When Larry Gottesdiener bought downtown Hartford's Metro Center One in 1997, he snapped up his first office building in the city for a bargain, reaping the benefits of a real estate market still weak from a crippling recession.
From that modest beginning, Gottesdiener and his Northland Investment Corp. have grown to become downtown's largest landlord and a dominant commercial real estate owner in central Connecticut.
Now, though, Gottesdiener is the one with real estate troubles.
Metro Center on Church Street sank into foreclosure in September after Northland stopped making mortgage payments in April on the 12-story office tower at 350 Church St., according to court documents and city records.
The foreclosure follows Northland's decision to close the money-losing Goodwin Hotel in downtown last year. The Metro Center filing also now raises questions about the health of Northland's massive real estate empire and just what role it will play in Gottesdiener's vision for downtown Hartford as a "24-hour neighborhood" in which people would "live, work, eat, drink, shop and play."
Northland insisted Tuesday that it will remain active in those efforts, even as it works through its financing troubles.
"Northland's track record speaks for itself," Mary Brennan Coursey, a Northland spokeswoman, said Tuesday. "We remain the most committed investor in downtown Hartford."
It remains unclear, publicly, whether the foreclosure signals deeper problems at Northland or is an expected blip in a real estate recession. In addition to its holdings downtown, Northland, based in Newton, Mass., owns large apartment complexes in Manchester and Enfield. It also has the contract to operate Rentschler Field in East Hartford and the XL Center downtown.
City officials said Tuesday they are monitoring the situation but remain confident that Northland's size — owning and managing properties in nearly a dozen states — will help it navigate through the weak economy. The firm is up to date on its property taxes, which will total $1.36 million in the current fiscal year.
"They remain engaged, looking to the future of Hartford and where we want to go," said David E. Panagore, the city's chief operating officer.
Northland purchased Metro Center for $10 million. In 2000, the company refinanced the mortgage for $25 million, ratcheting up the debt on the property.
Coursey said Northland is working to refinance the mortgage, but is finding that difficult because lenders remain cautious, especially about financing commercial real estate loans. Northland also is under a tight deadline because the mortgage is nearing maturity — at which time the loan must be refinanced or paid off.
"Northland is currently negotiating an extension that will give the company sufficient time to secure a new loan on commercially reasonable terms," Coursey said.
On its face, Metro Center does not appear troubled. Built in 1986, it is about 80 percent occupied, with Lincoln Financial Corp. its flagship tenant. Lincoln renewed its lease in 2007, but downsized by two floors. The Connecticut Business and Industry Association is also a tenant.
Bank of America is the trustee on the mortgage, which was sold to investors on the secondary market. A lawyer for the bank, Katherine A. Burroughs of Dechert LLP in Hartford, did not return a call Tuesday seeking comment.
Commercial real estate financing experts in Hartford said refinancing remains a tough slog for property owners facing their loans coming due — and more will face that challenge as next year steadily approaches.
"We haven't seen a lot come to foreclosure, but we are expecting to see more of them," said Bob Martino, a commercial real estate attorney at Updike, Kelly & Spellacy.
Some lenders, Martino said, are granting property owners extensions of one or two years, but are demanding, in return, higher interest rates and a payoff of some portion of what is owed.
One rival building owner in downtown Hartford said Tuesday that all building owners have had to "tighten our belts" in the recession.
"Some of us have less financing than others, and those are going to be the ones that are left standing," said Michael Grunberg, whose family-owned real estate firm owns 280 Trumbull St., and the Bank of America building.
Gottesdiener, originally from New London, came to Hartford buying things other people wouldn't, saying he had great faith in the city. He quickly branded himself the city's "catalytic developer," the one to get things started — and he did.
He has invested tens of millions of dollars from Northland and other private investors in downtown, assembling an enviable portfolio: CityPlace II, Goodwin Square, The Crosthwaite Building on Allyn Street and The Standard Building at Trumbull and Pratt streets.
Gottesdiener crowned those investments with the construction of the Hartford 21 apartment tower on Trumbull Street, funded partly with public money. The tower has 262 upscale apartments and street-level retail space.
But not everything he set into motion is still spinning. Gottesdiener, who has sought to bring major league hockey back to the city, had a goal for 2008 to open a grocery store at Hartford 21. Even though he spent $2 million building out the space, he hasn't found anyone to run it.
He also has had a tough time filling retail space in Hartford 21 or along Pratt Street.
Courant staff writer Jeffrey B. Cohen contributed to this story.
Reprinted with permission of the Hartford Courant.
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