said each day's delay is costing his client $10,000 in interest.
There has been a lot of talk among local developers about the project, but no buyer has come forth. "I would like to work with that Arkansas bank if they can get it back. I don't want the whole thing, but I might want part of it," said one builder.