IBT Asset Management was retained by RI Waterman Properties, Inc. (a subsidiary of Bank of America) to prepare a post-foreclosure due diligence study and risk assessment of Grande Reserve, and to develop a stabilization plan and value maximization strategy for its final disposition.
Zoned and annexed into the United City of Yorkville, Illinois in August 2003, Grande Reserve is a 1,037 acre master planned residential community developed by Moser, Pasquinelli, and Isenstein (MPI). Entitled for a total of 2646 dwelling units (1715 total lots), of which 1877 potential buildable dwelling units (1405 total lots) owned by RI Waterman Properties, Inc. MPI improved significant portions of Grande Reserve intending to sell and enter neighborhoods to production comprised of semi-custom and small volume costume homes. In late 2004, they contracted to sell five neighborhoods to Pasquinelli Homes, Gladstone Homes, Richmond America and Kensington Homes. Each builder began construction of homes on their respective lot purchases, however, in late 2006 two builders halted their lot take downs, and by late 2008 Gladstone Homes remained the only active builder.
The severe downturn in the U.S. residential market in late 2007 overwhelmed residential land developers and homebuilders working in Yorkville and in the surrounding communities. It is estimated that the gross oversupply of platted and finished residential lots in the Yorkville area has an absorption period exceeding ten years. This inventory must be absorbed before deteriorating home values can be reversed and the residential market time reduced.
Value Maximization Strategy
After a thorough review of Grande Reserve and the greater surrounding marketplace, it was determined that the two courses of action for disposition available to RI Waterman Properties, Inc. included:
Hold Property and Create Value
IBT Asset Management recommended that RI Waterman Properties, Inc. continue to market Grande Reserve with a listing broker to potential buyers in the marketplace; simultaneously developing a strategy to move forward with the development of the property in expectation of not receiving an acceptable purchase price. It was also recommended that the strategy include a willingness to complete improvements to the project that create value for a potential disposition of the Grande Reserve whether it be at the property level or the neighborhood level.
IBT Asset Management effectively stabilized Grande Reserve by completing construction of the project’s incomplete units. The completed units were sold maximizing value for the Grande Reserve community association. Lastly, IBT managed the construction of roadways and utilities throughout the remaining 85% of the 1,037 acres and eventually negotiated the land sale to a master developer.