Noisette facing foreclosure lawsuit
The Navy Yard at Noisette has been hit with a $23.8 million foreclosure lawsuit that could result in a public sale of about two-thirds of Noisette's holdings on the former Charleston Naval Base and threaten the company's ambitious redevelopment plan.
The suit marks the most serious setback to date for the 8-year-old effort to convert the base's northern end into a new American city, one touted as a national example for balancing economic, environmental and social goals.
North Charleston Mayor Keith Summey said he expected the suit because he had heard that the Noisette Co. was having trouble finding new backers.
"They were hoping to still find investors' financing," Summey said, "but in this market, right now, it's almost impossible."
Noisette Chief Executive Officer John Knott said the company continues to talk with Capmark Finance Inc., which provided the loan, "and we're confident this will be resolved."
Knott said the company was close to getting financing that would pay off the bridge loan when the Legislature began pushing for more rail traffic through the Noisette site to serve the new State Ports Authority terminal being built on the base's southern end.
A state Commerce Department-sponsored plan cited a Noisette parcel as a possible site for an intermodal yard served by trucks and trains, but Summey said the rail route would violate an agreement the city had with the State Ports Authority.
This year's legislative session ended without a resolution, and it's unclear whether the issue played into the lenders' decision to foreclose. The lender's attorney, James Pulliam of Charlotte, did not return calls Monday.
Knott said the company's struggles are partly the result of the collapse in the nation's capital and housing markets last fall but added that "the rail situation did not help matters."
Summey said the suit does nothing to change his opposition to the rail line because he hopes that whoever ends up with the property will pursue Noisette's vision of a mixed-use development with homes, offices and retail stores. That will be a tougher task with a sharp increase in train traffic.
Summey said the city would work with any new developer that might emerge but isn't eager to change the zoning plan there.
"That doesn't mean that sections of it can't be changed a little bit. That's something we can work with the developers on," he said.
"My argument has always been that the Noisette project will be successful whether it's the Noisette Co. or not. That's still the position I hold."
The plaintiffs and the amounts they're owed include: SPG CDE Subfund A LLC ($12.9 million); Urban Development Fund II ($6.9 million); and Capmark Finance Inc. ($4 million), according to the suit.
The lenders reached a deal to give Noisette a $23.8 million bridge loan in August 2006, with the balance due two years later. Noisette did not repay the amount, and the lenders have been unwilling to extend their loan.
The foreclosure suit involves mortgages on about 240 acres of the 340 acres that Noisette received from the city. The 240 acres mostly includes the large parking areas near Spruill Avenue and the rolling hills where much of the former base's officers' housing was built.
It does not include some of the more prominent buildings along Noisette Boulevard, such as 10 Storehouse Row, Noisette's offices and the Powerhouse.
News of Noisette's troubles had some nearby residents concerned.
"This is the ninth year, and I don't see anything that really has been done over there in the nine years," North Charleston City Councilman Bob King said. "The historical houses are falling down over there. They've had that property since 2003, and they've let that deteriorate."
Gayle Frampton, president of North East Park Circle Civic Club, said Noisette had good ideas about energy conservation and sustainability and benefited by receiving the base property from the city at a low price.
"I've always been concerned that they came to town without the money to do what they said they were going to do, without having the North Charleston taxpayers underwrite some of that," she said.
Summey said he has no regrets about the city's handling of the project. "I think we've lived up to the obligations we've had. It's just one of those things," he said. "It's a mix of the economic downturn and those kinds of things that we don't have any control over."
In March 2001, Knott, Summey and other officials unveiled their intended public-private partnership to redo the depressed area. Knott predicted at the time that North Charleston "will be one of the most significant cities in the country."
But there were setbacks, largely out of Knott's or the city's control, including delays in having the base property transferred through the Charleston Naval Complex Redevelopment Authority, the authority's deal to sell the shipyard portion to a local industrial concern and the Legislature's 2002 decision to locate a new container terminal on the base's southern end.
The project also involved a community planning effort that examined ways to redevelop about 3,000 acres in the southern end of North Charleston, one that has led to projects as diverse as the North Charleston Elementary School renovation and the new Mixson development just west of Park Circle.
The Noisette Co. was involved directly in only about 340 acres of the former base site that it bought from the city for $9.6 million in 2003.
Its special relationship with the city hit a bump in March 2005, when city officials learned via The Post and Courier that the company had taken out more than $3 million in loans without informing the city.
Knott said the company did nothing improper, but Summey said at the time, "We have grave concerns about some of the financing that has been done without the city's knowledge." The company and the city later mended fences, and the city recently approved a multimillion-dollar deal in which Noisette could begin infrastructure work and get reimbursed from increased property tax collections in the redeveloped area.
That infrastructure plan included a large drainage basin in the current parking areas just east of Spruill Avenue, as well as other road and utility work.
Knott said that work has been engineered, designed and bid and is awaiting a resolution of the company's efforts to secure new financing.
"We're ready to break ground," he said.