Twenty acres of prime land near Daniel Island were supposed to be transformed into a hub of retail shops and residential condominiums.
Instead, the property is being foreclosed on, bogged down by more than $17 million in debt.
The owner, Clements Ferry Southwest LLC, stopped making loan payments last fall for the site at Interstate 526 and Clements Ferry Road, according to a lawsuit filed in Berkeley County.
The debt on the property now exceeds $17.2 million.
Berkeley County officials plan to auction the land 11 a.m. Wednesday in Moncks Corner.
A Texas-based development group that is a minority investor in the project said the demise of Daniel Island Village stemmed partly from the slowing housing market as well as zoning restrictions that the city of Charleston put on the land.
Also to blame, the company said, are a North Carolina developer and some of his associates, who have been accused of bilking investors out of more than $100 million in an unrelated failed real estate project near Asheville.
"It was a falling domino type of thing," said Fred Morgan, president of Houston-based Housing 2000 Inc.
Clements Ferry Southwest bought its four parcels of land for about $7 million in 2005. It financed the deal with a loan from Bank of America, which has since been paid off. It later borrowed $11.5 million from another lender to make the mortgage payments.
When interest and other unpaid debts are factored in, New Stream Real Estate, formerly Charter Oak Real Estate Fund, says it is owed $17.2 million, according to the foreclosure suit.
The first condo units at Daniel Island Village were supposed to be ready by next summer.
Morgan said Tony Porter, a North Carolina developer who is being sued by that state's attorney general, was largely responsible for putting the real estate deal together.
He said Porter's group controls most of the Clements Ferry Southwest partnership, contradicting what he told The Post and Courier in October for an article about Porter's mounting legal and financial troubles.
While the plans for Daniel Island Village were quietly unraveling, Porter was attracting national attention for his ties to a failed North Carolina mountain development called the Village of Penland.
In that project, Porter allegedly convinced about 200 investors to borrow money to help him turn a rural piece of land near Asheville into a residential and retail community with more than 2,000 lots, according to the attorney general's lawsuit. The complaint alleges that appraisers inflated the lot values, and now the buyers and investors owe $100 million collectively on land that has little value.
Porter's lawyer, Douglas Kingsbery of North Carolina, has previously denied any wrongdoing.
Porter also had a hand in a Johns Island project that became the target of a foreclosure lawsuit, after companies he is affiliated with stopped making payments on 471 acres of land near Kiawah Island.
Morgan said he has had little contact with Porter since the Penland issue became public.
"There's going to be some blood out there on the ground, but I don't believe it's going to negatively affect our credibility or our credit," Morgan said of Housing 2000.
Aside from Porter's troubles, the likelihood that Daniel Island Village would succeed financially waned as the local housing market slowed, Morgan said.
Zoning issues also came into play, he said.
The Daniel Island Village site was rezoned by the city as a "gathering place," a new designation created to encourage high-density, mixed-use neighborhoods at high-traffic intersections. Morgan said his group found that the strict gathering place guidelines were too costly and cumbersome to comply with.
The plans for Daniel Island Village were reviewed by the city's Commercial Corridor Design Review Board, which rejected them, citing design and landscaping required under the zoning.
"We thought we were in compliance with the direction they laid out for us," Morgan said.
Christopher Morgan, director of the city's planning division and no relation to Fred Morgan, defended the process.
"Ultimately, they were turned down because the development didn't meet the principles behind the gathering place zoning," he said. "They are good, strong standards, but it's important for them to be that way because what we're trying to create are great places."