Henrico holds GreenCity developer in default for lack of progress, missed land payment

An aerial rendering of the proposed $2.3 billion GreenCity development. (BizSense file)

The fate of Henrico’s massive arena-anchored GreenCity project is in question after its developers have been deemed by the county to be in default of agreements the two sides signed several years ago.

Default notices were recently issued to Green City Partners LLC, the development entity led by principals Susan Eastridge and Michael Hallmark that is driving the mixed-use portion of the 200-acre project along Interstate 95 between I-295 and Parham Road.

The default notices followed a nonperformance notice that the county sent the developers in mid-December, as well as a missed payment of over $5 million that was due last Friday to secure the site of the planned arena and supporting commercial development.

Friday’s scheduled payment was to be the last and largest of three annual installments for the developers to close on the former Best Products headquarters property, which makes up about half of the overall GreenCity site. Local firm Markel | Eagle is developing the other half, which is to consist of primarily single-family homes.

A purchase agreement between Green City Partners and Henrico’s Economic Development Authority includes a cure period that gives the developers 10 more days to make the $5.2 million payment, after which ownership of the property would revert back to the EDA. The cure period ends March 13.

County Manager John Vithoulkas said officials have been in conversation with Eastridge and Hallmark and have had two meetings since the default notices were issued. He said the content of those meetings is confidential due to the ongoing cure period.

Calls to Eastridge and Hallmark were not returned Monday.

John Vithoulkas

While he called the alleged defaults “concerning” to the county, Vithoulkas said GreenCity remains a viable project that could be picked up by another developer, if it comes to that.

“Simply put, the developers have not performed to the terms of the agreements. We believe it’s time to move forward and return the Best Products property to the County, as stipulated in the agreements,” Vithoulkas said in a statement to BizSense.. “As a county, we remain bullish on the concept of a large, mixed-use development at this extraordinary location and believe it is perfectly suited to a privately funded arena for sporting events, concerts and other entertainment.”

Vithoulkas said the deals with Green City Partners and land ownership entity Green City Development Corp. were structured in a way that protect county taxpayers.

“We included extensive provisions to protect the interests of Henrico County and our taxpayers when we entered into agreements with Green City Partners and Green City Development Corporation,” he said.

Purchase agreement was changed, project schedule delayed

The former Best Products headquarters building, which is to be repurposed as part of the GreenCity development. (File image courtesy Henrico County)

Green City Partners had made two prior payments that were considerably lower, at $500,000 each. The three payments were to add up to $6.2 million, the agreed-to total purchase price that was the amount the county paid for the 93-acre property in 2011.

The purchase agreement with Green City Partners had originally called for an initial payment of $5 million in 2023 and $1.2 million in 2024, with a possible extension for an additional year. The agreement was amended in 2022 in what county officials said was a change meant to firm up the closing date and show good faith for the project as it worked through the governmental process.

Well before Friday’s due date, however, concerns about the project had been brewing for months and were officially conveyed to the developers in a letter last July, in which Vithoulkas requested an update on the project’s progress and proof of steps taken to secure the site and line up financing.

The letter noted that since the Board of Supervisors approved zoning for GreenCity, the county had sold the Best Products property at cost, signed the development agreement, assisted in acquiring the residential portion of the site, acquired the neighboring Saint Gertrude athletic center property in support of GreenCity, started infrastructure improvements, and approved two community development authorities (CDAs) to help fund the development.

“By contrast, despite repeated assurances of imminent activity, GCP and GCDC have not obtained financing, submitted plans, or begun construction of any portion of the project,” the letter reads.

“As a result, GCP and GCDC are significantly behind the development schedule incorporated into the development agreement, and the property remains the same as it was at the time of the rezoning. Understandably, confidence has begun to wane in the ability of GCP and GCDC to begin (let alone complete) the project.”

In the notice of nonperformance sent in December, Vithoulkas reiterated that the developers had made no progress on construction and didn’t secure the residential portion of the property, known as Scott Farm, as they had originally said they would. Henrico would end up going in on the purchase of that land with Markel | Eagle, effectively splitting the $35 million price tag paid to the seller, an entity tied to local businessman Bill Goodwin.

A site plan of the GreenCity project.

“Developers’ failure to place the Scott Farm Property under contract prior to rezoning dramatically increased the owner’s leverage and exposed Developers’ tenuous position,” the December notice reads. “To prevent the window from closing, the County and EDA partnered with a different developer and contributed over $18 million to the acquisition of the Scott Farm Property…”

The notice goes on to note quarterly meetings that were held with the developers in which they repeatedly extended schedules and projections for the project. It says the developers tied the lack of financing “to their inability to account for a hypothetical third-party development on the Best Projects Property first introduced in 2022.”

“The third-party development is not within the control of Developers or the County, has never proceeded beyond preliminary discussions, and does not present a viable and reliable path to financing or funding Developer’s obligations,” the notice reads, adding that the development agreement makes it the developers’ “sole obligation to fund and finance the project, which cannot be avoided by the failure of a hypothetical third-party development to materialize.”

The notice adds that the developers’ estimates for proposed bridge loans varied from $5 million to $12 million, and proposed third-party debt and private equity varied from $50 million to $400 million.

To resolve the situation, the notice demanded that the developers provide their balance sheet and pro forma capital structure, unaudited finance statements for 2023 and 2024, details on planned equity contributions and projects necessary to support the CDA financing of the arena, lenders in talks to finance the projects, and an accounting of costs incurred and paid since the project’s inception.

The notice was copied to McGuireWoods attorney George Keith Martin, outside legal counsel for Henrico.

The Feb. 15 default notice reiterates the claims and notes the county “intends to pursue one or more remedies available to it” under the development agreement, including its repurchase option for the Best Products property. The agreement also requires that senior-level negotiations start within seven days of the default notice and conclude within 30 days.

Same developers behind Navy Hill, VCU Health project

Michael Hallmark and Susan Eastridge. (BizSense file photo)

The default notices come four years after Henrico announced GreenCity at the Best Products site in late 2020. The announcement followed the defeat earlier that year of Richmond’s Navy Hill plan, another arena-anchored project steered by Eastridge and Hallmark that would have replaced the shuttered Richmond Coliseum and redeveloped areas around it.

Eastridge and Hallmark also were the development team behind the ill-fated redevelopment of Richmond’s Public Safety Building that would have included a high-rise office tower for VCU Health. The demise of that project ended up costing the health system over $80 million in known exit penalties, tax payments and other costs.

While GreenCity was announced before the VCU Health project, Vithoulkas said the latter’s demise was a cause of concern for Henrico, which connected with Eastridge and Hallmark after Navy Hill was voted down by Richmond City Council.

Vithoulkas said he met the day after the vote with Tom Farrell, the late Dominion Energy CEO who was among several Richmond business heavyweights who had promoted Navy Hill and, Vithoulkas said, had vetted and vouched for the developers.

He said Henrico also vetted Eastridge and Hallmark and the GreenCity project before announcing it. Eastridge is CEO of Concord Eastridge, a Fairfax-based firm that focuses on public-private and mixed-use developments. Hallmark is a principal with Richmond-based Future Cities and has designed several arenas across the country.

Hallmark’s Future Cities also is planning Clay Street Station, a mixed-use rehab of an old power substation in Richmond’s Carver neighborhood.

Vithoulkas said the county was told during the process that the I-95 corridor in Central Virginia is the most underserved corridor in the country for an arena-anchored development like GreenCity. He said the need for a new arena and the attractiveness of the site for a large-scale development would remain.

“I fully expect that development will occur in this corridor,” Vithoulkas said Monday.

In addition to the 17,000-seat arena, which has been projected to cost $250 million, GreenCity is approved for 2.2 million square feet of office space, 280,000 square feet of retail, two 300-room hotels, 2,400 residential units and green space. The $2.3 billion project also would rehab the former Best Products headquarters building.

Venue management company ASM Global had signed on to develop and manage the arena and invest in other parts of GreenCity, including retail and hospitality uses that would support the arena and the larger so-called “ecodistrict” development.

The arena, which would theoretically replace the shuttered Coliseum as a regional venue, was most recently targeted for completion in 2026. Full buildout of the entire GreenCity project had been anticipated in 2033.

While those targets now appear to be in jeopardy, Vithoulkas reiterated that GreenCity remains a viable and needed project that would remain attractive to potential developers. He noted that Markel | Eagle is moving forward with developing the $400 million, 880-home residential section, and that designs are approved for two new bridge crossings over I-95 and planned sewer extensions under I-295 are on track.

Of the developer defaults, Vithoulkas said, “It’s disappointing on one hand, but I’m also optimistic that GreenCity is the kind of development that…I’m sure we’ll have another partner come forward at some point, if these developers aren’t able to literally take control of the property. I don’t know how they could because they are in a default situation.

“Right now what I think you have is a pause in a great project. I think you’ll see this go forward; this development team just couldn’t put it together,” he said. “I am optimistic as to the project itself.”

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