The Morning Report
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The developers of Vantage Pointe, downtown San Diego’s largest condo building, haven’t met their deadline to repay their $210 million construction loan, putting them in default — a precursor to foreclosure.
The project’s lender filed a default notice against the developers on March 9. The notice said the outstanding loan balance as of March 8 was $197,829,642.29.
The default notice is the formal first step for the developers and the lender to negotiate new terms on the loan — namely, to give the company more time to sell the units in the project in the next few years, said Randy Klapstein, CEO of Pointe of View, the building’s Calgary-based developers.
“We’re working on our final arrangement to have a sellout over the next 24 to 36 months,” he said. “It’s a modification of the original terms.”
Construction loans have a shorter lifespan than a residential or regular commercial mortgage. They’re often paid off within a couple of years — when units sell, the developer repays the loan. But the developers of this building have had major trouble with the project, which finally opened last year.
The construction loan’s time was up in September 2009. At that time, the developer owed $176.8 million of the original principal. Combined with interest, the loan reaches the $198 million balance noted above.
Vantage Pointe has about 47 condos under contract, in process of being sold. The company has taken months to get the building approved for certain kinds of attractive loans for buyers, and no buyer has been able to close yet. Some buyers under contract are renting and living in their units in the meantime.
Last year, the developers split their project up into several mini-projects. One whole tower of the complex, comprising more than 200 units, is available for rent.
Formality or not, this is a giant loan balance to show up in the county’s default rolls. The total $210 million loan is most likely the largest private sector loan for a single building in county history, said Alan Nevin, chief economist at MarketPointe, a local real estate consulting firm.
A representative from the mortgage arm of a Canadian investment firm did not return calls for comment.
These kind of loan workouts on a massive scale are not uncommon around the country, said Greg Rutten, senior vice president of Quality First Commercial, a commercial real estate firm.
“Most lenders are extending loans for a lot of reasons right now, but there is a point when they start filing [notices of default] — kind of ‘enough is enough,’” Rutten said. “It’s a little bit of an ultimatum.”
Klapstein said he’s getting encouraged about the San Diego housing market.
“To me it just has a better feel these days,” he said. “Maybe I’m hopeful. I have a better feel for the market going forward.”
— KELLY BENNETT