Rarity, Ross & Arp
Rarity Bay has reached 1,132 lots sold with 424 residences. In 2009, 52 resales were transacted and construction began on eight homes.
Rarity Bay has reached 1,132 lots sold with 424 residences. In 2009, 52 resales were transacted and construction began on eight homes.

Loudon, Monroe Rarity community starts strong, but appraisal problems arise

By Hugh Willett knoxnews.com

VONORE, Tenn. - Of all the projects connected with the Rarity brand, Rarity Bay in Loudon and Monroe counties stands out as a nationally known example of a successful luxury retirement community.

In 1994, developer Mike Ross purchased the initial 960 acres of land for Rarity Bay from the Tellico Reservoir Development Agency for $9 million, or about $10,000 per acre.

By 1996, roads, water and sewer were in place and waterfront lots were beginning to sell, some for as little as $85,000. Two years later, the development was recognized in "Where to Retire" Magazine as one the "Top 100 Retirement Places."

At the height of the housing market, half-acre waterfront lots in the more exclusive parts of Rarity Bay sold for around $1 million.

Strong start

Although Rarity Bay followed in the successful footsteps of its lakeside neighbor, Cooper Communities' Tellico Village, Ross developed a unique vision of what the development would look like. 

Rarity Bay is on the shores of Lake Tellico in Vonore.

Rarity Bay differed from Tellico Village in the use of design guidelines that ensured a consistent look for condominiums and custom homes.

Ross said he also invested a lot of time visiting other parts of the country to learn more about the construction industry. He also began to learn more about the mass of baby boomers who were driving the need for communities such as Rarity Bay.

"I learned a lot about this business," Ross said. "It's about place-making, starting with exceptional land with many natural attributes, hiring experienced development consultants, working managers and caring staff to create the master concept plan."

Part of the concept plan involved aggressive marketing, not just locally, but at real estate investment seminars from Maryland to Colorado. By the end of 1998, Rarity Bay had acquired more than 20,000 names in its marketing database and had sold more than 150 custom home sites, Ross said.

By 2005, the real estate boom was still building and Rarity Bay had reached the sale of almost 50 percent of its planned 1,600 total units. More than 300 homes also had been built, Ross said.

"Everyone was forecasting nothing but good news for real estate developers," Ross said.

Suspect appraisals

2005 also was an appraisal year in Loudon County, and not surprisingly property values had risen considerably in Rarity Bay. Lots in the exclusive peninsula section of Rarity Bay that had been valued at $500,000 just a year or two before were appraised at close to $1 million.

For some owners, the appreciating appraisals seemed too much to believe, at least compared with some parcels owned by Ross in the development.

Frank Renkel of San Marco Island, Fla., bought lot 990R in August 2004 for $500,000. When he received his tax bill, he checked into the value of other lots in his part of the development.

With the help of newly elected Loudon County Assessor Chuck Jenkins, Renkel discovered that his property was now valued at $900,000.

He also learned that lots adjacent to his that were owned by Ross were assessed based on a value of $500,000.

"I didn't think it seemed fair," Renkel said.

Jenkins discovered that previous Loudon County Assessor Doyle Arp had lowered the assessments representing about $11 million in assessed value on 175 Ross-owned lots in Rarity Bay. There were no records supporting the reductions, Jenkins said.A map showing the locations of the Rarity Communities properties.

Arp, the current Loudon County mayor, said that the reductions were based on legitimate requests from property holders including Ross. In 2008, Ross said he did not request the reductions. In an interview earlier this month Ross said that he did request reductions on some lots in Rarity Bay, not in writing, but in phone conversations with Arp.

A clerk in the assessor's office provided Jenkins with an affidavit stating that she had entered the reductions into the tax records database at Arp's instructions. She also said that Arp asked her to destroy the records.

Jenkins disclosed in late 2009 that he had discovered similar assessment reductions made by Arp at 35 Ross-owned lots in the Rarity Pointe development on Tellico Lake near Lenoir City.

Ross denies making any kind of deal with Arp to lower the assessments.

He hired Arp's son Richard in 2006 as a salesman at Rarity Bay, although the younger Arp had no real estate sales experience.

"He was a basketball coach," Ross said. "He seemed like a nice guy. I thought he could sell."

Neither Mayor Arp nor his son has replied to requests for an interview.

Inflated values

After months of looking at deeds filed for properties purchased at Rarity Bay, Jenkins contacted 9th Judicial District Attorney General Russell Johnson.

He provided Johnson with information about the reduced assessments. He also showed Johnson examples of deeds in which the values recorded for lots sold at Rarity Bay had been changed, sometimes inflated by as much as 100 percent.

On the deed filed for the Renkel property, for example, the value of the transaction had been changed from $500,000 to $865,000. Loudon County Register of Deeds Tracie Littleton recorded the transaction as $865,000. Littleton said it was not unusual to see changes on closing documents.

Ross said he does not know why the changes were made on the documents because he was not involved in day-to-day operations at Assurance Title. The value shown on the deed should reflect the true value of the property and may be higher than the price paid, he said.

Tracy Riedl, a partner in Assurance who has been described as being in charge of day-to-day operations, declined to comment because pending litigation.

In 2008, Johnson predicated a yearlong Tennessee Bureau of Investigation probe of the assessments and the changes on the deeds, which was referred early this year to District Attorney General Mike Dunavant of McNairy County in West Tennessee for further investigation.

'A viable community'

Following the collapse in 2008 of the U.S. financial industry, sales volume at Rarity Bay dropped off 80 percent, Ross said.

The past two years have been tough, Ross said, but he hopes that the real estate market will turn around, allowing him to bring more of the Rarity communities to fruition.

"Rarity Bay is and always will be a viable community," Ross said.

The development has reached 1,132 lots sold with 424 residences. In 2009, 52 re-sales were transacted and construction began on eight homes.

Ron Hammontree, executive director of the Tennessee Reservoir Development Agency, describes Rarity Bay as a jewel in TRDA's crown.

"We consider it a tremendous success," he said.

Things are looking even better at Rarity Bay this season, according to local real estate agents.

The market for homes and lots in Rarity Bay has improved considerably compared with this time last year, according to Karen Milliken, owner of On The Lake Realty in Vonore.

Milliken said recent sales activity includes high-end lots and midpriced homes.

"Let's hope it continues through the rest of the season," she said.

This week the News Sentinel looks at a number of Ross developments mired in setbacks, as well as a development that has proved a shining success.

Special report: Rarity Awry

Dilemmas and delays: Oak Ridge properties sour along with economy

The rise of Mike Ross

Campbell County exit to nowhere

Success - and questions - at Rarity Bay

Lack of electricity stymies Rarity Oaks home construction

Two houses up at Rarity Meadows; none built at Head of the Creek