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Lender files foreclosure on CityNorth, seeks $290 million
By Chris | February 2, 2010
The lender of CityNorth’s first phase has filed foreclosure proceedings against the developers, claiming it is owed more than $290 million for the project.
Capmark Finance Inc. filed the paperwork Dec. 30 with the Maricopa County Recorder’s Office on money it says it and other lenders are owed on the nearly 627,000-square-foot mixed use development in what may be the largest foreclosure proceeding in the state.
John Klutznick, principal at the Klutznick Co. and one of the project’s joint partners, attributed the foreclosure to the poor economy.
“The foreclosure will result in a restructuring of equity interests in the High Street portion of the project to enable fresh capital to be injected,” Klutznick said in a statement. “Day-to-day operations will continue as usual and Klutznick Company remains committed to the success of High Street.”
The foreclosure is targeting the High Street group of companies responsible for CityNorth’s first phase, including Phoenix High Ground LLC, Phoenix High Building LLC, Phoenix High Residential I LLC, Phoenix High Residential II LLC and Phoenix High Residential III LLC.
The entire development is a joint venture between the Related Cos. LP, the Thomas J. Klutznick Co. and Jer Real Estate Partners.
Najla Kayyem, vice president of marketing and public relations for Related Urban, which oversees the development’s operations, said while the ownership may change, the development will continue to lease space and try to attract tenants.
“The filing and subsequent proceedings will result in a change of ownership and we anticipate that this transfer will have no direct effect on the operations of the property or the tenants in place at CityNorth,” said Kayyem in a statement.
Formerly GMAC Commercial Holding Corp., Capmark was one of the lenders of the project near Loop 101 and Tatum Boulevard in Phoenix, along with Deutsche Hypothekenbank and CSE Mortgage LLC.
CityNorth is billed as a multiphase retail, office and residential project that was designed to be an urban hub just east of Desert Ridge Marketplace.
The first phase opened in November 2008 but was hit with the early stages of a brutal recession that saw several retailers abandon their plans for the project. Nordstrom’s announced it was pulling out of the development, and Macy’s and Bloomingdale’s pushed their opening back until 2010.
The project also was hit with another blow as a lawsuit by the Goldwater Institute sought to overturn the $97.4 million in tax incentives given to the developers of the project by the city of Phoenix. The Goldwater lawsuit is now sitting with the Arizona Supreme Court awaiting a decision.
Klutznick said his company was continuing to work on future phases of the project and believed it still would be successful.
“We have weathered economic downturns in the past, and we are confident in CityNorth’s long-term success,” he said.
Source: Phoenix Business Journal, Patrick O’ Grady, January 5th, 2010
Topics: Foreclosures/Bank Owned, Uncategorized | No Comments »