County: Complex financing, large Missoula subdivisions add to protracted timeline
A 350-lot subdivision planned in 11 phases is selling one phase to a Montana company that plans to complete more than $640,000 in infrastructure work to build 14 single-family homes.
While Missoula County approved the subdivision improvements agreement with ASJ Ventures LLC on Tuesday, doing so rekindled a debate over the complexity of today’s large subdivisions and the time it takes to move them through the process, from financing to approval.
“Without these improvements, there wouldn’t be this phase of the Running W Subdivision,” said Commissioner Josh Slotnick. “This is indicative and emblematic of the complexity of these really large subdivision deals.”
The Running W Subdivision is an 11-phase project planned on 184 acres north of the Wye in Missoula. It was approved 16 years ago subject to nearly three-dozen conditions.
The owners, Williams Development LLC, recently submitted approval to begin Phase 2A of the project. But some of the infrastructure required to receive that approval hasn’t been completed. The work will cost an estimated $641,000.
“That estimate was as of April 11,” said deputy county attorney John Hart, who reviewed the financial agreement. “That was a couple of months ago. I have some sense that some of that infrastructure has already been completed in the subsequent two months.”
Williams Development is selling Phase 2A to ASJ Ventures, a Montana LLC comprised of three partners. However, closing the deal with Williams Development could not occur until the county approved the improvements agreement, and that required ASJ to provide a guarantee that it could financially afford to so.
In offering that guarantee, ASJ offered a letter of credit to the county from Private Money Capital in the amount of $641,000. As additional assurance, it also referenced a Fund Management Agreement, making it obligated to deposit around $1.7 million with a third party.
That amount will be held in escrow, and $641,000 of it will be committed to pay for the remaining infrastructure required for county approval – and to close the transaction with Williams Development.
“We have two layers of assurance with this particular improvements agreement,” Hart said. “We have a letter of credit in the full amount and we also have an agreement that … shows there’s going to be a financial arrangement managed by a fiduciary where ASJ is obligated under that agreement to put in the infrastructure.”
The complexity of the financial transaction and the 16 years that have lapsed since the project was first approved pending infrastructure improvements prompted the county to take issue with recent reports that it takes up to seven months to get a project approved.
Slotnick said such statements are misplaced and misleading. The timeline has little to do with approval from local government, he said, but rather from the development community.
“These time frames are because of the complexity of these deals,” he said. “We’re talking about a tremendous amount of money and a tremendous amount of infrastructure that has to be built, and really complicated financial constructions that are required to actually facilitate this type of work. This happens irrespective of the few months it takes to get a subdivision approved.”
Ross Keogh, an attorney representing ASJ Ventures, said the financial transaction will enable the development firm to complete the infrastructure and build the homes.
He described the financial process as common in the building industry and suggested the county be clearer on what type of financial assurance it requires as part of the process. Keogh added that the firm plans a second large subdivision nearby and will likely undergo a similar process.
“When we talk about deadlines, one of the things that would have been helpful for us as we try to condense that seven months, is some parameters from the county on what they expect to see on financial assurance,” Keogh said. “Some clear guide posts on what’s understood as acceptable financial assurance would have allowed us to come to the county with a package a lot sooner, and maybe shave another month or two off the time process.”
Slotnick suggested the process was already clear and the county had little to do with reported delays in moving a development project forward.
“The standard we’ve been going by is a letter of credit form the bank, which doesn’t seem to obscure or difficult to wrap one’s head around,” he said.