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Business Observer Thursday, Jan. 21, 2010 10 years ago

Legal Limbo

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Sarasota's Forest Lakes Country Club Estates' homeowners look out at 12-foot tall weeds instead of golf course views, and now have a fire hazard, flooding worries, new forms of wildlife and crime to contend with while the foreclosure drags on. It is a grim sign of the times.
by: Jay Brady Government Editor

REVIEW SUMMARY
What.
Fire and flood hazards mount at Sarasota's historic Forest Lakes Golf Course while home values fall.
Issue. Wachovia's foreclosure suit languishes.
Impact. Steep property value decline hurts everyone.

Vision-blocking weeds now dominate the landscape where Sarasota's historic Forest Lakes Golf Course once stood as the premier course in Sarasota County.
The re-developer has gone under, but the bank does not seem to want the financial burden of taking it back. So the project languishes part way finished, frustrating neighbors, driving down property values and creating a habitat for wildfires, floods and crime.

It is a grim sign of the times along the Gulf Coast.

Built in 1964, and co-owned by former neighborhood resident and Cleveland Browns' Hall of Famer Otto Graham, the club offered Sarasotans 18 holes of golf, a clubhouse, restaurant, three pools, and scenic views.

Today, the centrally located golf course is at the center of a foreclosure tug-of-war between Wachovia Bank and 13 defendants, including developers, builders, investors, an engineering firm and subcontractors.

The adjacent residents of the 522 homes, condos and apartments of the Forest Lakes Country Club Estates neighborhood find themselves caught in the middle. They aren't happy, judging from the neighborhood association's Jan. 12 annual meeting.

“Giraffes could run around there and we wouldn't know it,” says Doug Erb, a longtime resident, club general manager and partner in the golf course with Graham and others from 1977 to the early 1990s.

Though some homeowners seem resigned that the foreclosure matter is out of their hands, they may have more leverage than they think.

Those worried about fire danger are already taking matters into their own hands, having been out with their lawnmowers and bush hogs trying to prevent a future conflagration. Concerns are heightened as the dry season approaches after the recent freeze.

County Commissioner Joe Barbetta, whose district includes Forest Lakes, sees the foreclosure problem as “a private property issue,” and says the county can do nothing: “Our hands are tied.”

Yet Barbetta thinks the association should appear before the commission to make their case suggesting the county could do more from its bully pulpit given the obvious public nuisances.

A brush fire that the county fire department would have to respond to is a growing worry for residents. “If it's at night, it's an incredible danger,” says Erb who lives with his wife and children in a now weed view home on the former course.

Erb, whose home was originally owned by subdivision developer Roland King, says the fire department may be underestimating what they're up against. “They won't see the ponds and these ponds are deep.”

The grass and weeds problem has attracted enough attention that the fire department's mitigation team headed by Joe Padgett was out at the course last year to do an assessment.

But Padgett, while sharing Erb's access worries, says the property only gets a moderate hazard rating. “Grasses in general are a low fire hazard,” he says.

Yet when a small rest station went up in flames about a year ago, 11 units responded. The demolition permit dated last May was still there amongst overgrowth and debris this month.

However serious the fire hazard, stormwater problems might be worse.

Forest Lakes lies in the Phillippi Creek drainage basin and its drainage ditches move water from north and east of the development to the bordering creek. Maintaining the primary drainage ditches is the responsibility of the county per a 2000 agreement, according to Erb.

That claim is confirmed by retiree Bill Taft, vice president of the homeowners association. Taft has been on the front lines for the association and attended individual meetings with all five county commissioners to gain support.

But the county has only made minimal efforts maintaining those ditches, which are clogged with weeds and debris though residents pay into a county stormwater utility fund. Both Taft and Erb fear a major flood in the area is inevitable.

“We'll go after them”
Foreclosure papers were filed two years ago this month against the group of defendants, when the group's county-approved redevelopment plan for 200 units and course renovations failed.

But Wachovia, now owned by Wells Fargo, has not had much motivation to take ownership of the property, leaving it in legal limbo.

Calls to Wachovia representatives in Jacksonville and an e-mail to Wells Fargo's Florida headquarters seeking comment only resulted in a Wells Fargo e-mail reply stating they were looking into it.

“If they take it, they know we'll go after them,” says Terry Boswell, Sarasota County's general manager of land development services, pinpointing the key reason for inaction. Boswell has been the county's liaison to the litigants and others trying to help deal with the course's many problems, but has had little contact with Miller or bank representatives.

“They won't talk about it, and they don't,” says Boswell about Wachovia. Regarding builder/developer Mark Miller, Boswell says understandingly, “Mark will not return phone calls.”

Miller spoke to the Business Review. He's fighting the foreclosure claiming the bank shut him down unnecessarily after he took out about $12 million on a $47 million line of credit.

Erb says the developer ran into stormwater permitting issues leading to the bank requiring more pre-sales before stroking another check. The bank, says Erb, wanted at least 25 pre-sales and the developers could only come up with five. So Wachovia, apparently fearing they might be throwing good money after bad, filed suit to foreclose.

“We just have to be patient,” Taft told association members. But a few days later Taft had put in a call to Chief Judge Lee Haworth of the 12th Judicial Circuit to see if more can be done.

Nothing's happened in the case since April 2009 according to Haworth. The judge says the courts have a rule that if a foreclosure file is inactive for a year the case is dismissed, but can be refiled.

Wachovia has caught up with paying the property taxes after letting payments lapse a year, so its nearly $127,000 payment suggests interest in managing an asset it does not own — at least not yet.

The course site is valued as of Jan. 1, 2009 at $2.725 million by the property appraiser, down more than $1 million in two years. Forest Lakes Development paid $4.2 million for the property in March 2004.

Of the 13 homes recently for sale, 11 border what little remains of the Par 71 track. Taxable property values of these 11 have dropped an average of 47% from 2007 to 2009, according to county property appraiser records. Market values are down nearly as much.

One golf course home's taxable value is down 63%. It's market value is down more than 45% in that span. The two homes for sale that are not adjacent to the course have dropped an average of 14%.

By comparison, Sarasota County's overall taxable value declined about 23% from 2007 to 2009.

The value data suggests homeowners and the county have a big stake in what happens, too. Yet neither seems to have done all they could to move the foreclosure along given the public safety issues that judges could consider in prioritizing cases.

With thousands of foreclosure cases the court's squeaky wheel system is overwhelmed. And according to Haworth, the court's computer system isn't designed to prioritize cases.

“What it would take is someone going manually through 8,500 cases this year and 8,500 last year,” says Haworth. The Chief Judge says he will speak to Judge Charlie Roberts, the circuit civil case judge who has the case somewhere in his stack.

Discounted home values
“This is a unique situation,” says Barbetta, also an attorney. He says the county has been approached about it buying the golf course split by Beneva Road, “but we don't have the money to buy the property.”

The county is also losing hundreds of thousands of dollars a year in property tax revenue based on the lower values. Realtors say the golf course homes would be selling for significantly more if the course were operating in good condition.

Steven DuToit, a Realtor with Keller Williams Realty says, “A typical buyer would not consider purchasing there unless it was discounted from its true market value. For a typical 2,000 square-foot home, I would think that a buyer would be at least 15%-20% lower than anticipated sales price because of the uncertainty of the property.”

The county, which does not own or operate a public golf course, has also had to deal with a number of code enforcement issues tied mostly to the overgrowth that's resulted in roughly $30,000 in unpaid fines.

While obvious to anyone driving by on Beneva that the flora has changed, residents also report changes in the local fauna. Erb says he's seen five foxes around and snakes are proliferating. Other owners confirm fox sightings and more confrontations with snakes.

Another form of “wildlife” are teenagers, who some suspect in setting afire a golf course rest station about a year ago near homes on Brookhaven Drive.

The county also had to board up the old golf cart garage to deter trespassing, “but no abatement fees were filed as liens against the property due to the existing foreclosure actions,” according to an e-mail from Stacey Garecht, a county code enforcement officer.

In other words, the county doesn't expect to ever see a dime, and as such is reluctant to invest much in the neighborhood. That strategy may prove to be short-sighted if the neighborhood's property values continue to slide.

Sheriff Tom Knight was at the association meeting with three other officers to talk about a rash of recent burglaries. One officer told the group they now flying helicopters over the golf course looking for suspects because they can't see in through the weeds.

Angels to the rescue?
“It will be high on the agenda for someone,” association Vice President Bill Taft told members at the meeting referring to the course. For now, Taft says he only sees a small speck of light at the end of the tunnel.

He's hopeful an angel will appear to resurrect the course, which might just be Mark Miller, the principal of Forest Lakes Development, LLC, one of the 13 defendants.

Miller, who grew up in the area would like nothing more than to finish the job he started, and is rebuilding his businesses. He says, “We'd like to pick it up at a lower price. We're working on it.”

If that angel isn't Miller, it could be Mike Zedreck, former golf course superintendent at Pittsburgh Field Club, a Pennsylvania golf course he managed for 14 years.

Zedreck, who owns a home he rents out in Forest Lakes, says he's motivated to return the course to its glory days. But he's got challenges — he needs to line up investors in a very difficult market for both golf courses and investor cash.

Miller's plans include 189 condo units and a subdivision of 11 upper end homes. But all the zoning approvals expired.

Some residents want the bank to follow through with the foreclosure, take ownership and start mowing the site regularly, something Erb estimates could cost several thousand dollars each time around the 101 acre site.

Then there's the stormwater matter and reinstating the entitlements for the county to consider.

Forest Lakes recent history
March 17, 2004 - Forest Lakes Development, LLC (FLD) buys Forest Lakes Golf Course site from NB&R, LLC for $4,200,000.

Feb. 14, 2006 - Wachovia agrees to a $47 million revolving line of credit to Forest Lakes Development.

Aug. 24, 2006 - FLD files Notice of Commencement to demolish clubhouse and remove asphalt.

Jan. 15, 2008 - Wachovia files notice of lis pendens (intent to seek foreclosure of the mortgage) to FLD and other defendants.

May 9, 2008 - Magistrate orders FLD to abide by a modified maintenance plan and an agreed upon mitigation plan.

Aug. 9, 2008 - Special Magistrate orders initial fine for code violations for weeds and grass in excess of 12 inches in height of $250 and a $50 per day fine, plus interest at 11% annually.

Sept. 12, 2008 - Magistrate orders FLD to implement maintenance plan.

Jan. 1, 2009 - Wachovia acquired by Wells Fargo making the parent the fourth largest bank in the U.S.

Oct. 23, 2009 - FLD ordered to pay fine for not complying with order of special magistrate.

Dec. 23, 2009 - Wells Fargo, parent company of Wachovia, repays $25 billion in bailout funds from the U.S. Treasury Department Troubled Asset Relief Program.

Dec. 31, 2009 - Wells Fargo pays its top four executives share bonuses worth a total of $25 million.

FOREST LAKES' PROPERTY DECLINE
Homes for sale on Just Market Value % Change
golf course lots 2007 2009 2007-2009

3538 Sea View St. $384,600 $227,400 -40.9%
2042 Beneva Rd. $270,700 $157,300 -41.9%
3527 Brookline Dr. $286,500 $164,700 -42.5%
2019 Tanglewood Dr. $388,200 $207,200 -46.6%
3621 White Sulphur Pl. $350,300 $192,700 -45.0%
1926 Riviera Dr. $359,100 $217,100 -39.5%
3247 Pine Valley Dr. $283,600 $167,100 -41.1%
3271 Pine Valley Dr. $288,900 $157,800 -45.4%
3312 Pine Valley Dr. $313,000 $164,200 -47.5%
1949 Brookhaven Dr. $309,200 $176,300 -43.0%
1823 Brookhaven Dr. $284,600 $180,100 -36.7%
Averages $319,882 $182,900 -42.8%
Sarasota County $83.4 million$62.3 million-25.3%
Sources: Florida Department of Revenue and Sarasota County Property Appraiser.

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