Bank calls in $25 million loan
A planned development that saw construction crews start flattening a wooded ridge at the southeast corner of the Exit 407 interchange is still sitting idle, and now the local bank that helped foot the bill for the project is suing the developer.
Sevier County Bank is seeking $25 million and interest from Dumplin Creek developer John Turley, who personally guaranteed loans totaling that amount for his company, Kodak Land Co., LLC
Dumplin Creek was to be a 190-acre retail development along the interstate, featuring restaurants, stores, hotels and a movie theater. Turley had obtained $25 million in loans from the bank in 2007 and 2008, according to a complaint filed in Knox County Chancery Court, and the principal on the loans came due in 2010.
“Kodak and defendant Turley have failed and refused to pay the amounts due under Note 1 and Note 2,” the complaint states.
Turley had also agreed to pay a 5 percent late charge, as well as default interest on the notes.
He did not return calls to his office Tuesday seeking comment for this story.
SCB was the lead agency providing the loan, which was also backed by Citizens National Bank of Athens, Tennessee State Bank of Pigeon Forge, Mountain Commerce Bank of Johnson City, and Citizens Bank of Blount County in Maryville.
SCB CEO Matthew Converse said Tuesday the bank’s financial standing isn’t threatened by the situation.
“We anticipate it will have no negative financial impact on the bank that hasn’t already been reserved for,” he said.
The bank sets aside reserve funds to cover the difference in its loans and any collateral. In this case, because Turley guaranteed the loans, SCB is suing him directly to recover its investment. It has not foreclosed on the property, but could still have that option.
The Federal Deposit Insurance Corporation issued a consent order in 2010 requiring SCB to submit a plan to collect delinquent loans, leading to a restructuring of the bank’s leadership. Last year, the FDIC issued a directive against the bank calling for corrective action to address is capitalization; the bank later announced a public stock offering.
Turley has indicated he spent additional funds on the project. At a meeting with the 407 Merchants Association in January of 2010, he said his development team spent $40 million on the project, and that it had an agreement with Wal-Mart for the chain to build a store at the site as an “anchor” to attract other retailers.
Turley held the meeting as an effort to get the local business community behind his campaign to have the city build a road to serve his property at a cost of $8.5 million.
He estimated the development could bring in more than 1,000 retail jobs.
The Sevierville Board of Mayor and Aldermen refused to pay for the road, however, saying the city had never paid for infrastructure that solely supports a private development.
Turley argued the site would be part of the city’s Central Business Improvement District, meaning the city could use sales tax revenues from its stores to pay down the bonds the city used to pay for its convention center and for infrastructure improvements.
He noted the city had worked with Universe, LLC, the development group that had planned to build a commercial project alongside the convention center, on plans for infrastructure in that area.
However, city officials said the city only paid for infrastructure improvements that served the events center, the city’s golf course, or public roads.
Turley’s interest in the property generated hope that the development would succeed; he was fresh off completing the Turkey Creek development in Knoxville, which became one of the largest and most successful retail developments in East Tennessee.
The web site makes note of the connection, as well, saying “In the spirit of Turkey Creek, Knoxville’s wildly successful retail megalopolis, Dumplin Creek will offer miles of upscale shopping and a limitless range of choice and selection. From fine department stores and boutiques to great movie theaters and restaurants, Dumplin Creek will be an exciting, dynamic retail and entertainment center.”
Whatever the reason, work on the development stalled before any buildings were constructed on the property. It has been sitting idle for more than a year.
Mayor Bryan Atchley said he still believes some development will happen at the Dumplin Creek site, especially after the work that’s already been done there.
“We not only need development there, we need development up and down that corridor,” he said.
He is optimistic that the city will start seeing growth, he said, even if it doesn’t happen there.
“We went for a period of time where we didn’t hear form any developers. We hear from developers now two or three times a month,” he said.