Bank of Asheville Posts Unprecedented Losses – Who’s to Blame?

Small town bank crushed by Board of Directors decisions
Buddy Greenwood, Former CEO of Bank of Asheville
Buddy Greenwood, Former CEO of Bank of Asheville
Oct. 8, 2010 - PRLog -- If you have been to Asheville North Carolina in the past year, you may have noticed a series of billboards along the highways featuring – headshots of Jack Nicklaus as the golf designer for Queens Gap and Arnold Palmer, designer for Seven Falls’ course and teaching facility. The subliminal message of having these two golf icons on the same billboard was an illustration of two golf legends coming together to offer one premium golf membership – to both Queens Gap and Seven Falls golf courses.

Unfortunately, what has transpired so far is anything resembling a revered golf membership at these two golf communities. And it’s safe to say, there aren’t happy property owners out of either one of these master planned real estate developments just yet. Development progress at either golf community, Queens Gap and Seven Falls is virtually non-existent.    

Devin McCarthy, developer of Queens Gap, was once President of Franklynn Industries in Ohio. He set his sights on Western North Carolina to develop a master planned golf community that would have just about everything prospective buyers looking for a high end development would want – a Jack Nicklaus designed golf course, pro shop, equestrian center, wellness center, fitness center, miles of trail systems, resort style pool, clubhouse and restaurant on over 4,000 acres of land.   The Queens Gap real estate development is located about an hour south of Asheville North Carolina. McCarthy did his homework and knew demographically that Asheville and Western North Carolina were going to be a city and region many Baby Boomers would be coming to relocate and spend their retirement years. Devin unquestionably got that part right. Yet, it takes a lot of confidence and perhaps a bit of ego for an inexperienced developer to have his first project be a 4,000 acre large scale amenitized master planned real estate development such as what he had planned for Queens Gap.

Southern Way of Life has been informed over $30M in lots was sold from 2007 to 2009 at Queens Gap. It appears the Bank of Asheville was an active lender for the project. Lot prices were on average between $150k to over $300k offered for sale by the developer. Today the property owners of Queens Gap are looking at few roads in, no amenities built and the Jack Nicklaus golf course is incomplete.  It has also been reported the Army Corp of Engineer is concerned some of the land within this massive development may not be suitable for road or home construction due to possible erosion issues. The lot values at Queens Gap have had erosion issues of their own – there is virtually no market value or demand for the lots at present. Hence, many property owners have simply walked away from their debt obligation - leaving the bank(s) holding the essentially worthless paper.  How much of that paper was issued by the Bank of Asheville? Given the bank’s size, perhaps proportionately, far more than they wish they had lent on the project.

About an hour away from Queens Gap is Seven Falls of Etowah, a 1400 acre Western North Carolina golf community featuring legendary golfer and designer - Arnold Palmer. Southern Way of Life has learned about 150 lots were sold between 2007 and 2008 before development and construction came to a halt.

Keith Vinson, originally a construction company owner in Brevard North Carolina became a real estate developer in the Western North Carolina region. Mr. Vinson became involved with the Seven Falls development and eventually with the Queens Gap property as well. This left a few scratching their heads as Vinson’s reputation was already tarnished due to several of the developments he has been involved with which have left a trail of liens by unpaid contractors, builders and even some bankruptcies.  

Similar to Queens Gap, many Seven Falls lot owners have also walked from their debt obligations as their confidence in the community progressing has diminished. From the article in the Citizen Times, the Bank of Asheville was also a mortgage lender on this property.

Altura and Zona Lofts were two more urban like developments located in Asheville marketed to the public by real estate developer Rod Kagy. Zona Lofts had lofty plans taking deposits from buyers on condominiums to be built, of which were never started. Altura is also named in the article by the Citizen Times of Asheville as a third development the Bank of Asheville had loan involvement with.

The Bank of Asheville, a 55 employee bank, just 13 years old, with assets of only $200M was listed as a preferred lender to consider when buyers sought financing for property purchased at these three developments. The Bank of Asheville has come to its knees in recent weeks when the value of the bank plummeted to just $455K, the current value of the bank less than the price of a single family home in some of Asheville’s neighborhoods. The previous CEO and President of the bank have both resigned in recent months. The bank’s stock shares which traded as high as $13.70 is now currently priced at pennies a share.

Citizen-Times recent story: Bad real estate loans bleed Bank of Asheville

All this begs the question – at what level do local banks get involved with nearby new master planned communities as the ‘neighborhood’ bank without jeopardizing the bank’s assets by taking on undue risk? These three real estate developments failing in the current marketplace have substantially jeopardized the financial future of the Bank of Asheville. Was the Bank of Asheville far too aggressive in their lending position on these three projects? It appears so.

Most banks are not lending on master planned community projects such as Queens Gap, Seven Falls and Altura as they once did. This puts real estate developments in a real Catch 22. They can’t get bank financing to build amenities and without amenities, they won’t attract buyers to achieve sales.

Despite the headlines that these three developments are making of late, it is not all carnage in Western North Carolina and the Asheville area when it comes to finding quality developments to consider. In fact, there are some excellent communities with extensive infrastructure and most if not all of the amenities in place for buyers to enjoy right now about an hour or so from Asheville-

Balsam Mountain – located in Sylva North Carolina

Bright’s Creek – located in Tryon North Carolina

Headwaters at Banner Elk – located in the High Country North Carolina

Lake James 1780 Club – located in Nebo North Carolina

The Reserve at Lake Keowee – located west of Greenville SC on Lake Keowee

Trillium – located in Cashiers North Carolina

We wonder if depositors and shareholders of the Bank of Asheville had any idea of how much of the bank’s assets were being loaned on start up master planned developments? Perhaps not and many who invested in the Bank of Asheville are locals who felt their neighborhood bank would be a safe place to invest their hard earned money for the long term. Now those folk’s financial future may also be harmed by decisions the board made with investment funds of the Bank of Asheville.

It is not as though Queens Gap, Seven Falls and Altura did not achieve sales at their projects. They did. Our question - what did these real estate developers and others in Western North Carolina do with the money from their lot sales?  Responsible real estate developers pay off debt, improve their communities and build infrastructure. How about some common sense thinking going forward?

Let’s hope memories aren’t short and the woes of the ways of the past aren’t easily forgotten. While this economic correction hasn’t been easy on most, perhaps the honest ‘bleeding’ the Citizen Times of Asheville reports on the Bank of Asheville and other entities will soon stop. Let’s learn from these unfortunate experiences by banks, real estate developers and let’s not forget the consumer’s role in this as well.

# # #

Southeast Discovery has become a trusted guide advising clients on finding the right retirement, second or vacation home in the Southeast; Florida, Georgia, North Carolina, South Carolina and Tennessee. The blog site has becomed a source of candid commentary and news about real estate communities and developers throughout the Southeast.

Relax, Retire, Relocate™

Like PRLog?
Click to Share