Crown Farm property developers go bankrupt
Developers for the billion-dollar Crown Farm retail and residential project in Gaithersburg filed bankruptcy this month.
KB Home Maryland LLC and Centex Homes Crown LLC, which teamed to form Crown Village Farm LLC, tried selling the 181-acre property last summer. Bidders offered barely half the $140 million they paid for the property in 2006.
Chapter 11 protection documents filed in U.S. Bankruptcy Court on May 1 in Wilmington, Del., show that the two companies want to discharge much of their debts, reorganize and purchase the property for $70 million under a new name, CVF Operating LLC.
Approximately 2,250 residences and 300,000 square feet of retail are slated for the hilly farmland across from Washingtonian Center, according to site plans.
"It's going to delay the project further and it's obviously a result of the poor housing market," said Gaithersburg's Assistant City Manager Fred Felton.
Creditors in the proceedings — Steven L. Lebling of ARL LLC of Rockville; Aris Mardirossian of Jerunazargabr LLC of Potomac and attorneys for Crown Farm Retail LLC of Bethesda, a business owned by Finmarc Management Inc. — say they are shocked by plans outlined in the filing.
Officials representing KB Home Maryland and Centex Homes Crown met with city officials on Monday, said Felton.
Both companies were formed for the Crown Farm project and have no other holdings, according to documents filed in bankruptcy court.
According to court records, ARL, Jerunazargabr and Finmarc filed civil lawsuits against KB Home Maryland, Centex Homes Crown and their banks in December and January in Montgomery County Circuit Court, hoping to collect some of their anticipated revenues.
They alleged breach of contract, saying that KB and Centex were deliberately choosing not to process and sign record plats to avoid paying the balance due Lebling and Mardirossian, transferring the retail property to the developers and transferring 33 acres to the city for a future public high school.
Lebling and Mardirossian were original partners in the Crown Farm project. They helped KB Home Maryland and Centex Homes Crown get annexation and rezoning approval from the city and sold their interests in the property.
Attorneys for KB and Centex did not return calls for comment. They filed motions on Monday seeking to transfer the civil lawsuits to bankruptcy court in Delaware.
Crown Village owes the developers and a broker more than $75 million, according to reorganization documents.
Bankruptcy documents show that KB and Centex, both based in Virginia, have requested an Aug. 31 deadline to sell the property. They plan to bid on it as CVF Operating Company LLC.
A 2006 annexation agreement for the property requires a $1 million donation to the city in 2010, said City Attorney Lynn Board.
Board said the city's position will be that any buyer of the Crown Farm property must honor the annexation agreement and approved plans for the parcels, she said.