A Charlotte firm has bought the debt on North Hills developer John Kane's Ramblewood residential development, which is now in default on nearly $26 million in loans.
Last week the new note holder, Mountain Real Estate Group, appointed a substitute trustee over the property, a move that often is a precursor to instigating foreclosure proceedings against a borrower.
"Mountain is pursuing its legal remedies and will decide in the future on which alternative path to take," said Arthur Nevid, the firm's chief investment officer.
He declined to comment further.
Kane said he had been in negotiations with the original lender, BB&T Bank, before it sold the loans to Mountain.
"It's not unusual at all for loans to be in default when you're renegotiating a deal with someone," he said. Kane said he's had no contact with Mountain other than being notified that the debt changed hands.
"I'm sure we'll have dialogue with them at some point," he said.
The Kane Realty entity that developed the property, Ramblewood 2005 LLC, owns about three dozen lots and a handful of condominiums in the development, which sits on the south side of the Beltline just off Six Forks Road.
Kane borrowed $12.77 million in May 2006 from BB&T, according to Wake County property records. He borrowed an additional $13 million from BB&T for the project in February 2007.
Many developers who borrowed large sums of money around that time quickly found themselves in trouble when lending froze up and the housing market went into free fall.
Kane has sold nine lots and condos in Ramblewood since the beginning of last year, according to property records.
Of late, banks have become much more aggressive about dispensing with the distressed real estate loans on their books, either by selling individual notes or pools of debt.
The buyers of such loans often acquire them for a fraction of the money owed, which enables them to reposition the projects at price points that make more sense in today's market.
Mountain has acquired $800 million in notes, doing deals that range from as few as nine residential lots to ones that involve thousands.
The firm's investment in Ramblewood comes while Kane is seeking to rezone other land in the development that he owns under a separate entity, Ramblewood Lantern LLC. The property includes the 1960s-era Lantern Square apartment complex.
If approved, the rezoning would allow for a new apartment complex to be built on the site with as many as 276 units. A public hearing to discuss the rezoning was held Tuesday.
Kane said the two projects are separate.
"It's a different ownership and that debt doesn't have anything to do with it," he said.
For all Kane's success developing North Hills, he has not escaped the downturn unscathed. A plan to build a North Hills retirement community on the east side of Six Forks has stalled.
In November, Kane and the financing partner on the project, Health Care REIT, terminated the lease agreement they signed in 2008. But Kane continued to move ahead with some projects, most notably partnering with Concord Hospitality Enterprises on a $40 million second hotel in North Hills.
Kane's success at North Hills, which has boosted property values in surrounding neighborhoods, means he's frequently praised by residents who might otherwise be wary of developers' intentions.
At Tuesday's hearing about the apartment rezoning, the half-dozen residents who raised concerns were quick to add that they are grateful for what he's accomplished at North Hills.
Bill Wilson, who is worried about the proposed density of the project, said an additional concern is that someone other than Kane might end up redeveloping the property.
"Will this be done by John or some other entity?" he asked.
