Andrew Little, an investment banker with John B. Levy & Co., explores the implications of the Magnolia Green lawsuit for development in western Chesterfield County in a column appearing in today’s Metro Business.

Magnolia Green Development LLC filed a lawsuit recently against its financially stressed New York-based lender, iStar Financial, which had asked the developers to post $24.3 million in 15 days. Magnolia Green’s developers contended that iStar’s financial situation, not the viability of the project, was the motivating factor behind the loan recall.

On the other hand, Little notes, “the dirt just isn’t worth what it was last year. A combination of collateral that isn’t worth what it once was and a lender that is being pressured to raise capital can be a formula for disaster for developers and lenders alike.”

Magnolia Green’s misfortunes may play out well for the developers of the giant Roseland development project, also in Western Chesterfield, which received rezoning approval from the county only last month. Writes Little: “The lawsuit will delay progress at [Magnolia Green] and most likely will give builders who have contracts to buy lots there reason to look elsewhere.”

The lawsuit also raises issues about the Community Development Authority bonds approved for Magnolia Green. While the county is not liable to repay the bonds if the project runs off the rails, Little notes, the CDA’s success is important to get infrastructure in place for redevelopment of the Hull Street Road corridor. The revenue stream to repay the bonds will be delayed by the lawsuit.