Bank files foreclosure on Michigan investors

$13.86 million owed on developments

— Two Michigan investors are defendants in six foreclosure suits filed recently by Regions Bank seeking almost $14 million in unpaid mortgage balances on seven Benton County properties.

Dominic D. Geric and Gaetano T. Rizzo, who both live near Detroit, own and operate Landquest Communities of Arkansas LLC, Oxford Ridge LLC, Summit Executive Park LLC, Lochmoor Development Inc. and Crestmark Homes Inc.

Those entities were all named as defendants in the foreclosure suits filed Oct. 19 and Monday in Benton County Circuit Court.

Regions Bank has made more than $21.42 million in construction and business loans to the various companies for construction and property development since February 2003. More than$13.86 million remains unpaid, according to the complaints filed by Mitchell, Williams, Selig, Gates & Woodyard attorneys of Little Rock on behalf of Regions Bank.

Sales of new homes posted an unexpected gain of 4.8 percent nationally in September to a seasonally adjusted annual rate of 770,000 units, according to the U.S. Commerce Department. That level of activity was still 23.3 percent below a year ago, indicating that housing across the country and in Northwest Arkansas remains in a steep downturn.

Home sales in Arkansas for August continued a 20-month decline, dropping 14 percent from a year earlier, the Arkansas Realtors Association said in early October. Northwest Arkansas' market continued to deflate as Benton County sales of previously owned and new homes were off more than 26 percent.

The Regions Bank petitions are in addition to three suits filed Aug. 20 by Liberty Bank seeking foreclosure proceedings against Landquest Communities for more than $20 million unpaid on 16 loans.

"We have been working with Liberty Bank to restructure the loans and we are working with Regions to do the same," Geric said from his Detroit office Tuesday "We have been givenadditional time to recapitalize the company."

Geric did not say how the company developed financial problems.

Landquest Communities of Arkansas has seven active residential subdivisions in Bentonville and Rogers, according to the company's Web site. Three of those subdivisions are named in the Regions Bank suits.

"We are not planning any additional developments. We are considering selling some of our commercial developments and the land holdings so we can focus on selling the lots in our residential developments," Geric said. "We already have deals pending on some of our real estate."

Jeff Collins, a partner in Streetsmart Data Services real estate consulting firm and a real estate developer, said concentrating on the existing subdivisions would be the most sensible move such a company could make, because those propertiesare ready to be sold.

"That is where the market is, so that makes sense. You would be most exposed in raw land holdings because that is further from the market," he said.

Selling the peripheral properties might be the best idea to help save the company, said Ethan Nobles, media director for the Arkansas Realtors Association in Little Rock.

Trying to sell that land might slow the real estate market a bit more in Northwest Arkansas for a while, Nobles said.

"But that is how this market works; it works in cycles," he said. "That would just be part of the cycle."

More pressure on the real estate market concerns Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas at Fayetteville. The center is part of the Sam M. Walton College of Business, and performs the quarterly Skyline Report real estate market survey of Benton and Washington counties.

"I wouldn't be surprised if there were some more big-dollar-figure foreclosures coming," Deck said. "We've seen the first wave of these. There could be a second or even third wave."

Collins said the potential for future foreclosure filings of similar or even greater amounts does exist in Northwest Arkansas, because there are several large developers with large outstanding loans. He declined to identify those developers but said some could have loans of more than$100 million.

"The biggest issue has to do with the banking side of this equation," Collins said. "Losses of that size would impact [the banks'] shareholders. If they are local, then that adds to the local problems."

If large foreclosures occur frequently, then the available investment loan money in the market will be harder to get, Collins said.

"In a slow real estate market, that hurts the area's ability togrow," he said.

The banks filed the foreclosure suits to protect their investments, Geric said.

"They need to do what they need to do. The people at the banks there are good people. They want to work with us," he said.

The company will restructure the loans and reorganize itself to focus on core residential real estate business, Geric said.

Bonnie Warschauer, a spokesman for Birmingham, Ala.-based Regions Financial Corp., the parent company of Regions Bank, said in an e-mailed statement that the bank does not discuss individual customers and initiates foreclosure only as a last resort.

The foreclosure petitions ask for payment of the outstanding debts or the turnover of 98 lots in Oxford Ridge residential subdivision, 24 lots in Windemere Woods Phase I residential subdivision, five lots in Lochmoor Club residential subdivision, and two parcels of property - one of 40 acres and the other with total acreage unknown - in Bentonville.

In Rogers, the petitions seek 18 lots in the commercial Summit Executive Park/Van Dyke Center and a 70-acre parcel of undeveloped land.

Landquest Communities will need about six to 12 months to reorganize, Geric said. He said bankruptcy was not part of the company's planned reorganization.

Business, Pages 27, 32 on 10/31/2007

Upcoming Events