Two closely affiliated companies that own the site of an idled urban redevelopment project in the Charleston Neck Area filed for bankruptcy Monday with the goal of selling most of the 182-acre property.
Bogged down by the last economic downturn and lengthy litigation, Ashley I LLC and Ashley II LLC sought protection from creditors in Columbia. Their debts total more than $23 million, with much of that owed to one lender, according to the filings.
The companies estimated in a bankruptcy document that they invested more than $50 million in the “Magnolia Project” from 2002 to 2008. The value of the land, made up of 33 contiguous parcels around Braswell and Milford streets, was estimated at about $14.1 million this week.
Lawyers for the companies said in a filing that the plan is to “seek court-approved sales of their properties to ensure future cleanup and development of these properties to the great benefit of the Charleston community.”
An auction is expected to take place in June.
The Magnolia site is just across the marsh from the Wagener Terrace neighborhood in the upper peninsula. Decades ago, the land housed fertilizer factories, a lumber-treatment plant and other heavy industrial businesses that left a legacy of lead, arsenic, creosote and other contaminants in the soil.
The Magnolia backers set out to clean it up for reuse, describing their project as the largest redevelopment of polluted industrial land in South Carolina. The idea was to build a dense mix of homes and commercial space on the remediated land along and near the Ashley River.
Ashley I and Ashley II, which began acquiring property in 2002, are owned by Raleigh-based Cherokee Investment Partners. Cherokee did not respond to requests for comment Monday.
The Magnolia master plan called for a mix of up to 4,400 residences, 900 hotel rooms, 2 million square feet of commercial space, parks and a marina. At one point, there was talk of extending a rail line from the lower peninsula to the property for a commuter trolley service.
The city of Charleston sold bonds to fund $15.6 million in infrastructure work to help to move the deal along. One of the improvements was an $8 million span linking the south end of the property with Heriot Street. Completed in 2010, the structure has since become known as Charleston’s “bridge to nowhere.” Only its pedestrian lane is open to traffic.
The Magnolia construction phase also went nowhere. The development got rolling in 2007, just before the economy and the real estate market went into a tailspin later that year.
Also, years of unresolved litigation involving past owners of one of the polluted sites has further complicated the deal, the companies said in a bankruptcy filing Monday. That land will be excluded from the auction.
Ashley I and Ashley II said the bulk of their financial obligations consists of an $18.6 million mortgage owed to Magnolia/ARC Lender, a group that is 70 percent-owned by MeadWestvaco Corp. successor WestRock Co.
Ken Seeger, president of WestRock’s Summerville-based real estate division, said the mortgage partnership plans to use its unpaid loan balance as credit and submit an offer on the Magnolia property “when it goes up for sale.”
Lawyers for Ashley I and Ashley II are seeking to administer the two bankruptcies as a single case to minimize court fees and other expenses. They have asked for an emergency hearing on that request. No date has been set.
Columbia bankruptcy attorney Bill McCarthy, who represents the companies, said he had no immediate comment Monday.
Contact John McDermott at 843-937-5572.