Tuesday, March 15, 2011

Of Bad Investments and Bailouts

Consider the empty field in the photo below.

Most everyone who looks at this area will define it as undeveloped land, but not so long ago some enterprising individual saw it as a walled enclave containing a desert (think New Mexico) several hundred upscale homes and a golf course with fairways wide enough to cut the discriminating player's mulligan rate by half or more. The golf course would contain an artificial hill, be 7000 yards and closely resemble Las Sendas in Scottsdale, Arizona without the difficulties one generally encounters when playing Las Sendas. Take it all around, this was an ambitious project at best, and would incorporate buying up perfectly good farm land, getting the zoning changed and ultimately forcing a selective area drought so as to make a Southwestern desert in Northern Ohio. Undaunted by the complexities involved in the radical change of an established climate, the developer damned the torpedoes and ordered full speed ahead. The news became official when ground was broken in June of 2000 and the story hit the press in September of the same year. Happy Y2K, and here are two links to a business site and the local bird cage liner.

The desert is coming to Sylvania
The man behind the daunting task of bringing the desert to northwest Ohio is Jack Sparagowski, an avid golfer and president of Sparagowski and Associates market research and criminal investigations firms.
'Desert look' planned for golf course, homes
Hoses are expected to be priced in the $500,000 to $1 million range with villas priced at about $300,000.
Remember that these are year 2000 prices. At the time the Toledo area was sliding even further into the gravel pit, but Sparagowski decided that his project was immune to failure. It was during this period that I was reminded of the six phases of any project: Enthusiasm, Frustration, Despair, Search for the Guilty, Persecution of the Innocent and Praise for the Non-Participants. We have just seen the Enthusiasm phase.

Moving right along to the fall of 2002, it looks like the swamp has failed to drain and the promised desert is still on the drawing board.

Desert Village Limited Partnership fights litigation
We contacted Jack Sparagowski, the key principal behind Desert Village Limited Partnership, an Ohio Limited Partnership involved in developing this project. Sparagowski confirmed that several delays had occurred with the golf course construction. He also confirmed that he has become aware of a number of rumors concerning the financial situation with this development.
"There is simply no truth to any rumors about financial problems," Sparagowski stated.
Litigation stalls work on upscale subdivision
Lawsuits allege default by project's developer
The future of a pricey Sylvania Township golf course and housing development is in doubt after a series of lawsuits filed against its developer has brought construction to a standstill.
Evidently there was some question about earth moving, contracts and invoice terms. Well, these things happen. Then there's the little problem about bank financing and how it's no longer available. In one case Sparagowski found a loan officer who was an avid golfer and was willing provide an enthusiastic green light. When news of the latest investment floated to the top, the green light was turned off, removed from the light socket, the wires to the socket were cut and the light along with the loan officer were instructed to leave the banking industry and take up street sweeping. The bank then began the arduous process of damage control. Perhaps a bit late, as in the spring of 2003 we see the developer reaching out for some help:

3 Area Developers In Deal For Proposed Golf Site

180 Acre Western Sylvania Township Development - New Park Included In Plans

Then there's the rumor mill, which keeps passing notes about financial problems - the same problems Sparagowski claimed he didn't have. So... if there aren't any problems, then why did this hit the news?

Chapter 11
On April 28, 2003, Desert Village Limited Partnership (“Desert Village”) filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.

Looks like there might be some truth to the rumors after all. With Desert Village filing Chapter 11, the land is up for grabs. The Olander Park System of Lucas county snatched up a hefty parcel and started trying to change the man made hill into something suitable for sledding.

Olander Park system takes steps to add hill for sledding

"The Board of Park Commissioners ran the park system just the way my little Polish mother runs her household: If we didn't have the cash, we didn't buy anything," said Gary Madrzykowski, Olander's director.

But while the park system has retired the loan for the original Sylvan Prairie purchase, it isn't free from debt yet. That's because it also borrowed money for the 51 acres it bought 11 months ago for $875,500 from Brint Park Holdings, LLC to boost the site's total to just under 150 acres.

While grants covered $495,390 of that cost, a 10-year mortgage was taken out from Huntington for the rest. Mr. Madrzykowski said the park system intends to pay that off in three years.
I think Gary doesn't remember much about the way his mom ran their household, as it would seem that a ten year mortgage was required. What really bothers me about this entire business is that the government bought the land at a good deal less than a fire sale price, and it shouldn't have. Now I wonder just who oversees the purchases for The Olander Park System and how this purchase was approved.

This is quite a history for land that still sits empty. Quite possibly everyone would have been better off if the project had never been started. I know that a few of the vendors who were involved likely feel that way, and I also note that many of these people were from out of town and didn't understand the Toledo metro area or never gave any thought to just why a project that specifies transforming farm land into desert is not going to work. Clearly building permits were issued by the local government and the zoning for the land was changed without incident. Me, I just put it down to the new economy: I'll build it and the government will cover my mistakes.

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