Retail, housing at Crown Farm project gets going again
Project had been stalled by lawsuits and bankruptcy
Seven months after developers for the billion-dollar Crown Farm retail and residential project in Gaithersburg filed bankruptcy, the project is back on track.
A property deal and annexation agreement with the city signed in 2006 promised to bring homes, residents, retail, office space, roads, public art, a school and other amenities to the 181-acre property near interstates 270 and 370 at Fields Road. But then, the project's creditors alleged breach of contract, and two of the original developers filed bankruptcy in May. Creditors filed lawsuits in three states that did not settle until December.
"We bought everything, so we have the title free and clear to the entire property," said Steve Coniglio of Sunbrook Partners, a division of Westbrook Partners based in Los Angeles. "We're the majority partner and managing member." Sunbrook bought the Crown Farm property for $77.5 million on Dec. 29, Coniglio said from his office in Richmond, Va.
KB Home Maryland LLC and Pulte Homes of Maryland will help to bring 2,250 planned residences and 320,000 square feet of retail to the hilly farmland across from Washingtonian Center, Coniglio said.
The developers signed an agreement in late December to get the project going again, Coniglio said. The swift turnaround is a relief to city officials and residents, who feared the project could go undeveloped for 20 years.
"It is a wonderful turn of events," said Aris Mardirossian, an original partner in the project.
In 2006, Mardirossian whose development company is Jerunazargabr LLC of Potomac and Steven L. Lebling of ARL LLC of Rockville, helped KB Home and Centex Homes Crown LLC buy the property as Crown Village Farm LLC and secure an annexation agreement with the City of Gaithersburg that still stands, said City Attorney Lynn Board.
"They filed the project bankrupt, they owed us money," said Lebling, who described Westbrook Partners as a hedge fund operation. "It settled."
Lebling said that in the settlement he and Mardirossian received $8 million of the $28 million they expected to collect.
The annexation agreement, which has brought $7 million in farmland preservation and recreation funds to the city, promises to bring another $1 million to Gaithersburg this year and over the long-term a school, roads, public art and a stop for the Corridor Cities Transitway, a proposed 14-mile light rail or rapid bus line connecting the Shady Grove Metro station to just south of Clarksburg. Overall, the project is expected to bring more than $10 million in contributions to the city.
"We're feeling cautiously optimistic," said Gaithersburg Director of Planning and Code Administration Greg Ossont, who said the city is working with Sunbrook to get commercial site plans approved by the spring.
Once commercial site plans are finalized, the city can focus on permitting, and construction could be underway by early 2011, Ossont said.
In summer 2008, Crown Village Farm tried selling the property, but bidders offered barely half the $140 million it paid for the property in 2006.
According to Chapter 11 protection documents filed in U.S. Bankruptcy Court in Wilmington, Del., KB Home and Centex Homes Crown LLC, separate entities with no other holdings based in Vienna, Va., sought to discharge much of their debts, reorganize and purchase the property for $70 million under a new name. Reorganization documents show that they owed the developers and a broker more than $75 million and wanted to wipe out the debt.
Mardirossian, Lebling and attorneys for Crown Farm Retail LLC of Bethesda, owned by Finmarc Management Inc. all creditors in the bankruptcy proceedings filed civil lawsuits against KB Home Maryland, Centex Homes Crown and their banks in 2008 in Montgomery County Circuit Court, hoping to collect some of their anticipated revenues.
They alleged breach of contract, saying that KB and Centex, which is owned by Pulte, deliberately chose not to process and sign record plats to avoid paying the balance due to Lebling and Mardirossian, transferring the retail property to the developers and transferring 33 acres to the city for a future public high school.
With the property sale to Sunbrook, all that has changed. The creditors have dropped their lawsuits, Lebling said. Developers are operating on cash and have restarted the process of signing record plats with the city, he said.