How the wetlands were won: Beach property to be preserved

VIRGINIA BEACH

Over lunch at Chick's Oyster Bar on a rainy Tuesday in May, conservationists and officials from Wells Fargo bank hammered out the fate of the largest piece of undeveloped waterfront property on the Lynnhaven River.

City officials, environmentalists and residents had long coveted the 122 acres of wetlands, maritime forest and sandy beaches across the bay from Chick's for preservation. But developers also had their eyes on the land. The last owner, L.M. Sandler & Sons, wanted to build more than 1,000 homes there but then got into financial trouble.

Kent Whitehead, the Chesapeake project director for The Trust for Public Land, flew in from Washington to pitch a proposal to the bankers who had taken control of the property. The trust, working with the city and the Chesapeake Bay Foundation, could buy the land quickly, Whitehead told them.

The price wouldn't cover the full amount owed to the bank by the Sandler company, but it would be cash. And, Wells Fargo could qualify for tax credits for selling the land for conservation, Whitehead added.

On the other hand, if Wells Fargo held out for more money and sold to another developer, environmental permits would be needed before construction could begin and homebuyers would have to return to the market.

By the end of the meeting, Wells Fargo agreed to sell the property for $13 million, $6.4 million less than the Sandler loan. The bank gave the trust and its partners until the end of October to finalize the financing.

"It's kind of a pipe dream come true," said Christy Everett, local director of the Chesapeake Bay Foundation.

The deal, which the Virginia Beach City Council publicly unveiled last week, seemed to come together quickly and seamlessly.

Now the coalition has a little more than three months to make certain it has all $13 million in hand, which would include a $3 million grant and $4 million from the sale of up to 10 acres of the property.

"While this is coming together and looking promising, there's a long way to go, " Everett said.

The Chesapeake Bay Foundation had always considered the Shore Drive site called Pleasure House Point an ideal location for a new headquarters and an education center, Everett said. But it was too expensive - L.M. Sandler & Sons bought the property for $30 million in 2007.

When word spread last summer that the company was debt-stressed, the environmentalists pounced. Foundation representatives contacted the Washington-based land trust and Virginia Beach Vice Mayor Louis Jones, whose district includes the property, for financial help.

"We needed some big money," Everett said.

The city was interested. Nearby residents had opposed L.M. Sandler & Sons proposed Indigo Dunes development. Preserving the land would help efforts to clean up the Lynnhaven River and bring back its famed oysters, Jones said.

The city had about $9.6 million stored in an open-space fund, and leaders were willing to take a sizable chunk out of it.

"If you're going to do it, this is the piece of property that you need to do it for," Mayor Will Sessoms said. "I don't see anything of that magnitude happening again."

The City Council started the open space program with $50 million in 2001 and bought about 1,908 acres of undeveloped land over the years.

The other big chunk of cash would come from the land trust, which agreed that preserving 122 acres along a major river in the state's largest city would be a coup. The slow housing market and falling land prices have made cities and nonprofits competitive with developers, Whitehead said.

The trust also knew how to tap federal money. In the spring, it helped the city write an application for a $3 million grant for the purchase. The trust had contacts with the bank, too. Wells Fargo is the trust's banker, and a member of its board is a former executive with the bank's real-estate lending department. Still, getting an answer from Wells Fargo took months.

Bank representatives trying to reconcile bad loans came to Virginia Beach in the winter to assess Sandler properties, including Pleasure House Point. Developers had approached the bank about buying the land in the hopes that they could get it zoned for high-density residential use, Jones said.

"Quite frankly, I told them that wasn't going to work," Jones said. "I think they were going to lose no matter who bought it."

In May, bank officials agreed to the first face-to-face meeting with Whitehead and his colleagues.

The sale would be approved.

Deirdre Fernandes, (757) 222-5121, deirdre.fernandes@ pilotonline.com