Rarity Rivers project in limbo
Developers say planned community still viable
An East Tennessee waterfront project backed by a prominent Knoxville-area development firm is at a standstill after getting caught up in a Cleveland, Tenn., businessman's financial turmoil.
Located on the shores of Chickamauga Lake, near Dayton, Tenn., Rarity Rivers is one of several luxury residential projects across East Tennessee that was developed by Maryville-based Rarity Communities.
The project now is on hold and a firm that partnered with Rarity has run into financial difficulties. The trouble came to light in the bankruptcy filing of Steve "Toby" McKenzie, a Cleveland businessman whose name was recently removed from a University of Tennessee athletics building after he failed to complete a $2 million pledge.
In a filing submitted to U.S. Bankruptcy Court in February, GreenBank said an entity called Chickamauga Shores Holdings LLC owed more than $15.2 million on a note that is in default and secured by approximately 600 acres of Meigs County land. The filing said McKenzie owns 100 percent of the membership interest in Chickamauga Shores.
The property is the site of Rarity Rivers and, according to the filing, Chickamauga Shores has a joint venture agreement with Hiawassee Properties LLC, an entity that is partly owned by Rarity Communities President Mike Ross. The filing said Hiawassee owns approximately 200 of the 600 acres, and that GreenBank holds a first priority lien against that portion of the property.
In January, GreenBank filed a motion seeking relief from an automatic stay in the case, saying it must give McKenzie notice of a foreclosure sale since he is a guarantor of the original $15 million loan. The bank estimated that the liquidation value of the nearly 400 acres owned by Chickamauga Shores is just more than $7 million, and that the liquidation value of approximately 200 acres owned by Hiawassee is $10.2 million.
Last month, a judge approved the bank's request for relief for the purpose of foreclosing on collateral owned by Chickamauga Shores and/or Hiawassee.
In an e-mail message, GreenBank's chairman and CEO, Stan Puckett, declined to say if the bank has issued a foreclosure notice for property owned by Chickamauga Shores, citing financial privacy laws. He said the bank has not issued a foreclosure notice for property owned by Hiawassee, and that Hiawassee is not in default.
Puckett also said the bank feels Rarity Rivers is still a viable project.
A bank filing said only four lots had been sold, and none since August. Ross, the head of Rarity Communities, said last week that once GreenBank has foreclosed on the Chickamauga Shores portion of the property, the land would be available for sale to a third party so the project can continue.
Ross confirmed that only four lots have been sold, but said his firm isn't planning to walk away from Rarity Rivers. Noting that the economy has slowed down development, Ross said that "it will probably be a little while before things get started back" at Rarity Rivers.
An attorney for McKenzie, Kyle Weems, said that to his knowledge the bank has not yet filed a foreclosure notice on the Chickamauga Shores property. A filing by McKenzie in the bankruptcy case asked the court to reject GreenBank's request for relief from an automatic stay. The filing asserted that Chickamauga owns the 600 acres, and that "GreenBank is adequately protected by equity in the (property) and that the (property) is essential to debtor's reorganization."
Ross has been hit with multiple legal issues in recent months. In March, one of the original partners in the Rarity Pointe subdivision in Loudon County filed a lawsuit in Blount County against LTR Properties, which is owned by Ross.
The suit alleged that funds from the sale of Rarity Pointe lots may not have been deposited, and sought judicial dissolution of an entity called Tellico Landing LLC.
The suit also alleged that a Ross-owned entity called Assurance Title Company prepared Housing and Urban Development settlement statements that were false and misleading regarding the closing of lot sales in Rarity Pointe. Ross said in a statement that LTR strongly denied the allegations. In addition to suing to dissolve the partnership, original partner Robert Stooksbury Jr. filed a second lawsuit this month and is suing Ross individually for damages.
Assurance Title also is the subject of a separate legal action involving Ross and Lenoir City Judge Terry G. Vann.
Last July, Assurance Title filed a complaint in U.S. District Court relating to money that remained from the assets of Assurance, which was being dissolved.
As part of that action, Ross filed a cross-complaint against Vann, which said the judge "claims that he is entitled to additional, substantial distributions from Assurance Title and/or its other members." In his filing, Ross denied that Vann is entitled to additional distributions.
Earlier this month, Vann filed his own cross-complaint, which alleged that Ross and another individual asked Vann to join them in forming, managing and owning a title company, and said he would be paid a fixed sum for each title examination undertaken by the company. Among other things, Vann alleged that while he was paid for a time, he was later denied the promised compensation, and alleged that he was deprived of his proportionate share of company income.
Asked about Vann's claims, Ross said in an interview that "we feel like we're in the right."