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Council to consider Kennedy lawsuit settlement

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Marcia Nelesen
January 11, 2014

JANESVILLE--The 2008 default of Kennedy Homes continues to cause headaches for the city of Janesville, and council members Monday will be asked to settle a lawsuit with a bond company hired by the developer.

According to a memo, the attorney hired by the city, Mark Steichen, said it is prudent to settle before going to court because there is always the risk of losing and because of the time and money litigation would take.

The city filed suit because it believes Lexon Insurance did not live up to the specifics of the bond agreement after Kennedy Homes folded in 2008.

In April 2006, the city and Kennedy Homes signed an agreement to develop the 401-acre parcel located north of Highway 26 and east of John Paul Road. The development was to occur in six phases, and a preliminary plat prepared for the first phase was approved. It included 176 single-family lots.

At the time of the Kennedy project, the city changed the way it charged developers, requiring them to pay cash up front to cover the cost of infrastructure.

Before, the city offered to make the improvements, and the developers paid the city back over five years. The city lost money on some developments during the housing crash.

Kennedy Homes, though, paid the city in cash for the public improvements. The city agreed to allow the developer to get a bond to cover grading and installation of sidewalks in the first phase.

Lexon issued a $1 million subdivision bond in August 2006.

Kennedy did some grading and built some sidewalks, and the bond was reduced by about $400,000 to reflect that construction.

When Kennedy Homes ran out of money two years later, only 11 of the proposed 175 properties had homes.

In 2011, the first phase of the development area, about 90 acres, was sold at auction to Kaiser Property Group for about $400,000. The remaining Kennedy property, about 300 acres, was bought by another bidder and is being farmed.

The outstanding principal on the bond is about $605,000.

In the city's opinion, Lexon is required to either pay the city the cost of doing the remaining work or have the work done at Lexon's expense.

In 2009, the city demanded Lexon do the remaining work.

Lexon, though, argued it was obligated to make the improvements only if the additional lots were developed.

The city filed a lawsuit in Rock County Court.

In mid-November, Lexon asked to reopen settlement discussions.

The city and Lexon have since tentatively agreed that Lexon install sidewalks and do final grading in the section of the subdivision where the city has already installed sewer and water.

The remaining bond would stay in place if another developer chooses to continue building the subdivision. The agreement would allow any new developer to be substituted for Kennedy Homes for the purposes of the bond.

KAISER: LOTS GO ON MARKET BY SPRING 2015

Kaiser Property Group likely will begin selling lots on the former Kennedy Homes site sometime in spring 2015.

“It's just supply and demand at its finest,” Todd Kaiser, owner and president of Kaiser Property Group, said this week.

"We knew we'd be sitting on it, waiting for the market to start coming around, which it has," Kaiser said.

Kaiser bought the 90 acres that encompassed Kennedy's first phase of construction at auction for $400,000.

The property, which is off Highway 26 between Janesville and Milton, contains 163 improved and unimproved lots.

The Kennedy home philosophy was building big homes on small lots.

But Kaiser said he envisions a mixed use in the area that could include townhouses. Some lots would be larger than originally planned. Some might remain the same size, but the homes would be smaller.

“Really, it's all about quality, not quantity,” Kaiser said, noting the area is the first seen by people entering the city on Highway 26. Kaiser wants to make sure the homes are attractive with quality architectural design.

“It's a vast property, so we don't want it to look like a cookie-cutter,” Kaiser said.

“I do not support vinyl villages,” Kaiser said at the time of the sale. “I look at this as it's one of our main entrances into Janesville. I want it to be nice.”

Kaiser will sell the lots with the required architectural design specifications. Buyers will use their own builders.

Kaiser said the property is in a great location.

The development was originally meant to include 900 homes on about 400 acres.



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