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Developer of San Diego Condo Project Defaults on $200M Loan
Even the most sophisticated business owners and real estate property developers can use legal help when it comes to protecting their financial interests. But sometimes even sound legal advice may not be enough to prevent the bank from pulling out of a deal.
Canadian developer Pointe of View recently learned that lesson when a Canadian lender filed a notice of default on their $210 million construction loan. The loan was actually due last September, but for some reason the lender waited over 6 months before they filed the notice of default.
In 2010, Pointe of View finished construction of a 679-unit condominium high rise in downtown San Diego at Ninth Avenue and B Street. Funding for the "Vantage Pointe" project was originally granted in 2005, but the developer had trouble pre-selling the condo units, leaving them with little recurring monthly revenue. As a result, they have not had sufficient funds to pay off the loan, and just under $200 million remains outstanding.
When the project first launched, the developer actually pre-sold over 300 units, but later returned deposits to prospective buyers last year in order to restructure the deal to meet stricter government lending requirements. Pointe of View wanted government-controlled mortgage company Fannie Mae to buy out its private loan, but Fannie Mae requires that 70 percent of condo units be pre-sold before it will acquire private project loans.
Since returning the pre-sale deposits, Pointe of View has restructured the sale into five small phases so that they can more easily meet Fannie Mae's threshold. According to the developer's attorney, Pointe of View is currently negotiating with their lender to try to create a plan for the sale of all units and set up the final terms of the sellout period.
Local real estate agents note that condo sales in San Diego are slowly starting to increase, but some buyers might find that Vantage Point does not have as desirable a location as other available downtown condos. But, as one San Diego mortgage broker noted, if the lender does not reach an agreement with Pointe of View, then the project will be halted until a new developer or buyer steps in. Until that happens, the bank will continue to lose money. The developer remains optimistic.