OLD 700 BLOCK PLAN
Cost: $16 million
Size: nine stories
Housing: 58 condos
Parking: 158 spaces
Source: Trafalgar Development Corp.
Short-term: In three weeks, River City Co. plans to clean up the site on the day that the court case officially closes.
Long-term: River City plans to issue a request for proposals. The plan will likely include apartments, retail space and parking, but no condos.
Source: River City Co.
Developer Trey Stanley and nonprofit River City Co. have reached a settlement in their long-running dispute over the aborted $16 million condo complex planned for the 700 block of Market Street.
The unsightly hole in the heart of downtown has been "the greatest impediment to the growth of our downtown -- and potentially its development could be the biggest boost for our downtown," said Mike McGauley, president of Fidelity Trust Co. and a former chairman of the Chattanooga Area Chamber of Commerce.
Up and down the block are the headquarters or regional centers for four of the region's biggest financial institutions -- SunTrust, First Tennessee and Volunteer banks and the Tennessee Valley Federal Credit Union.
Collectively, such institutions have nearly $4 billion in local assets, but Stanley never could raise the capital needed to proceed with his Mayfair on Market plan for condominiums, retail stores and offices on the 700 block.
"Almost everything could have been done better," Chattanooga Mayor Ron Littlefield said of the fizzled project. "It started out as a dream for the central part of downtown, and it turned into a bad dream."
Stanley won't speculate on what he could have done better as a developer and declined to divulge details of what went wrong or how much he spent.
"I know everybody would probably love to have every single detail, but that's not the way it's going to be," Stanley said. "People are going to have perceptions; there's nothing I could say that could change somebody's perceptions."
River City President Kim White said Wednesday the downtown development agency will open the empty lot up for other development ideas, which she hopes will include apartments, stores and additional downtown parking.
"We've had quite a bit of interest from developers," she said.
The vacant, overgrown downtown property just north of the SunTrust building has been at the center of a series of lawsuits, countersuits and settlements ever since the Fannie Mae-financed deal went down the tubes in the 2008 recession.
River City has claimed that Stanley was to begin construction on the property within 16 months of receiving the deed in November 2005 or else give the property back.
"[River City] extended the time for performance numerous times in 2007 because it was aware of the inherent difficulties in developing the property, having unsuccessfully attempted to locate developers to do so ever since it was acquired in 2001," Stanley's attorney, Sam Elliott, said in a recent filing in Hamilton County Chancery Court.
TIMELINE OF TROUBLES
October 2000 -- RiverCity Co. agrees to buy about half of the east side of the 700 block of Market Street for redevelopment.
January 2006 -- Developer Trey Stanley announces plans to buy and develop the 700 block of Market Street with apartments and stores.
December 2007 -- Fannie Mae agrees to lend Chattanooga Housing Authority $3.65 million to help CHA fund the 700 block and the proposed Mayfair on Market plan.
January 2008 -- 700 Block Development Partners transfers ownership of property to Rose & Crown LLC.
February 2008 -- Demolition of abandoned storefronts begins.
November 2008 -- RiverCity Co. files lawsuit against 700 Block Development Partners to get back the property after project stalls.
September 2009 -- CHA ends involvement with Mayfair on Market after paying final $85,000 to the developers. In total, CHA paid nearly $2.2 million to the developers but didn't pay the rest of the promised $3.65 million.
November 2011 -- Lawsuits settled and River City (which changed the spelling of its name) agrees to buy back the land.
When the project hadn't started by 2008, River City sued Stanley's group, which was operating under the name of Rose & Crown LLC and 700 Block Development Partners LLC. Stanley countersued River City, claiming its lawsuit had stalled his project and cost him more than $2.1 million in damages.
As part of the out-of-court settlement, Stanley has agreed to return the lot deeded to him by River City, and River City will pay him $525,000 for his demolition and environmental expenses and for an adjacent lot that makes up about 28 percent of the total parcel.
So far, Stanley has received more than $2.2 million toward the project, with nothing to show except a chain-link fence surrounding a gaping hole in the otherwise unbroken line of storefronts. The developer said the money went toward demolition of the existing buildings, cleaning up asbestos and putting together architectural plans.
However, in River City's lawsuit against Stanley's development group, attorneys asked Hamilton County Chancellor Frank Brown to require Stanley to detail what was spent on Mayfair on Market and how $2.2 million it received from the Chattanooga Housing Authority was used.
In exchange for CHA's investment, Stanley agreed to make 18 of the 58 condo units more affordably priced, in the range of $150,000 and up.
In a court filing last month, River City attorney Gary Patrick said expert witnesses would show that Stanley and his development firm, Trafalgar Development Corp., "have both received significant sums of money" and that "many of the expenditures were not reasonably related to the development of the property."
The bungle begins
The now-dead deal traces its roots to 2001, when River City bought up many of the block's existing storefronts and gave the property to Stanley's Trafalgar Development Corp. with the stipulation that he would build on the site.
Stanley and the CHA formed 700 Block Development Partners, but the partnership had a short lifespan and ended in court.
The housing authority borrowed $3.65 million from Fannie Mae to get the project started, but diverted some of the money and didn't provide all the promised $3.65 million. The agency instead spent more than $1 million to pay its own operating expenses, including a new $3 million headquarters, leaving only a portion of a sum for Stanley, who then sued.
Littlefield at the time called CHA "an embarrassment" to the city, noting in a letter to regulators that its conduct "continues to defy common sense."
Housing officials later defaulted on their loan and fell under federal supervision as a "financially troubled" agency.
Now, all the parties have settled and the property is back where it started a decade ago.
The vacant block in the central city has left a hole in the revitalization of Chattanooga's downtown over the past two decades, but River City plans to have the site cleaned up and ready for development as soon as the ink is dry on settlement documents, White said.
But instead of a nine-story condo complex, White said changes in residential demand likely will bring about an apartment building with ground-floor retail space and parking.
Condos are probably out, said Littlefield.
"You don't want everything downtown to be million-dollar housing," he said. "It needs to be something I can afford."
Dave Flessner is the business editor for the Times Free Press. A journalist for 35 years, Dave has been business editor and projects editor for the Chattanooga Times Free Press, city editor for The Chattanooga Times, business and county reporter for the Chattanooga Times, correspondent for the Lansing State Journal and Ingham County News in Michigan, staff writer for the Hastings Daily Tribune in Nebraska, and news director for WCBN-FM in Michigan. Dave, a native ...
Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...