A labor pension fund has kicked out the original developers of the proposed $515 million mixed-use Augustalee project in Cornelius.
The Building Union Investment and Local Development Fund of America Trust, or The BUILD Fund, was a key lender to the project until it foreclosed on the developers, Cornelius Bromont and Bromont Investments.
At a foreclosure auction Thursday, BUILD bought controlling interests in the limited liability companies that collectively own all beneficial interests in VLN Beneficial Trust, a Delaware statutory trust that owns the land. Augustalee was previously called “Villages at Lake Norman.”
BUILD had sent a letter to the town earlier this month saying it intended to foreclose and purchase the property, which it plans to develop.
In a statement Thursday, BUILD said the foreclosure resulted from “the borrowers' failure to satisfy certain milestones and inability to raise additional capital needed to complete the project, including the financing of certain infrastructure and required offsite improvements.”
The developers, meanwhile, sued the pension fund Wednesday, claiming breach of contract and unfair and deceptive trade practices. They said the lender had caused them “substantial financial loss.”
The developers allege the fund promised to lend $23.5 million but paid only $19.5 million. Shortly after the fund failed to pay the remaining $4 million, the developers' senior lender, Fifth Third Bank, started to foreclose on the 104-acre project off Interstate 77 in northern Mecklenburg County, the lawsuit says.
The developers, which include a father-and-son team from Arizona, had proposed a mixed-use project that would include luxury condos, hotels and office and retail space. Local leaders have said the mixed-use project could one day employ 4,600 workers. Augustalee also involves major road projects, including a new freeway exit, which taxpayers may ultimately have to fund.
In the lawsuit, the developers said Fifth Third Bank, which had lent $33.9million, “expressed satisfaction” about the project's status in a May 20 meeting. But the bank was concerned by BUILD's failure to pay the $4 million, which was to pay down the loan made by Fifth Third. The next day, Fifth Third sent the developers a default letter, according to the lawsuit.
On Thursday, BUILD said it “is optimistic that it will be able to find new capital and can bring in additional development expertise in order to move the project forward.”
BUILD's investment advisor is Labor Management Fund Advisors, LLC, which is a full service real estate investment advisory firm.