Development projects like the $1.3 billion Ramsey Town Center are hard for small banks to pass up - and some are suffering large losses when such deals crumble.
Four years ago, Bruce Nedegaard laid out a vision for Ramsey Town Center, a $1.3 billion project that would turn the Anoka County city of 22,000 into a showplace of homes, shops and offices along a new transit line.
The dream is at a standstill now, with only a few buildings completed. Nedegaard defaulted on the primary loan for the project in 2005 and eventually was forced into bankruptcy. He died of cancer last year, leaving some $70 million in debts. Today, 150 acres that he bought for the project will be auctioned off at a sheriff's sale.
As the community tries to figure out how to keep the dream of Ramsey Town Center alive, questions remain about how things could have gone so wrong. One key question: Should bankers have approved a $35 million loan to Nedegaard in the first place?
It's a question small banks wrestle with daily.
Development deals like Ramsey Town Center have the power to transform their communities - for better or worse. They also are the bread and butter of many small banks. Those that don't do such deals miss out on an important revenue source. But banks that trust their money to the wrong person risk a big loss.
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