In February 2008 Ken Lewis, then CEO of Bank of America, gave a speech at the N.C. Emerging Issues Forum in Raleigh.

“Green commercial construction is a very big deal for our industry in general and Bank of America,” Lewis said. “We’re very excited about Greenbridge, an eco-friendly residential development here in Chapel Hill we’re financing.”

Today, Lewis is long gone and so, apparently, is much of the Charlotte bank’s excitement about Greenbridge, a $54 million project that has drawn national recognition for its numerous environmentally friendly features.

In October, Bank of America refused to pay the final $1.6 million in invoices on the completed 10-story project in downtown Chapel Hill. That led the general contractor, Weaver Cooke Construction of Greensboro, to file liens against the development.

Tim Toben, a partner in the Greenbridge development, is now bracing for the likelihood that Bank of America, which loaned the project $43.8 million, will foreclose.

The Greenbridge partners, after initially stepping in to cover the project’s costs and interest payments, ran out of money in January.

“We just needed the bank loan to fund the project,” Toben said.

Greenbridge’s plight is the latest local example of the problems that continue to plague the commercial real estate industry. While developers of high-profile projects seek patience from their lenders, those same lenders are under pressure to deal with the troubled real estate loans on their books.

About a third sold

Greenbridge has sold 36 of its 97 condo units.

The last sales occurred in early December, and only because Weaver Cooke temporarily lifted the liens to allow the sales to close.

“We still have 15 contracts that got frozen basically when the liens got put on the building,” Toben said. “A lot of those [contracts] are beginning to evaporate. We can’t do anything until these liens are removed, and the liens can’t be removed until the invoice is paid.”

A Bank of America spokeswoman said customer confidentiality prevents it from discussing any details of its relationship with Greenbridge.

“But I can tell you that we have been working with this borrower for some time to help address the financial issues impacting the project,” spokeswoman Shirley Norton said.

Last week, Bank of America appointed a new substitute trustee for the property, which also includes 36,000 square feet of retail and office space.

Toben said the bank cited the fact that the contractor “exceeded his guaranteed maximum price” as the reason for refusing to pay.

Bank of America and Greenbridge Development each owe the general contractor several million dollars, said Dan Estes, Weaver Cooke’s president.

The final invoices that Bank of America balked at paying were costs above and beyond what was budgeted. Toben said cost overruns were inevitable given the project’s use of cutting-edge technologies.

LEED certified

Greenbridge is the first mixed-use project in North Carolina to earn the Leadership in Energy and Environmental Design, or LEED, Gold certification. Its green features include solar energy, water conservation and energy-reduction systems.

Estes said he can understand Bank of America having a problem with the final invoices. But he said the bank was well aware of earlier cost overruns, which makes its decision to dig in at the end puzzling.

“They had their guy on site that was involved in the project,” Estes said. “It isn’t like it was a big surprise to anybody.”

Estes and Toben have been working on an agreement that would allow Weaver Cooke to receive the proceeds of future units sold once Bank of America is paid off.

Estes and Toben say the bank has refused to sign off on such an agreement.

Toben and his partners, meanwhile, have refused to sign a forbearance agreement that Toben said would have forced the developers to give up all rights to make future claims against the bank.

Even if Bank of America had not stopped paying invoices in October, Greenbridge would still have needed to either negotiate an extension with the bank or find an equity partner to buy out the loan.

Greenbridge’s construction loan comes due in July, and Toben estimates it will take two years to sell the remainder of the units.

Of the 36 condos that have sold, 14 were the project’s affordable units priced at under $100,000. In an attempt to boost sales, Greenbridge has discounted some of its market-rate condos, which range in price from $259,000 to nearly $1.5 million, by as much as 15 percent.

Toben, who also serves as chairman of the N.C. Energy Policy Council, believes Greenbridge’s problems expose a systemic problem.

“We bailed out these banks,” he said. “We’ve brought them out of insolvency. And what do they do but drive us into insolvency. It is really to me such a great frustration.”

Estes said he’s continuing to work with all the subcontractors on the project to find a solution.

“As far as I know it’s not a completely done deal that we’re not going to get paid,” he said. “I’m hoping somebody comes to their senses here somewhere.”

 
BY DAVID BRACKEN, News and Observer