Bella Vista Heights, so promising as an upscale residential development a decade ago, remains an empty reminder of the residential building bust and a millstone to developers and bankers.

Bella Vista Heights, so promising as an upscale residential development a decade ago, remains an empty reminder of the residential building bust and a millstone to developers and bankers.

The latest indignity to the 38.5-acre subdivision straddling East McAndrews Road just east of Foothills Road struck at around midnight Monday, when 50 yards of the hillside slipped between 6 and 10 feet. A water main broke, causing a loss of between 150,000 and 200,000 gallons before Medford Water Commission crews could cap the line.

Whether the slide caused the water line break or a break caused the slide has yet to be determined, city officials said.

Although a final report pinpointing the cause has not been issued, a draft report on soil samples prepared by Marquess & Associates was "in the mail" to the city, said Water Commission spokeswoman Laura Hodnett.

It appears the slide, which occurred between Carino Lane and La Strada Circle, was caused by the hillside giving way, rather than faulty water line components, she said.

"It sounds like there was some slumping before, just that no one noticed," she said. "The belief is the slide occurred first and the slide took out the water line. The bolts broke off like they were supposed to if they are properly installed. Because there was quite a deep drop, we basically capped off the pipe from both ends.

"The hillside is unstable so we weren't going to put employees in harm's way."

Andy Gerlicher, senior vice president and corporate counsel for Bank of the Cascades, said the lender still was piecing together information and responsibility, and insurance would cover water line repairs.

"Fortunately, no homes or people were directly affected," Gerlicher said. "We don't know yet who's responsible, but we do have coverage.

"We don't know what costs will be involved, but we're asking the same questions."

Bella Vista was a promising development pairing stunning views of the Bear Creek drainage with a five-minute drive to downtown Medford. Infrastructure was built, and the development's signature waterfall was installed at the western entrance. But years of haggling later, not one house was built, the lender foreclosed and the waterfall at the western entrance ran dry.

Today, the $2.9 million asking price is about 36 percent of the $8 million posted in 2009. Regardless of who gets saddled with clean-up costs, soil stability issues will impact future land values.

"We're getting the right kind of expert help to give us an assessment to determine the situation so we can make an informed decision going forward," Gerlicher said. "It's an incredible piece of land."

The conspicuous jagged tear and large gouge in the hillside is a reminder of Bella Vista Heights' ongoing struggles.

Five parcels that make up the development were annexed into the city in 2001 and 2005. The project had to wait for the East McAndrews Road extension to be built, and that was delayed until legal battles with adjoining land owners were settled. Some of the community's best-known builders and developers, as well as the city, came into conflict as the courts settled who would pay for what and who was giving up property.

The thoroughfare was finally opened in 2003 — at least three years after it was originally to be completed to meet up with the city's Brookdale Avenue-to-Foothill Road portion that was completed in 2000.

The residential market was at its peak in January 2006 when Excelsior Development Co., led by Jeff Chamberlain, paid Arthur Dubs $13.84 million for the 38.5 acres, with lots ranging from two-tenths to two-thirds of an acre. A Street of Dreams presentation was in the works and presale reservations were coming in nicely. A year later, property values were plunging and in December 2008, Bend-based lender Bank of the Cascades took possession.

In 2009, Bank of the Cascades put Bella Vista Heights on the block for $8 million for 107 lots, including one parcel overlooking Roxy Ann Vineyards once priced at more than $400,000 by itself.

At that price, the lots averaged $75,000. Today, the asking price is $2.9 million, or $27,000 per lot, on average.

Dan Westbrook, an agent with Windermere Van Vleet & Associates, the latest in a growing line of real estate companies attempting to market the development, said potential buyers continue to look at the property.

"We've had some very interested parties and they weren't making low-ball offers," Westbrook said. "With views like it has and developed lots, it's a really good purchase for a long-term or aggressive investor."

The task, however, is to find a buyer who doesn't see an easier return for dollars in other areas.

"Lots have to be priced like this in order for someone to be willing to build a new home," Westbrook said. "It's something of a challenge because this market and area have an over-supply of bare lots."

In essence, he said, the buyer will have to be willing to hold the property until market forces pop the cork. The uncertainty of falling land values, coupled with hillside erosion and deterioration from disuse, are only countered by potential.

"I've talked with investors and brokers," Westbrook said. "No one is going to find something this cheap. You may go around the state and possibly find something cheaper, but not with the views or what Medford has to offer."

Reach reporter Greg Stiles at 541-776-4463 or email business@mailtribune.com.