Northland's CityPlace II In Hartford Is In Foreclosure
KENNETH R. GOSSELIN
December 11, 2009
Even as Northland Investment Corp. and city officials celebrated a major new lease with St. Joseph College at the Hartford 21 complex, a second Northland building in downtown Hartford sank into foreclosure.
CityPlace II, an 18-story office tower on the corner of Asylum and Trumbull streets, was hit with the filing Dec. 4 — three months after Northland's Metro Center building on Church Street fell into foreclosure.
It remains unclear what the foreclosures will mean for Northland, the region's largest commercial landlord. As with Metro Center, Northland is saying that although it is in default on its mortgage payments, the CityPlace II foreclosure is essentially a way to launch negotiations on new loan terms.
The mortgage is due to reach maturity soon, meaning it must be refinanced or paid off. Both Metro Center and CityPlace II have $25 million loans, according to court documents.
"Like most commercial real estate borrowers, the lack of liquidity is making refinancing at maturity problematic," said Mary B. Coursey, a Northland spokeswoman. "We are negotiating with the lender to produce an extension that will give us time to get a new loan and a modification of the interest rate."
Northland could successfully negotiate its way out of the foreclosures or it could face the possibility of having to sell the buildings or lose them in the foreclosure, commercial real estate financing experts said Thursday.
Last week, Northland Chairman Larry Gottesdiener insisted that his company remains financially strong and committed to its vision of downtown Hartford as a "24-hour neighborhood" in which people would "live, work, eat, drink, shop and play."
The stakes are high for Hartford because Northland has been a key player in the move toward that vision. New building owners might not share in that same vision, experts said Thursday.
Court documents filed in Superior Court in Hartford show the mortgage on CityPlace II was taken out in November 2006. Northland has not made a mortgage payment since June 1, the documents show.
Northland is facing a tough challenge in seeking new financing for the mortgages.
Nationally, few lenders are willing to refinance commercial real estate mortgages because they fear a wave of defaults as vacancies rise and property values drop below outstanding loan balances. For loans such as Northland's, which sold as securities to investors, the path is even more complex. Northland isn't dealing with its original lender, but rather a servicer for the investors.
Katherine A. Burroughs, a Hartford lawyer at Dechert LLP who is representing the servicer, declined to comment Thursday.
Attorney James Tancredi, co-chairman of bankruptcy and distressed assets practice at Day Pitney in Hartford, said some servicers could require legal action — such as a foreclosure — before negotiations can begin.
"Most have real tough standards," Tancredi said. "They don't want to make it easy for them to default and get their loans modified."
Often borrowers have to come up with additional money, perhaps from another investor, to win new terms, Tancredi said.
Foreclosure on properties held within a portfolio does not necessarily mean the owning company is financially troubled, even if it leads to the sale of a property, said Marc Louargand, co-director for the Center for Real Estate and Urban Economic Studies at the University of Connecticut in Storrs.
"The ownership can continue with other assets that are viable," Louargand said.
Reprinted with permission of the Hartford Courant.
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