The high-profile developer of TPC and Bearpath could face foreclosure on several unfinished developments.
The sign seems superfluous. "Absolutely!!! No Construction Activity ... Outside of These Hours" reads the warning, posted outside the luxury Lakeside town home and condo development on Lake Riley in Chanhassen.
The 26 acres were supposed to become a $100 million, 250-unit complex from a high-profile developer known for teaming with golf legends such as Jack Nicklaus and Arnold Palmer for its luxury projects. But on a recent weekday, the only action was a Randy's Sanitation truck hauling garbage for the 20 homes that were built and sold before construction stalled. Much of the untouched land is dotted with "Lot for Sale" signs.
Lakeside, a Sienna Corp. development offering a luxurious, maintenance-free lifestyle, is in voluntary foreclosure, an all-too familiar occurrence as the housing market continues its collapse. For Sienna, known for developing the gated Bearpath Golf and Country Club and community in Eden Prairie, Deacon's Lodge golf course in Brainerd and Tournament Players Club, a golf community in Blaine, it is the latest -- but not likely the last -- troubled property that the developer has had to give up on. GardenWood, what was to be an upscale community of luxury homes and townhouses on 125 acres in Blaine, is already in foreclosure proceedings.
Rod Hardy, co-founder and one of Sienna's three principals, worries the 32-year-old Edina company won't be able to recover.
"I doubt whether there will be much more operation in the future for Sienna, per se, because I think the world's going to change," Hardy said last week.
Hardy said Hunters Crest in Minnetrista, Windrose in Elko-New Market and two western-Wisconsin developments, Wissota Green in Chippewa Falls and the Glens of Willow River, may be moving toward voluntary foreclosure.
Citing its debt, legal battles and the changing dynamics of the development business, Hardy said it would be tough for Sienna to again build up the equity needed for future projects and hard for builders to get financing, he said. " I don't see them putting a lot more gas back into our gas tank."
One-fifth the demand
Of course, Sienna is not alone, as developers around the country have called off projects midstream. "Developers are really in a tough position right now," said Ryan Jones, director of the Twin Cities branch of Metrostudy, which tracks house and lot supply nationwide. "They purchased this land and developed this land at a cost back in 2005 and 2006 with the belief that things would continue to go. There's going to need to be a lot of working out between banks and developers and there's going to be some developers that don't make it."
The seven-county metro area has about 20,000 developed but vacant lots right now and a 70-month backlog of lots, meaning that it would take that long to clear all the current lots. That compares with a 16- to 24-month backlog in 2005 and 2006, when there were 17,000 to 19,000 vacant, developed lots.
"The number of lots hasn't changed much over the last several years," he said. "It's just that the demand has dropped from upwards of 20,000 [housing] starts per year down to 4,000 starts per year."
A big player
Sienna's founders, Hardy, Bruce Nimmer and John Hankinson, came together when Ed Dunn and Jim Curry, owners of Dunn & Curry Inc., who developed Pentagon Office Park, invited them to help develop land they owned. Once Dunn and Curry retired, the three stayed together in the land-development business. Hardy described himself as the technical person of the three, Nimmer as the financial mind and Hankinson as the marketer.
The Twin Cities suburbs are dotted with dozens of completed Sienna developments: Lac Lavon Shores and Sunshine Estates in Apple Valley, Southcross Heights in Burnsville and Thomas Lake in Eagan, to name a few.
"Over the years we've been very fortunate and we worked hard to do the business that we do, which is create house-lot inventories for builders," said Hardy, who likened the forces that have devastated the housing industry to a tsunami.
"We're wondering what we did to deserve this, but we'll work through it."
The proceedings and court fight over the GardenWood development have had a ripple effect for Sienna, Hardy said.
GardenWood's main builder, Toll Bros., backed out of the project more than two years ago, leading the two companies to sue each other in federal court. Since then, Sienna defaulted on a large development loan for the project from three banks. Late last year, one of the banks, Village Bank in St. Francis, won a $14 million judgment against Sienna.
That judgment "put the clamps on us doing anything else," said Hardy.
Sienna purchased the 26 acres on the north end of Lake Riley for about $8.4 million in June 2006. For years, the site included one of Chanhassen's few affordable rental complexes.
Over five years, Sienna planned to build 250 units of upscale town homes, duplexes and three-condo buildings. It touted a planned waterfall on the property and said it would own and maintain boats for residents to use on Lake Riley without the hassle of maintenance or storage.
Now, only parts of the complex have been built, including a clubhouse. The three condo buildings -- The Classic, The Isles and The Heritage -- were never built. Upper-bracket twin homes called The Highlands, built by Charles Cudd, are across a fence from Bearpath. Just 18 of 38 planned units have been completed; 11 are occupied. Price: $650,000 to $875,000.
The Liberty town homes built by Wooddale Builders run along the other side of the development. Of 28 units originally planned, about 10 are occupied, with four under construction. Price: $550,000 and up.
Both Charles Cudd and Wooddale Builders continue to market and sell the homes. They've bought land from Sienna, which as a developer designed the project and laid the groundwork for the complex.
"This is a developer and a bank problem, not a builder problem," said Joe Liberko, who markets the town homes for Cudd and Wooddale.
The Lakeside sheriff's sale will be held Monday. The bank, formerly Eagle Crest Capital Bank and now Home Federal Savings Bank in Edina, declined to comment. Hardy expects the title to transfer to Home Federal on Monday but said someone else could still step in during the sale and outbid the bank.
If the bank takes over, Hardy said, it "will continue to operate the project as it was originally laid out and continue to move forward with the builders that are out there. It's the best solution you could have."
At this point, the best-case scenario, said Steve Clay, senior appraiser with the county, would be for some other group to come in and continue with the high-quality homes. "You'd hate to see someone come in and start developing less-expensive homes next to those more-expensive ones," he said.
David Neubauer and his wife, Carrie, have lived at Lakeside since last summer. "We're just going to have to see what the new owners do in terms of ongoing development," he said. "In the meantime, we just do what we can do to stay positive and optimistic that things are going to be OK."
Suzanne Ziegler • 612-673-1707