In late August a big land deal went down -- and hardly anyone noticed.
That's probably because the $4 million, 181-acre transaction, which included about 270 lots -- most of them empty -- involved one of Merced's many half-full subdivisions.
The property had more than $20 million invested in its infrastructure only a few years ago.
The subdivision in question, the Moraga Development, sits mostly vacant on the eastern edge of town, rangeland and the Sierra in view.
The 20-plus homes that were actually built here stand clustered together like a fortress in the middle of a field of empty dirt lots. There are roads here too, and even a playground, but few houses to drive home to. The occupied stucco structures here are filled mostly by renters.
On Aug. 26 the whole affair was purchased for a little more than $4 million by a limited partnership from Southern California called Moraga LP.
When the land was bought to be developed in long-ago and faraway 2005 by one of four companies that subsequently owned it, the purchase price was more than $6 million.
Now Moraga LP is hoping to do what all its predecessors couldn't -- make a buck.
Today, nearly every home in the place is for sale.
This is just one of the many incomplete developments encircling Merced like an unholy halo: the empty shell of once vibrant growth that ground to a halt during the recession.
This particular story of "irrational exuberance" is all too common in the Valley and across the county -- a tale of diminishing returns, debt and finally foreclosure.
According to a handful of documents, the story of this piece of land follows a tortuous trail of faceless limited liability companies and limited partnerships that have unsuccessfully tried to birth and then resurrect this withered and incomplete subdivision.
The story of the Moraga Development begins in 2003 when the city annexed 181 acres of county land. In 2005, Lakemont LWH LLC -- Brian Kesler -- bought a 117-acre parcel for about $6 million. Lakemont then got a $22 million loan from Ohio Savings Bank to begin what must have been the construction of the 520 single family homes it hoped to build in the Moraga Development.
By 2007, the national real estate bubble that had inflated the building boom and driven prices higher and higher began its precipitous and ignoble collapse.
By 2009, after the financial crisis was taking its toll nationwide, Lakemont was foreclosed on. What exactly happened next to the company is unknown. But like other companies, it's probable that its credit started drying up, which would have stopped any work on the site.
According to documents at the Merced County Recorder's Office, the company owed more than $30 million to another company, Iota Brass LLC, which then took over the subdivision property.
It wasn't long before Iota went delinquent itself on its back taxes in November 2009. Much of what it owed was community facility district fees(CFDs), which pay for police, fire and other services provided by the city. Once the roads and lights and other infrastructure is complete, such fees begin. But without homes and homeowners paying their individual CFD fees, the owner gets stuck with a massive bill each year just to hold on to the property.
While Iota paid up on its back taxes, by June 27, 2010, they went delinquent again, according to the Merced County Tax Collector's Office. They owed, for just a half a year of back taxes, including late fees, $238,555.
Later that summer another buyer -- Golden Management Services -- came along and paid just under $4 million for the property, or almost $2 million less than the original price. The new price included the 22 homes now on site.
But by August 2010 the property was sold again for roughly the same price to its current owner, Moraga LP, which is owned at least in part by Tom Stabben.
The day after the sale was made, all of Iota's back taxes were paid up, according to the tax collector. It's unclear who paid the taxes since the payment came through a wire transfer from a bank. It's not clear exactly how much Moraga LP will have to pay in taxes each year, but adding up the half year of back taxes would make it around $400,000. Without many homeowners and hardly any homes, that is a hefty fee just to hold the property.
No one associated with any of the four entities that owned the property could be reached for comment.
Observers of the local real estate market say new buyers like this one picking up cheap subdivisions aren't a sign of a turnaround in the market. Instead they're more like vultures picking the cheap remains of a carcass.
Land deals like this are unfolding up and down the Valley, said Andy Krotik, a Realtor in Atwater. "This is what a lot of investors are seeking across the Valley," he said. Investors are buying half-complete developments for pennies on the dollar, he said. Krotik foresees Moraga LP selling the houses to break even and holding onto the lots until the market improves. "The lots are a great buy-and-hold," he said.
David Gonzalves, Merced's development services director, said other properties, such as the incomplete Bellevue Ranch development in North Merced, are also being bought up. But not so they can be completed. "What happens in this kind of economy is that entities that are not doing well have to turn their assets," he said. Most of the subdivisions that are being bought and sold, Gonzalves explained, are being liquidated either by banks or investors. "This is not a sign of an immediate turnaround in the housing market," he warned.
Whatever happens to the national and local real estate markets, one point is clear: the development's owners hope there's still someone out there looking to buy homes in Merced.
At the development's entrance on Via Moraga a sign reads: "22 Homes Available."
Reporter Jonah Owen Lamb can be reached at (209) 385-2484 or firstname.lastname@example.org.