Remember that coastal Leucadia development called Nantucket, the Barratt American luxury subdivision?
Several $2 million homes are next door to three half-finished, papered-up houses, weeds and some empty foundation slabs, surrounded by a chain-link fence. The subdivision was put on hold in the wake of Barratt’s trouble with its lender, Bank of America.
Four months later, the transaction is still on hold.
Why have I kept tabs on this situation? To my mind, the development appears as a snapshot of market trouble in some upper-end areas, and of the damage sustained by one of the region’s most prominent homebuilders. And it shows how tricky some of these negotiations can be.
The investors who bought the house, including a longtime Barratt employee who has since been laid off, paid about $1.9 million in December 2006 for the house. They leased the house back to the developer to use as a model home (listing photos), and the garage was converted for use as an office and showroom. But when Barratt fell into financial trouble, the investors stopped getting paid. That’s when they hired agent John Kline to sell the house as a short sale.
There are a couple of issues, though. When Barratt submitted plans to build the luxury development, the company signed an agreement to build two price-restricted affordable homes, for sale or rent to a very low-income household earning 50 percent or less of the area median income. For a family of five, that’s $44,600.
To make sure they followed through on that deal, the city withheld one certificate of occupancy from the development, meaning Barratt could sell all of the homes except for one before building the affordable unit. The city said in December it’s working with the parties to resolve the situation.
Now, four months later, the lot for the affordable home is vacant, Barratt is largely out of the picture because of its bankruptcy, and the owners of this house just want to be done with it. The sellers even have someone who is willing to buy the house, and those buyers invested money to convert the garage back, he said.
“They’ve done everything, but they can’t get the final from the city until the city can release the certificate of occupancy, which really makes that house un-saleable,” Kline said.
Two weeks ago, amid bankruptcy proceedings, Barratt American offered to buy the vacant lot and donate it to the investors so they could deed it to the city and try to get the certificate of occupancy released that way, Kline said.
But Barratt’s lender has added more strings to the negotiation, Kline said — Bank of America didn’t think Barratt’s offer to pay $25,000 for the lot was enough. Kline said the reason for a low land price is due to the federal price restriction. Anyone who buys the lot might face building a property that can’t pay for itself with the low rent or sales price required.
“Everyone’s gone to their neutral corners and no one is pushing this forward except for me and the buyer’s agent who has someone who wants to buy the property,” Kline said.