Wednesday, September 19, 2012

DeNovo plans end with foreclosure

Elkhorn mining property gets cleanup without development

Express Staff Writer

Grand plans for development of an 850-acre property in the hills between Elkhorn and East Fork, announced in 2008 by Denovo Independence, came to an ignominious end last month when the property was foreclosed upon in 5th District Court.

Following Denovo’s default on a $12 million mortgage, Fort Wayne, Ind.,-based Sun Valley Credit Co. filed a lawsuit against the developer in May. On Aug. 23, Judge Robert Elgee ruled that the property would be put up for auction and that Sun Valley Credit Co. was entitled to a deficiency judgment should the property not fetch all of the $13.8 million owed it. Elgee’s ruling was in the form of a default judgment, meaning that Denovo Independence had not appeared in court to contest the lawsuit.

Sun Valley Credit Co.’s lawyer, Emily McClure with Boise-based Givens Pursley, said in an interview Tuesday that no date has yet been set for a foreclosure auction.

“We’re still strategizing with our client,” she said. “We’re trying to figure out what our next steps are going to be.”

DeNovo, which means “anew” or “from the beginning” in Latin, specializes in buying and remediating contaminated properties for development. In 2008, DeNovo secured the mortgage in question from Sun Valley Credit Co. to purchase the property, which included four old, contaminated mining sites (the Independence and North Star mines and the Triumph mining shaft and tunnel).

DeNovo’s original plan was to clean up the property, then subdivide 93 acres into 15 home sites. The remainder of the property would be dedicated as open space for conservation purposes and recreational opportunities. The project was known as the Independence Project. 

The property’s foreclosure is only the latest in a series of roadblocks that have stymied development over the past four years.

The project first ran into trouble in late 2009 when the city of Sun Valley declined to annex the area and amend its hillside development ordinances to accommodate DeNovo’s plan. Without annexation, DeNovo was subject to Blaine County’s Mountain Overlay District, which severely restricts residential development in rural, mountainous areas.

In October 2009, DeNovo filed a lawsuit in 5th District Court against Commonwealth Land Title Insurance Co., headquartered in Nebraska and the parent company of Sun Valley Title Co. The complaint alleged that Sun Valley Title provided inaccurate information regarding zoning ordinances in the area. The lawsuit was settled out of court and terms were not made public.

Though DeNovo’s development plans never made it off the ground, the company has honored its commitment to clean up the property and has worked closely with the Idaho Department of Environmental Quality to do so. It funded removal or capping of more than 100,000 cubic yards of soil contaminated with arsenic, lead and other toxic metals from old mining operations in the Triumph area.

“DeNovo ran into financial difficulties,” said Bruce Wicherski, voluntary cleanup program manager for the DEQ. “The indication I got was that their creditors weren’t getting paid. Work was getting done on the cleanup, though.”

Wicherski said that, about a year ago, Sun Valley Credit Co. “took over” the final stages of the cleanup.

“It was essentially all done by that point, though,” he said. “The last steps were mostly paperwork and the final stages of revegetation.”

Wicherski speculated that Sun Valley Credit Co. was interested in the completion of the remediation because it would add to the property’s value.

“I’m guessing that a property that’s been cleaned up would be easier for Sun Valley Credit Co. to make their money back on,” he said.

Wicherski said that although the DEQ has not yet released a certificate of completion for the project, he expects the cleanup to be completed as planned.

“As a requirement for the DEQ’s involvement in the cleanup, we required DeNovo to leave financial assurance funds in two separate escrow accounts to ensure that the final stages of the cleanup would be completed,” he said. “We require this because there are elements of these cleanups that extend years into the future even when 99 percent of the work is done.”

One account is to pay for revegetation of the cleaned-up areas and the other is to pay for a final inspection and a monitoring program that must be conducted periodically for a number of years after the remediation is declared complete.

“The entire project represents more than $18,000,000 of investment including property acquisition, engineering and construction, and property repositioning costs,” DeNovo’s website states.

Blaine County residents who opposed the development might just get to have their cake and eat it too. DeNovo paid a pretty penny to remediate the land, yet—for the time being at least—it seems the site will remain undeveloped.

Brennan Rego:



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