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Blue Heron Bay foreclosed upon
Published 12:00pm Thursday, February 7, 2008Blue Heron Bay Land Company (BHB) reported this week that the bank holding a mortgage on its property near Dead Lake has commenced foreclosure proceedings. A sheriff’s sale of the property is scheduled for March 13.
Even though a sheriff’s sale will be held next month, BHB, under Minnesota law, has a one-year redemption period in which to refinance the property or sell it to someone else. If refinancing or a sale were successful, BHB could then pay off the amount bid at the sheriff’s sale, plus interest.
During the foreclosure process BHB will retain full ownership and control of the property.
“We have until March 13, 2009, to fully redeem the property by refinancing the bank note of something more than $3 million,” developer Jim Erickson said. “Until then, we’ll conserve our cash and let the bank carry the debt. We will clearly redeem within the 12-month redemption period, since the value of the property is far more than the debt.”
In a letter to the Otter Tail County Board of Commissioners, Erickson said timing is everything in real estate development.
“When you (commissioners) approved the original cluster development in April, 2003, the lakeshore market was hot and stayed that way for some time,” Erickson said. “Litigation and the Environmental Impact Statement (EIS) delayed the project until your reapproval a little more than a year ago. By the time we got the road construction plans in place last summer, the market was very different.”
While waiting for lakeshore market conditions to improve, the land company put the entire parcel on the market. The listed price is $5.9 million. Last spring the Minnesota DNR purchased a 54-acre parcel on the east side of the property for just under $1.5 million, to add to the existing Dead Lake Wildlife Management Area.
In 2002, when first proposed, Blue Heron Bay was a 151 residential/commercial project, later reduced to a 94 housing unit cluster development. Property owners at Dead Lake asked the county to study the impact of the development, through the Environmental Impact Statement process. In 2007, as a result of the completed study, the project was reduced in size.
“The general real estate market conditions which became evident last year have now impacted major lakeshore development projects throughout northern Minnesota,” Erickson said. “We put further infrastructure investment and the sale of the Dead Lake home sites on hold last summer. That made sense then and even more dollars and sense now.”
He said the current market conditions have made development financing extremely difficult.
“We’ve been unable to come to reasonable terms with the bank for an extension of the loan,” Erickson said. “During the foreclosure process we’ll continue to talk to potential buyers and development partners who have an interest in the project for investment, personal use, family compound, corporate retreat, campground, recreation or public conservation purposes.”
The remaining 200-acre Blue Heron Bay development parcel includes over 19,000 feet (3.5 miles) of shoreline.
Spencer Schram, treasurer for the Dead Lake Association which represents other property owners, said the association will closely monitor the foreclosure proceedings and other developments over the next several months.
