Northland Investment Corp. is accusing the firm handling foreclosures on two of its downtown Hartford towers of acting in bad faith by improperly holding one office building hostage over the other as Northland tries to renegotiate its loans.
In a court filing on the CityPlace II foreclosure, Northland Chief Executive Steven P. Rosenthal accuses the foreclosure servicer, LNR Partners, of intertwining the fate of CityPlace II and Goodwin Square, even though they have separate loans — a move that Rosenthal said was "actionable."
Northland also blamed LNR for the loss of a highly desirable prospective tenant for the tower, Bank of America, early last year. The bank has moved hundreds of employees from a building at 777 Main St. to CityPlace I, which has separate owners not affiliated with Northland.
LNR attempted to "coerce us" and "there were threats made with respect to actions against us on that property relating to this property," Rosenthal said, according to a transcript of a Jan. 13 deposition.
The documents offer a behind-the-scenes look at the complex and nasty battle as central Connecticut's largest commercial landlord works through a real estate crisis that left three of its large Hartford buildings in foreclosure. In January, Northland lost Metro Center One to repossession by lenders.
In the deposition, Rosenthal complained that LNR had repeatedly rebuffed efforts by Northland to renegotiate the $25 million loan on CityPlace II.
"Once we were able to engage in having any kind of conversation with them, they were repeatedly in e-mails, phone calls and conversations linking the two loans so that we were somehow, whatever we were doing in one related to the other," Rosenthal said, referring to CityPlace II and Goodwin Square.
LNR did not return a telephone call seeking comment. Northland declined to elaborate on Rosenthal's deposition remarks.
CityPlace II fell into foreclosure in late 2009 and Goodwin Square the following June. In late 2008, Northland closed the Goodwin Hotel at Goodwin Square, and it remains vacant.
Northland's troubles in Connecticut continue to mount. The firm had to shelve plans to redevelop the former New Haven Coliseum property in New Haven, and the city is now seeking other developers. And in the past two weeks, Northland has come under pressure from its tenants at an apartment complex near the Manchester mall for failing to quickly repair damage caused by ice dams.
In a positive development, Northland's Hartford 21 apartment tower across Asylum Street from CityPlace II saw its long-awaited food market open last week, to a warm reception by downtown residents and workers.
Commercial real estate experts say it is not unusual that a loan-servicing firm such as LNR that represents investors, handling multiple foreclosures by a single borrower, would look at the buildings as a group rather than individually.
"If the borrower has multiple properties that are in trouble, and wants relief, the servicer might try to get the borrower to do something that it might not otherwise do on another property," said Bob Martino, a commercial real estate attorney at Updike, Kelly & Spellacy in Hartford.
According to the deposition, Bank of America wanted assurance that if it leased space at CityPlace II that the building would not be repossessed, throwing into uncertainty about who the bank's landlord would be. With negotiations going badly, Northland was unable to provide that assurance. Northland also failed to gain approval from LNR for the lease and tenant improvements, according to the deposition.
"The conduct of the lender in linking these properties, failing to let us operate the properties, failing to acknowledge what is going on at the properties clearly indicates a pattern of behavior that I think is actionable," Rosenthal said.
Reprinted with permission of the Hartford Courant.
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