Developer's trail of stalled projects runs through area

North Carolina developer Tony Porter once envisioned several hundred upscale homes spread over nearly 1,100 acres off Bohicket Road on Johns Island. In another potentially splashy deal, he sought to seize on the rapid growth around Daniel Island by getting involved in a large condominium project in that area.

But now, embroiled in litigation, he's keeping a much lower profile,

Loan payments have stopped and the projects he had a hand in have stalled amid allegations from North Carolina's attorney general in June that Porter, his Peerless Real Estate Services Inc. and other defendants conned investors and banks out of more than $100 million.

While most of Porter's legal troubles stem from a failed project in the Blue Ridge Mountains, they extend to the Charleston region, where he is named a key defendant in two active lawsuits that allege he and various associates have defaulted on $8.7 million in loans. A third complaint says he and other investors backed out of a deal to buy 250 acres that was to be part of the proposed Lakes of Kiawah project.

Porter, living in an undisclosed location in North Carolina, has left a trail of stalled real estate projects, from the Palmetto State to far-flung places such as the U.S. Virgin Islands, according to court documents. His legal and financial troubles have stunned some of the people who did business with him, including real estate developer Tom Sacks.

"I was extremely surprised," said Sacks, a former Kiawah Island resident who loaned Porter $2.85 million in May 2006 to buy land he owned on nearby Johns Island.

Before Porter appeared on the scene, Sacks said he "had been dealing with some real strange characters" who were looking to purchase his property.

"But Tony seemed like an honest man and a guy who was going to make this successful," he said.

It takes a village

Porter, 50, began marketing his flagship development in the North Carolina Highlands, called the Village of Penland, in 2002. His group bought more than 1,200 acres of rolling forestland near

Spruce Pine, later subdividing it into 2,000 wooded lots.

The idea, according to marketing materials, was to transform the isolated property into a thriving retail and residential community for the wave of retirees and baby boomers seeking a place in the mountains.

To get the Penland deal rolling, Porter didn't need homebuyers. Instead, he wooed investors who would be willing to use their blue-chip credit to purchase lots at what authorities say were inflated prices, on the condition that his company would buy them back within three years, according to court documents.

The investment scenarios were complex, but typically investors were told they would be paid sizable returns, as much as 10 percent, when their loans closed, and that they wouldn't have to put any money down on the lots. In some cases, Porter or one of his companies guaranteed the mortgage payments at least a year.

Some five years later, no homes have been built at Penland. Porter sent letters to investors in May, saying that he could no longer pay their mortgages because of the slumping real estate market.

With no infrastructure in place on the property, the $125,000 home sites that people agreed to invest in are probably worth a fraction of that, leaving them on the hook for the loan balances.

North Carolina Attorney General Roy Cooper won a court order in June to halt the project, saying some of the lots at Penland were so tiny they could not support a septic system or a well.

"These developers squandered more than $100 million in financing, leaving consumers stuck with property that isn't worth what they owe on it," Cooper said.

Porter's lawyer, Douglas Kingsbery of North Carolina, told The Post and Courier his client denies any wrongdoing. Kingsbery recently told the Wall Street Journal that Porter "very much wants to do everything he can to make sure that all of the individuals who invested in the project receive all of their money back."

Bohicket boondoggle

It isn't known precisely where the money from the Penland project went, and no criminal charges have been filed.

Cooper said in his lawsuit that some of the funds probably went toward Porter's other failed developments, such as a proposed $300 million overhaul of Richland Mall near Columbia, which was shut down and sold at a foreclosure auction earlier this year. Penland funds also paid for lavish trips to the Greek isles and Switzerland, Cooper said.

Porter's dealings in the Lowcountry started about five to six years ago, just as he was kicking the Penland project into high gear. On Johns Island, for instance, he set out to assemble 1,094 acres by piecing together several large tracts, as well as some smaller pieces off Bohicket Road.

At the time, two local developers, Tom Sacks and Michael Casa, were planning an exclusive golf course community just outside the entrance to Kiawah and Seabrook islands. Sacks said they saw how well the nearby Golf Club at Briar's Creek was doing and decided to try a similar project with 181 home sites.

But in January 2002, Sacks was diagnosed with cancer, and his priorities suddenly changed.

"I wasn't sure I wanted to spend that much time (on the project) anymore, but we had all the entitlements and permits in hand," he said.

That's when Porter and his associates stepped in, offering to buy in two separate deals 721 acres that Sacks and Casa owned. Sacks met with Porter dozens of times, saying he seemed to be "very upfront, very open and very sincere."

Porter and a handful of business partners formed a company, Orange Hill Development Group LLC, to act as the developer. It closed on the first 471-acre parcel in 2006 for $9 million, financing the bulk of the purchase with $5.85 million from Regions Bank and a $2.85 personal loan from Sacks.

Charleston County already had signed off on the original plans for 181 home sites, but Orange Hill Development had its own vision for the landlocked tract. It hired an engineering firm to redesign the plans, doing away with the proposed golf course and instead laying out homes around a network of narrow lakes.

"Many of the lakes will be joined by canals to allow water sports use by the community residents," according to the revised development plan submitted to the county.

Porter's group later snapped up an additional 212 acres nearby, allowing them to bump up the number of home sites to 274.

The larger project, dubbed The Lakes at Kiawah, was set to go before the county for approval in December and January, but it was withdrawn shortly before each meeting. Planning officials said they lost contact with Porter's group after that.

Sacks sensed trouble last fall, when loan payments from Orange Hill Development stopped. He contacted the company and had a few discussions about possibly refinancing.

"And then everything became quiet: no phone calls, no e-mail, and no one was able to contact them," Sacks said.

Both Regions Bank and Sacks are now suing the developer to recoup their money. Sacks and Casa have filed a separate lawsuit, saying Orange Hill Development failed to buy a 250-acre parcel from them.

Loans and liens

As Porter was cutting land deals on Johns Island, he went across town to join forces with Clements Ferry Southwest, which was proposing to build 314 condominium and retail shops at U.S. Interstate 526 and Clements Ferry Road near Daniel Island.

He told Fred Morgan, whose Texas-based Housing 2000 Inc. is part of the development group, that he wanted a piece of the rapid growth in that area.

So Porter agreed to pay off part of a $5.85 million loan that the developer had obtained from Bank of America in exchange for a cut of the profits from the project, Morgan said.

"From there, the whole deal turned into a continued mess," he said.

Morgan and his partners later discovered that the Internal Revenue Service had placed a tax lien against Porter.

"When that surfaced, we realized that he would be of no value whatsoever ...," Morgan said.

The development group decided that it would have to restructure the condo deal. It found an Alabama-based investment firm to work with, and it was able to avoid serious financial trouble with a loan.

But the condo project has been set back substantially, and Morgan hopes to start over again next year.

Porter's attorney declined to comment on his client's Charleston projects.

Reach Katy Stech at 937-5549.