Developer turns to personal credit cards to fund project
The Legacy subdivision was always meant to live up to its name.
But the monumental credit card debt real estate developer Vicki Sanger has incurred in financing its development in Fruita is one legacy she did not envision.
A national credit crisis has all but frozen lending from financial institutions, and Sanger, who at the outset of construction was easily able to secure loans for the project, has had to resort to using personal credit cards to finance infrastructure such as road and sidewalk paving. Now, four months from completion, Sanger said she will have to find an investor to finance the last leg of the project.
“I’m maxing out my cards,” she said. “The stress of that is really overwhelming. I feel like I’ve shaved 10 years off my life.”
Sanger said she did not want to disclose how much money she had to put on her credit cards but said the sum was astronomical.
The Legacy subdivision was given final approval by the city of Fruita in 2006, but Sanger said she designed the development when she was 18 years old.
Sanger, now 32, said the 18-acre parcel along 18 Road was her childhood home and family farm until she graduated from Fruita Monument in 1994.
The farm was a “hobby farm,” Sanger said, where her parents “worked hard every day to earn just enough to pay taxes at the end of the year.” Sanger said she sat on every real estate board she could to learn the development business while saving up money to buy the property from her parents.
“I designed my whole career around making this happen,” Sanger said. “My goal with this is to help them retire. That’s why it’s named Legacy.”
Sanger began to have difficulty securing loans in March, she said. She is a lone developer without partners or the backing of an investment firm, she said, but banks had been lending to her prior to March without trouble because she has a good credit rating and low loan-to-value ratios for her project, Sanger said.
Banks didn’t explicitly turn her down for a loan, Sanger said, but delayed applications and attached so many conditions to awarded loans that it would be impossible to meet them. Local home-building company Griffin Concepts Inc. and its partner investment firm purchased 40 residential lots to begin construction on single-family homes around the same time Sanger started to have trouble, CEO Rob Griffin said.
Land development cannot lag behind construction without stalling the whole project, Sanger said, so she turned to her credit cards.
Griffin said many developers are having trouble securing loans because of hefty price tags associated with land development and the time it takes to do it. Building homes on the property costs $150,000 to $170,000 per home, he said. Developing the property, however, would cost about $4 million, he said.
“It’s a tough thing to be a developer right now,” Griffin said. “They need a lot of money for a long time.”
Banks have tightened lending across several industries, including real estate development, according to the Mesa County real estate report for the second quarter of 2008, and the Grand Valley is projected to experience a reduction of 600 single-family housing construction permits this year compared to 2007.
The infrastructure Sanger is responsible for providing in Legacy subdivision is about 90 percent complete, she said. Infrastructure for the proposed 23 town homes and fencing for the subdivision have yet to be completed, however, and Sanger said she is seeking an investor to help cover those costs.
She has been researching investors for a couple months, Sanger said, but she is cautious for scam artists. Sanger said the going is slowed even more because Sanger now lives in Wisconsin, where the down-turning economy is hitting harder than Mesa County, and potential investors are charging sometimes as high as 22 percent interest.
“It’s frustrating to be so close to seeing the finish line,” Sanger said. “But I have optimism. I just know that the banks must unfreeze, and if a bailout is going to make that happen, then so be it.”