The disputed default on Rincon Center Towers’ $110M of debt we first reported last November is now a foreclosure in process. From the San Francisco Business Times:
Residents received a letter [Wednesday] from Default Resolution Network — a division of Fidelity National Title Co. — telling them that the property was default and that they were “in the process of foreclosing on behalf of the lender.”
The letter goes onto say that the “if the lender takes title to the property at the foreclosure sale, the lender intends to honor your lease so long as you comply with the terms of your lease.”
Once again, the 320-unit Rincon Center Residential Towers at 88 Howard was purchased for $143 million in 2007 with an additional $10 million invested since.
∙ Rincon Center Towers $110M (And Possibly In Default) Debt For Sale [SocketSite]
∙ Rincon Center faces foreclosure [San Francisco Business Times]
The CRE meltdown continues. These indebted companies don’t care, and they’re just walking away as many people should. Of course, when corporations walk away, it’s considered exercising a contractual right, whereas when Average Joe does it, it’s considered violating morals. Talk about a double standard.
This meltdown is even slower than a paint drying on a painting of grass growing of the higher end residential market. It’s going to keep bankruptcy attorneys busy for years and years.
What a mess! Those apartments are really nice, too.
How does this work if the lender taking back the property can’t service the project based on the rents? And, of course, once the leases are up?
Raise rents? But will the market allow that? Put the property up for sale at a steep discount?
“the lender intends to honor your lease so long as you comply with the terms of your lease.”
Like they have a choice in San Francisco…
The market may not allow a rent increase, but these units are not under rent control (or shouldn’t be, anyway) because they were built after 1979.
Presumably the lender will sell the project at what the market will bear.
The “lender” is a real estate investor who bought the loan at a discount recently with the full intention of foreclosing and acquiring Rincon Center at whatever price they paid for the loan. The current owner / borrower is Capital Properties out of NY who does not believe they are in default and will contest the foreclosure proceedings – they have no intention of walking away. If the lender is successful in foreclosing, they’ll refinance with the best debt they can get, which will be pretty good in this market as multifamily rates are sub-5 for 30 year fixed. If the lender is not successful in foreclosing, it will be because the borrower became current and the lender will still be doing all right because they’ll be getting interest on a balance of X even though they bought the loan at a discount to X.
I have an apartment in this building and truly enjoy living there when in SF. There have been complaints about the management, but I have had no problems. The concierges, the cleaning staff, and the parking personnel have all been very nice and make it a pleasure to be there. I hope this can all be worked out.
I believe there are a good chunk of BMR rental units in the building …. Some of the few in the Rincon Hill neighborhood today.
It went to auction this afternoon and went back to the lender with opening bid at $73MM. No bidders, but a LOOOOOT of suits showed up to watch it go down.