NORTH CHARLESTON, S.C. (CN) – Three investors claim a company hailed as a model for sustainable urban revitalization on the Charleston peninsula defaulted on $23.8 million in loans it received two years ago. The plaintiff private equity firms wants the assets of the Navy Yard at Noisette LLC placed in receivership and liquidated.
According to the complaint Charleston County Court of Common Please, the Navy Yard at Noisette obtained the $23.8 million commercial mortgage loan on Aug. 1, 2006, and executed a series of promissory notes to the three individual lenders.
These included a $12.9 million note delivered to an entity called SPG CDE Subfund A, an LLC registered in Delaware, LLC; a $6.9 million note delivered to the Urban Development Fund II, another LLC registered in Delaware; and a $4 million note delivered to Capmark Finance Inc., a California corporation.
The loans were to be repaid with interest by Aug. 9, 2008, but have not been. The total now due, not including interest and penalties written into the contract, is just under $23.2 million.
Noisette originally entered into a $9.6 million deal financed by the City of North Charleston in 2003, intent on transforming a 300-acre industrial site at the north end of the former Charleston Naval Base into a mixed-use, sustainable urban district defined by new office, commercial, academic, retail and residential development.
The Navy base was closed in 1996, and with a projected build-out of more than 20 years, the Navy Yard at Noisette was heralded as the creation of the “New American City.”
Published reports in the late summer of 2006 stated that about $4.2 million of the Capmark Finance loan was used to pay off the balance of Noisette’s indebtedness to the city. An unspecified amount of the money was expected to be used for design and infrastructure studies, and the initial development of roads and other infrastructure on some 125 acres.
Since then, the project had the unwavering support of the city, something that’s manifested itself in recent weeks in a fight between North Charleston Mayor Keith Summey and state officials, over whether double-stacked freight trains should be allowed to depart from the north side of a new cargo container terminal, which is being built south of the Noisette project.
The Charleston peninsula is transected by two major east-west rail lines, both owned and operated by CSX Transportation, and a shorter line owned by Norfolk Southern which winds its way through the Noisette development site in North Charleston and extends into the north end of the old Navy base.
Summey signed a memorandum of understanding with the S.C. State Ports Authority to forestall the freight activity from that end of the terminal, but in recent weeks state lawmakers and others have been maneuvering to allow just that, as well as the creation of an intermodal rail facility at the north end of the terminal.
The mayor has responded by waging a loud and persistent public relations campaign against the proposal, charging the state is reneging on the deal he has with the ports authority, a quasi-state entity, and asserting that rail activity would destroy the sustainable “green’ communities being developed in and around the Noisette property.
While most locals think of Noisette in broad terms, it is actually two distinct entities with different ownership structures. There is a 3,000-acre master-planned community with guidelines for sustainable redevelopment, and the 340-acre, mixed-use urban revitalization called the Navy Yard at Noisette, which is owned by the Noisette Company LLC.
The only project outside the Navy Yard that Noisette manages, through a contract with the City of North Charleston, is Oak Terrace Preserve, a green neighborhood that has received accolades from groups involved in the sustainability movement. The company does not own any land outside the Navy Yard.
The lawsuit does not make reference to the larger master-planned community nor to Noisette’s contract related to the Oak Terrace Preserve.
Other private “sustainable” projects in the area include the Beach Company’s Garco Park, and I’on Group’s Mixson, are in the early stages of redeveloping formerly blighted neighborhoods in the City.
Plaintiffs are represented in by James Pulliam, with Kilpatrick Stockton of Charlotte, N.C.