By Hannah Guzik
The echoing courtyards of Julian Square, a partially vacant condo complex on North Mountain Avenue, tell how the financial crisis emptied the pockets of longtime Ashland developer Larry Medinger.
All 14 of Medinger's unsold Julian Square condos are scheduled to be auctioned at a foreclosure sale May 14.
Overextended at the time of the real estate collapse, the builder is being sued by investors for more than $1.5 million, according to court documents. Medinger also owes Umpqua Bank $2.5 million, and the bank is in first place to receive money from the sale of the foreclosed condos, at 905 N. Mountain Ave., Medinger said.
"We had this unprecedented recession and there were still a lot of people interested in the homes, but they couldn't get financing because all the banks froze up," he said Wednesday. "Suddenly I went from having a really great project going to having this huge millstone around my neck."
It's unlikely the investors will recover all of their money after the condos are sold in the auction, said Gerald Shean, attorney for two of the investors, Ashland residents Kelly and Victoria Quinn.
The 14 condos, four commercial and 10 residential, are worth between $3 million and $3.7 million, said Medford resident Lee Dorsey, the investor who filed the lawsuit in June.
Dorsey, who loaned Medinger $1.25 million in 2006, is seeking $1.5 million from Medinger to cover interest, attorney's fees and other costs, he said. He is in second place, behind Umpqua Bank, to receive money from the sale of the condos.
Dorsey said a bid of about $4 million at the auction would cover what Medinger owes him and the bank.
"Somebody would have to bid over $4 million (for anyone) to receive any funds below me," he said.
As the economy worsened, Medinger began to take out more loans on the project, the court documents show.
"It's just a shame what happened with Medinger after all these years of developing," Dorsey said. "I feel sorry for everybody below me (on the lien), but on the other hand, they should have known what they were getting into."
The lawsuit lists two dozen other parties, including several Ashland residents, who were owed collectively about $2.8 million as of July 2009, Dorsey said, bringing Medinger's total debt to an estimated $6.8 million.
The Quinns, who are in third place to receive money from the foreclosure, initially loaned Medinger about $750,000, but he has repaid them much of the money, Shean said. Medinger still owes the Quinns $150,000, according to Shean.
Several of the investors said they loaned Medinger money because of his respected background as a developer, but they did not fathom at the time that they could lose most or all of the money.
"I'm a natural-food cook who loaned this guy money and I'm in over my head now," said Daniel Greenblatt, one of the investors participating in the lawsuit and owner of Greenleaf Restaurant on the Plaza. "I've lost weeks of sleep over the last three years just because I loaned the guy money."
Greenblatt loaned Medinger $240,000, according to court documents.
Other investors initially listed in the suit as claiming an interest in the property include Dennis Tetz, Barbara Ricketts, Ellen Clephane, Don Wiljamaa, Melanie Mindlin, James Hudak, South Valley Bank & Trust, Timothy and Francene Orrok, Linden Crouch, Gary Hecht, Keith Brown Building Materials, Metal Masters Inc., the State of Oregon Employment Department, General Credit Service Inc., North Pacific Supply Co. Inc. and Southern Oregon Credit Service.
Medinger said it saddens him to think about the investors who will likely lose money.
"It's really hard for me to even talk about it," he said. "I feel very bad about it. People were trusting that I knew what I was doing and I thought I knew what I was doing — in any other situation I would have.
"I could have easily survived a typical recession," he said. "I survived one in '82. Every builder goes through those cycles and knows how to deal with them, but this was something entirely off the scale."
Mindlin, an Ashland Planning Commission member, said Medinger has repaid her the $60,000 she loaned him and that she isn't participating in the lawsuit. She said she views Medinger's Julian Square project as a victim of the recession.
"Everything was fine, but he just couldn't sell them because the economy took a dive," she said last week. "Like so many things that were going on in town two years ago, he got caught in a bad moment."
County, state and federal governments are also listed as claiming an interest in the property, because Medinger has failed to pay taxes, according to the suit. Medinger owes Jackson County $35,500 in taxes, the Oregon Department of Revenue $42,000 in taxes and the Internal Revenue Service $19,000 in taxes, court documents state.
The number of liens tied to Julian Square has made it virtually impossible to sell the condos, Dorsey said.
"We need to clear up the title issues," he said. "He's borrowed an awful lot of money from an assortment of people and all that has to be cleaned up. I'm working with the bank on seeing what we can do to revitalize the project."
The 20-condo project was initially expected to sell for about $7 million, Dorsey said. Six of the condos have been sold, Medinger said.
"If the housing values were somewhere where they were in 2007, all of the loans would have been easily paid off and I would have made some pretty good money on it," Medinger said.
If Dorsey does not recover all of his money through the foreclosure sale, he said he will foreclose on Medinger's home and his 50 percent stake in the Mountain Meadows, which Medinger co-developed.
"I have a security interest in Mountain Meadows, so that is possible," Dorsey said.
Madeline Hill owns the other 50 percent and is the managing partner. It is unclear what impact, if any, Dorsey's potential foreclosure would have on the retirement community adjacent to Julian Square.
Dorsey estimates the 50 percent stake in Mountain Meadows is worth between $3.5 million and $4 million.
Medinger, a developer for 37 years and former chairman of the Oregon State Housing Council, fell into financial trouble as the economy faltered, he said. Initially, he had lined up buyers for nine of the condos, he said.
"I lost some of the buyers with the new criteria the banks were using, because they couldn't get their loans," he said. "Then as time went on it was clearer and clearer that there weren't going to be any more sales."
Medinger, who developed many successful local projects, served on Ashland's Historic Commission for 10 years, Housing Commission for 13 years and Planning Commission for five years, he said.
He closed the office of his business, Medinger Construction Company Inc., in December and has been working out of his Ashland home since, he said.
"When the bank notified me in December that they were not going to extend my loan, then I had to close my last, what I would call, office," he said. "It's just been a process over the last couple of years of cutting expenses and cutting expenses and getting smaller and smaller."
Medinger's wife, Susan Cowper, is also named in the lawsuit and is living in Fez, Morocco, where she is working as a high school English teacher, he said. She could not be reached for comment.
Medinger spent the last few months in Morocco with Cowper, but returned recently, he said.
"I have been over there for the last couple of months because I really didn't have any work here and I could earn something over there working in the schools," he said.
Medinger, who is 69, said he doubts he will return to developing large-scale projects, because of the economy and because he has cancer.
"I've been battling cancer for nine years, and when you talk about battling cancer, the kind of cancer I have, it's a retreat you make as slow as possible, but you don't beat it," he said.
"I don't see that there's a chance the housing economy will turn up in the next year or two, so I don't see that there's much of a chance that I will try to rebuild my business."
Contact staff writer Hannah Guzik at 482-3456 ext. 226 or firstname.lastname@example.org.
Longtime developer sued by investors
By Hannah Guzik