JARED SOARES The Roanoke Times

Ashton Hill apartments, vacant and boarded up, are scheduled to be demolished in January.

JARED SOARES The Roanoke Times

Ashton Hill, a 216-unit apartment complex taken over by the Virginia Housing Development Authority after the previous owner defaulted on a loan, had low occupancy rates and lost money.

They survived a deadly arson, two foreclosures, multiple name changes and the use and abuse of countless tenants, but life has finally played out for the apartments at Shenandoah Avenue and Peters Creek Road in Northwest Roanoke.

The 18 buildings and 216 apartments first known as Spanish Trace, and most recently as Ashton Hill, will be demolished as soon as January and the land put up for sale in what could amount to a $6 million loss for the state agency that owns the complex.

The apartments, owned by the nonprofit Virginia Housing Development Authority, have been vacant since early July. About a year ago, VHDA, which acquired the complex through foreclosure, ceased leasing the apartments to new tenants as old ones moved out. That left fewer than 50 tenants to take relocation packages of $950 to $1,350.

The 38-year-old VHDA was created by the state to offer mortgages to home buyers and rental housing developers. The mortgages are funded by bonds, not tax dollars, so taxpayers aren't the losers on Ashton Hill.

This is the first time the organization has taken possession of a property it financed because the borrower was in default, officials said. It's also the first time that VHDA has demolished a property.

"We never intended to own it," said Mike Stoneman, multifamily property portfolio manager for VHDA.

VHDA financed the $6.2 million purchase of the 12-acre complex by its previous owner, Laurel Ridge Associates, in 2000.

"It had all the promise of being a good loan," Stoneman said. But the loan was restructured in 2004, court records show, and by 2006, Laurel Ridge Associates was in default. VHDA has since adopted minimum design and construction requirements for properties it finances.

VHDA foreclosed on the Shenandoah Avenue complex, and bought it at auction for $5.87 million.

"We determined we had to step in to protect our interest, and to protect our reputation in the community," Stoneman said.

VHDA put $1 million into renovations at the complex it renamed Ashton Hill. "We couldn't leave these properties in the condition they had deteriorated to," Stoneman said.

But despite that, VHDA was unable to increase occupancy at the complex, which was at 60 percent when Laurel Ridge Associates defaulted.

Though rents ranged from $439 a month for a one-bedroom apartment to $592 for a three-bedroom unit, there simply wasn't enough demand for them. In part, Stoneman said, the complex was competing with another VHDA-owned complex, West Creek Manor Apartments, just a quarter-mile away. That complex, which just underwent a multimillion-dollar renovation, even now has more than 90 apartments available at similar rents.

"We always subsidized its [Ashton Hill's] operation," Stoneman said. "It just simply doesn't generate the cash with the rents you can expect to justify putting a lot of money into it."

That left just one prudent option.

"We'll first scrape it to a piece of dirt, and then we'll start marketing it for future development," Stoneman said. "We have no inclination for what is the highest and best use for it."

"That's going to be a decision the market's going to drive," said Brian Townsend, Roanoke's assistant city manager for community development. Townsend and then-City Manager Darlene Burcham met with VHDA officials a year ago to hear about their demolition plans and gave their blessing.

"There aren't many consolidated, single, ready-to-develop parcels of that size in the city," Townsend said. With the buildings gone, "at least you now have a better range of possible options."

Ironically, the best option for the parcel may well be the same thing that's about to be razed.

"The highest and best use is for low-income multifamily housing," said Dennis Cronk of commercial real estate firm Poe & Cronk. But that doesn't mean the property will have much appeal.

"In any economic times, I don't know of a use that would be attracted to 12 acres at the corner of Shenandoah and Peters Creek Road," Cronk said. He doubts a developer of market-rate apartments would be interested.

"It's not a retail site, and you can tell that by what the retail site across the street is doing," Cronk said. It could make a nice site for a church, he added, if a church could afford it.

Cronk estimated the site could draw $600,000 to $700,000 once it's scraped bare.

"It doesn't mean you'll sell it because the market is very thin because financing is very hard to come by," he said.

Things have never been easy for the complex or those associated with it. It was originally built in multiple phases starting in 1969 for about $3 million.

In 1976, an 18-year-old rescue squad volunteer set fire to one of the buildings, destroying it and killing a mother and two toddlers.

Later that year, its owners defaulted on their mortgage and the complex was bought at auction for $35,000.

The complex was sold again in 1988 to United Dominion Realty Trust, which 12 years later sold it to Laurel Ridge.

By the time Laurel Ridge defaulted on its loan, the property was weighed down with multiple mechanics liens as well as a city of Roanoke tax lien.

VHDA officials point out that the real loss the organization might take on the property won't be known until it's actually sold.

So they haven't lost anything yet.

And they can afford to hold on to the property until the economy improves and the land has more interest and more value. "The holding cost would be minimal," Stoneman said.

"And when the economy changes, and the right developer comes," he said, "it gets put back into the privately held inventory."