Lewistown Commerce Center

Common Bond’s Involvement

One of the early inquiries to Common Bond Capital Partners came from a long-time institutional bondholder regarding a $37.6 million bond issue intended to assist in the development of a commercial and retail center in Hanover County, Virginia, just north of Richmond. Subsequent to the initial bond issue, the recession of 2008 – 2010 killed development dreams in the area. Land values fell sharply and 75% of the property taxes and assessments became delinquent as landowners balked at repaying bond debt that had become three times greater than recently collapsed land values. The project stalled.

The bondholders knew that resolving a seemingly intractable community bond and real estate problem like this was exactly what the principals of Common Bond had successfully demonstrated over decades.

During the next two years, working with all the local Lewistown stakeholders, Common Bond proposed, negotiated and successfully closed a restructuring of the bond debt, in which the default was resolved and the barriers to continued development of the site were materially reduced. The process created value for all shareholders. Additionally, as is its practice, and to demonstrate its commitment and capture some of the value (for its own book), Common Bond acquired 43.5 acres of the development’s land, purchased $1.6 million of the restructured bonds and commenced marketing the land for a variety of retail, commercial and light industrial uses.

Strategy

Common Bond’s strategy was to reduce the bond assessments to a level commensurate with the post-recession reality of reduced actual land value. Reducing the bond assessments rendered the land more affordable to stimulate land sales, renew development and generate revenues for bondholders and the community as the recovery from the recession continues.

While reducing the bond assessments by two-thirds to appropriately reflect current land values might appear to cost bondholders two-thirds of their investment, the alternative of years of foreclosure processes and no ongoing development or tax revenues was an unpalatable course for all concerned.

Thus, the Common Bond solution was to restructure the $37.6 million of defaulted bonds into two tranches of new bonds totaling the same $37.6 million: $12.3 million assessment bonds secured only by property assessments and $25.3 million of revenue bonds secured by tax revenues to be generated from the resulting development. Bondholders now have a good chance for full return of their investment over time and the community now can look forward to development and growth. Common Bond’s strategy and effective execution saved the county’s taxpayers, bondholders and landowners from the alternative of a continued stalled project and no new revenues for any of the stakeholders.

2014 Update

The bond restructuring successfully concluded in 2014. The State of Virginia has committed $30 million to a new Lewistown Road/I-95 interchange at the property, and the Craig Retail Group of Newport Beach, CA has announced a 375,000 SF outlet center adjacent to the property.