A Texas real estate firm is set to buy 31 acres of the Magnolia property on the upper peninsula and is in talks to acquire the rest of the site, setting up a revival of the long-dormant redevelopment project.
An affiliate of Highland Resources Inc. of Houston was named the high bidder with its cash offer of $8.6 million at a U.S. Bankruptcy Court hearing in Charleston on Tuesday.
The firm plans to finalize the deal no later than Jan. 31, after an inspection period, according to the sale agreement.
It hopes to start cleaning the contaminated soil at the site as quickly as possible, CEO Charles W. Wolcott said.
The vacant former industrial tract will be developed into a mix of commercial space and residences, he said.
Judge David Duncan said he plans to approve the sale to HR Charleston LLC.
The deal effectively closes the interlocked bankruptcies of the two companies that owned the 182-acre Magnolia site.
The tract is just across the marsh from Charleston’s Wagener Terrace neighborhood on the upper peninsula, between Interstate 26 and the Ashley River.
Decades ago, the land housed fertilizer factories, a lumber-treatment plant and other heavy industrial businesses. Those users left a legacy of lead, arsenic, creosote and other contaminants in the soil.
Led by Cherokee Investment Partners, the Magnolia backers set out to clean the property so it could be reused, describing their effort as the largest redevelopment of polluted land in South Carolina. The idea was to build a dense mix of homes and commercial space on the land.
Raleigh-based Cherokee and its investors formed two companies, Ashley I and Ashley II, which began buying up property in 2002. Over time, they had amassed a large swath around Braswell and Milford streets.
The Magnolia master plan called for a small city: some 4,400 residences, 900 hotel rooms, 2 million square feet of commercial space, parks and a marina.
But the deal faltered. Bogged down by the 2008 economic downturn, cleanup expenses and costly litigation, Ashley I and Ashley II filed for bankruptcy last year, listing debts of more than $23 million. The owners also disclosed they had invested more than $50 million in the deal from 2002 to 2008.
Ashley I LLC sold its holdings at a court auction in late 2016. The new owner is a group led-by former Nexton developer WestRock Co.
The Ashley II property was more problematic. One of the primary uncertainties was the unknown cleanup cost for the 31-acre tract.
Wolcott said his firm has years of experience dealing with contaminated real estate and working with regulators, and he's confident it can prepare the land for reuse.
"The path is well known," Wolcott said after a 90-minute hearing Tuesday.
He also said privately held Highland Resources is negotiating to acquire the rest of the vacant Magnolia site from the WestRock-led group.
The piece that was up for grabs this week attracted two other qualified bids, said Columbia attorney Bill Metzger, who was in charge of selling it.
Chicago-based Clarius Partners made the opening offer of $6.25 million. The other bidder, Magnolia North LLC, will serve as a backup buyer in case the Highland Resources deal falls through.
Of the sale proceeds, $5.75 million will go to Ashley II's mortgage lender, and the U.S. Environmental Protection Agency will receive $2 million. The rest of the money will cover property taxes and miscellaneous expenses associated with the deal.