Dwight Frankfather of Corus Bank, the first mortgage construction lender, tells GlobeSt.com that Seegmiller was able to sell approximately 100 of the 168 units before the market collapsed in the second half of 2006. As is typical, all proceeds went to the first mortgage lender, enough to pay it down "to a loan-per-sf [amount] where we think we are really quite safe," Frankfather says.
With no more proceeds to pay off the Corus loan, let alone the mezzanine loan, Frankfather confirms that Pyramis opted to foreclose, taking over the unsold portions of the project and, therefore, the responsibility for paying the bills. Those bills include the interest expense on the Corus loan, which is being paid, Frankfather says.
"We were not willing to lend any more [to Seegmiller], the mezz lender also was not willing to lend more money in to the deal and the equity investors weren't either," Frankfather says. "As a result, the mezz lender foreclosed on its interest in the borrower, apparently believing there's enough in the deal that it would make sense to stay in, carry the costs and thereby become the owner of the project."
Corus funded a $67.1-million, 75% construction loan for the $90-million project in July 2005. The amount of the mezzanine loan was not immediately available. Neither Seegmiller Partners nor Pyramis Global could be reached Friday for comment.
While not privy to the mezz lender's strategy, Frankfather says it has at least a couple of choices going forward. If it needs to recoup as much as possible as quickly as possible, it will have to test the market. If not, it could wait out the market, own it as inventory for a couple of years and hope that the market will rebound such that it can sell at the same numbers it was selling for prior to the downturn.
The 21-story building has 5,310 sf of retail at street level and internal parking on the next six floors. Residences begin on the eighth floor, providing views of the Strip, Downtown and surrounding mountain ranges. Typical units have 10-foot ceilings and range in size from 900 sf to 1,600 sf while the two-story penthouses range from 1,800 sf to 3,072 sf. Common area amenities include a rooftop deck with a fitness club, exercise track, garden and pool.
Most of the sales that closed were buyers who made pre-sale commitments that included a 15% down payment. The sale prices averaged about $450 per sf. "It's hard to guess what the value is now because there have been no sales," Frankfather says.
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