Commercial Development News - Appraisal Development International

Las Olas Centre owner faces foreclosure on Wachovia loan
Prestigious office complex in downtown Fort Lauderdale faces foreclosure, the latest commercial property in South Florida dealing with financial problems.

By Paul Owers
Sun-Sentinel
Published: Aug 25, 2009

The owner of Las Olas Centre, a prestigious office complex in downtown Fort Lauderdale, is facing foreclosure, the latest commercial property in South Florida dealing with financial problems amid the credit crisis.

In Palm Beach and Broward counties, 52 office, industrial and retail complexes worth nearly $800 million are considered troubled assets, according to Real Capital Analytics and Grubb & Ellis Co.

"This is a very substantial problem," said Stuart Kapp, a real estate lawyer with Proskauer Rose in Boca Raton. "Many owners are not able to refinance properties at a rate that will pay off the prior debt."

Wachovia Bank filed the foreclosure suit against Las Olas Centre's owner, BentleyForbes, on Aug. 18, alleging that the Los Angeles-based company defaulted on more than $220 million in loans. A lawyer for Wachovia, now part of Wells Fargo, referred calls to a bank spokeswoman, who could not be reached.

BentleyForbes contends that Wachovia asked to help underwrite the company's proposed initial public offering and urged BentleyForbes to buy the Las Olas Centre with temporary financing provided by the bank. The parties agreed that the loan would be repaid from the proceeds of the offering, but the IPO market later collapsed, said Stephen Meister, a lawyer for BentleyForbes.

"They're trying to strip us of our equity and our hard work, without any chance to ... work out the terms of this," Meister said.

BentleyForbes bought Las Olas Centre in July 2007 for about $231 million, or nearly $500 a square foot. Tenants include Huizenga Holdings, SmithBarney and the Samba Room restaurant. Fort Lauderdale developer Terry Stiles built the 468,000-square-foot property in 1997.

Downtown at the Gardens and Pembroke Lakes Mall are among the 52 South Florida properties in distress, meaning they have been taken over by a bank or are facing a mortgage default, foreclosure or bankruptcy.

Some landlords are negotiating with lenders, and banks may eventually be forced to write down the values of the mortgages.

"So many of these assets were bought at inflated prices based on the assumption rents would increase and vacancies would stay down," said Jonathan Kingsley, managing director of Grubb & Ellis in Miami and Boca Raton. "But now the market has turned."

Paul Owers can be reached at Powers@Sunsentinel.com or 561-243-6529.