When Fieldstone Farms was launched four years ago as one of Walker County’s biggest subdivisions, nearly two dozen home builders lined up to buy the first 127 residential lots offered.
“We sold all the available lots we had in phase one during an afternoon barbecue,” said Jack Webb, a Chattanooga Realtor and partner in the Rock Springs development.
But a couple of years later, when the developers were ready to launch the next phase in the 180-acre complex, they found a much different market and decided to postpone phase two.
Staff Photo by Dan Henry
Fieldstone Farms subdivision near Fort Oglethorpe, Ga., has stalled expansion towards their private lake.
“We could see the slowdown coming and, whether you like it or not, you can never lose sight of the market in the real estate business,” Mr. Webb said. “We were fortunate we did phase one when we did and I’m glad we decided to wait on the next phase.”
A lot of area developers of projects, ranging from subdivisions to shopping centers to commercial businesses, are waiting along with Mr. Webb. Amid the worst credit crunch in more than a generation, developers say they are having trouble borrowing money to buy lots and pay for construction. Even when they can build, they complain that home buyers and other consumers are holding back on spending.
Across the Chattanooga area, at least a half billion dollars of planned developments have been deferred or set aside in the past couple of years.
A planned $330 million expansion by Memorial Hospital is waiting for a better bond market. Subdivisions, a shopping center and hotel sites in Harrison, Hixson and downtown Chattanooga are cleared but still waiting for buyers or tenants.
Roger Tudor, president of the Associated General Contractors of East Tennessee, said the credit crunch has halted many borrowing and building plans.
“The construction industry runs in cycles, but I’ve never seen financial constraints placed upon developers, contractors and business owners that we have today,” Mr. Tudor said. “This is unprecedented.”
Memorial Hospital announced plans three years ago for a $330 million upgrade and expansion of its main campus in Glenwood. But when the hospital was ready to go to the bond market last year to finance the five-year project, the credit crisis undermined much of the market for tax-exempt bonds, especially those issued by hospitals.
“The need that drove our plans is still there, but the timing for our solution is paused right now as we continue to look for the bond market to stabilize and improve for us,” Memorial Hospital Chief Financial Officer Carol Newton said. “We’re in a good position to move forward as soon as the markets make sense.”
Retail and residential developers have been especially hard hit in the current market.
In Hixson, a Georgia development firm bought, cleared and leveled 60 acres along Highway 153 near Grubb Road for a $40 million shopping center. Paragon Development Inc. in Barnesville, Ga., which is developing the proposed Fountains of North Chattanooga, planned to announce the retail tenants for the project last September. But when the credit crisis hit Wall Street last fall, work on the retail complex stopped.
The economic slowdown hit the housing market even earlier.
Two years ago, developers cleared more than 50 acres on both sides of Webb Road in Harrison for 107 lots in Windward Preserve, which was to include homes priced from $500,000 and up “for all the seasons of your life.” But developers are still waiting for the right “season” to market the upscale complex.
Across Webb Road, another 100-lot subdivision is planned, but site work was halted after lots in Windward Preserve failed to sell. Realtor Jill Kisling said the developers are waiting for the market to improve later this year before resuming work on the proposed townhomes and single-family residential lots.
In downtown Chattanooga, plans for several new condominium and hotel projects were deferred last year when credit tightened and many stock and housing markets collapsed.
In the 700 block of Market Street, half the block was cleared two years ago to make way for a proposed $16 million condominium and retail complex known as Mayfair on Market. But developer Trey Stanley has struggled to get financing for the project despite assistance from the Chattanooga Housing Authority and City Hall. The project is now stalled amid a legal battle between RiverCity Co. and Mr. Stanley over who controls the property.
Four hotel projects were announced early last year for downtown Chattanooga and the North Shore. Hotels once envisioned in Warehouse Row on Market Street and next to the Renaissance Park on the North Shore were shelved because of the deteriorating credit and economic markets, officials said.
At Fourth and Chestnut Streets, Vision Hospitality Group President Mitch Patel said work should begin by late summer on a $19 million Hampton Inn & Suites, which will include 134 rooms and parking for 150 cars.
“There is funding out there for the right project and the right brand, but it’s obviously much more difficult than in the past and the terms are going to be different than what they were two or three years ago,” Mr. Patel said.
Vision Hospitality also is opening an $8 million Fairfield Inn in Lookout Valley but has set aside its plans for a North Shore hotel planned near Renaissance Park.
Two blocks away from the planned Hampton Inn downtown, Performance Hospitality Group plans to renovate the 12-story Maclellan building into a boutique hotel, known as Hotel Indigo. Ben Parker, president of Performance Hospitality Group, said the Maclellan building is uniquely positioned to attract downtown hotel guests with its 10-foot-high ceilings, spacious windows and central city location.
“Following the banking debacle last year, we’ve retooled the project and are coming back at it and hope to be under way with construction this summer,” Mr. Parker said. “The economy in Chattanooga has had its dips, but there are obviously a lot of very positive things coming to Chattanooga so it’s certainly not as bad as the rest of the country.”