March 29, 2012
A trustee plans to auction the Caroline County property where the State Fair of Virginia has been held since 2009 after continued losses and heavy debt forced fair organizers to liquidate under federal bankruptcy law.
"My hope is that someone will come buy the name and restart the state fair," said Christine Myatt, an attorney representing ArborOne Farm Credit, the servicer for the bondholders. "It's never been our intent to put the state fair out of business, but we have an obligation to maximize the value of our collateral."
The 360-acre Meadow Event Park site, personal property and the State Fair of Virginia name and event-operation rights will be up for sale in an attempt by creditors to recover at least a portion of what they're owed. The secured creditors' group provided more than $80 million in bond financing.
A Richmond auction house is working to solicit bids and to schedule a foreclosure sale sometime in May.
The foreclosure sale marks the ending to the State Fair of Virginia Inc.'s efforts to move the 11-day event out of Richmond.
The nonprofit corporation purchased the Meadow Farm site for $5.3 million in 2003 and moved the annual fair from the Richmond International Raceway area to the more pastoral setting about 20 miles north. Meadow Farm was the site where Triple Crown horse racing legend Secretariat was born in 1970, and fair organizers expanded equine facilities to highlight that history.
The State Fair of Virginia took on large amounts of debt for the project, even as the economy worsened. It also failed to curb spending, with State Fair president Curry A. Roberts and a handful of officers continuing to draw outsize salaries, according to documents in the bankruptcy case as well as SFVA's own filings with the Internal Revenue Service.
The nonprofit's Internal Revenue Service 990 documents, which all tax-exempt groups are required to file, also showed that Roberts' compensation package was estimated at $278,090 in 2008, $242,523 in 2009 and $234,131 in 2010.
Senior director of development David P. King received $138,945, senior director of risk management John S. Bryan, $131,884, and senior marketing director Michael J. Fritzsche $139,077 made in total compensation in 2008, according to IRS documents. In 2009, King's compensation was $128,926; Bryan's, $115,926, and Fritzsche's, $122,760. The following year, King received 129,686; Bryan, $121,535; and Fritzsche, $134,602.
An email message left for Jonathan L. Hauser, the attorney representing the State Fair of Virginia Inc., wasn't returned.
Lenders provided $25.8 million in corporate bonds along with about $49.8 million in tax-exempt bonds in 2007 to State Fair of Virginia to help finance $94 million for construction on the site to prepare for hosting the fair. The nonprofit had set aside $45 million in an investment account, and had projected that the account, combined with operating funds, would be enough to cover their costs and debt repayment.
State Fair of Virginia Inc. also received more than $6.5 million in direct loans in 2008, as well as a $3 million line of credit in 2009, from the U.S. Department of Agriculture. The agency also has lien rights to the Caroline County property as it agreed to back 90 percent of the corporate bond debt.
A spokeswoman for the U.S. Attorney's office in Richmond, which is representing the USDA in the bankruptcy case, declined to comment on Wednesday.
The State Fair of Virginia made its initial appearance in 1854 in Richmond's Monroe Park.
After major construction, the fair debuted in Caroline in September 2009. Attendance hit a record 250,000 last year, but the group was unable to make money after leaving Richmond.
The stock market also slumped during the recession, shrinking the group's investment portfolio and exacerbating its cash crunch.
A consultant hired by the State Fair of Virginia determined that the nonprofit had losses of about $1.3 million in 2008, $1.8 million in 2009 and $1.7 million in 2010, according to filings in the bankruptcy case. In addition to high officer compensation, the group's IRS forms also show big payments to contractors, including $22.2 million to English Construction in 2009-10.
The creditors group anticipated the nonprofit would lose $1.5 million in 2011, Myatt said.
"So, we told the State Fair that we weren't going to continue to fund their operating losses," Myatt said. The nonprofit filed for Chapter 11 bankruptcy protection in December and proposed to buy out the bondholders to settle the debt. The creditors declined, saying the offered amount wasn't anywhere near what they were owed. The Chapter 11 case subsequently was converted to a Chapter 7 liquidation.
"In 2011, they had the best attendance ever," Myatt said. "Then you start to say, if you had a great year, and you still had operating losses, then you need to bring your expenses in line with revenues — and they just didn't."
The property's tax-assessment value is $14 million, and the state fair organizers had put the liquidation value at $10 million, including $5 million for the real estate.
It's unclear whether any purchaser would be able to develop the grounds for housing or other uses.
Caroline County rezoned the site specifically for the State Fair of Virginia. Board of Supervisors Chairman Wayne A. Acors has said that officials hope another operator will step in and hold the fair there.