ST Residential owns loans on Concerto and Terranea Resort, and owns Solair outright. Pictured: Starwood's Barry Sternlicht, FDIC Chairman Sheila C. Bair
Last week, news broke that ST Residential, a partnership between a Starwood-led group of investors and the FDIC, had taken title on the Solair project in Los Angeles. According to Peter Marino, a representative for ST Residential, things will be quiet at the Koreatown sales office in the short term. "[Solair] is not actively being sold,” said Marino, noting a sales program will re-launch in the fall. For those just catching up, ST Residential bought the loans of defunct Corus Bankshares, the Chicago bank that provided financing on numerous LA-area projects, including the three properties pictured above. Given the financing arrangement with the FDIC, ST Residential has flexibility in how it can deal with these projects. To the chagrin of developers like Sonny Astani, it can push to foreclose, sit on the property, refuse to lower prices, or renegotiate the loan. "Each property is different, and everything is on a case by case basis," said Marino, of the properties it holds notes on. At this point, ST Residential is really acting as guardians of some of the biggest LA-area developments. Let's check in to see what's going on.
This is just a snapshot of the bigger projects ST Residential is connected to in LA, all projects that used to have Corus loans:
1. Solair: According to Marino, Solair's developers defaulted and the deed was transferred on July 2nd. ST Residential has hired the Park Company to do sales for the building. “We’re trying to do an assessment of the market and will relaunch in the fall," he said. "We have the flexibility to wait longer if we choose to.” Asked if ST Residential--Starwood's Barry Sternlicht has publicly talked about how it can afford to hold on to some properties-- might wait as long as till next spring to relaunch Solair, Marino said he doubted the time lag would be that long.
Principals at Koar Wilshire LLC, the original developers, didn't return calls seeking comment, so it's not clear if they still have any role at Solair. In an extensive Bloomberg article published this week entitled "FDIC Selling Corus Loans Means Betting on Failed Condo Projects," in some cases the developers are staying on to manage the properties after ST Residential forecloses on their property.
2. Concerto: Everyone knows Sonny Astani has been fighting with Corus Construction Ventures LLC, ST Residential's LLC on the project, to keep his development. (And in the same Bloomberg article referenced above, one meets a few Florida versions of Astani, Miami developers who are also battling ST Residential). Some very important things happened in the last week in respect to Concerto. The majority of creditors in Astani's chapter 11 case voted in favor of his plan of re-organization. Days later, Corus Construction Ventures LLC asked a judge to to allow them to foreclose on Astanti's three sites (tower, lofts, land), which is currently valued at $122 million, according to their estimates. The judge has to approve both motions. (And in a third twist, a court appointed expert stated the debt Astani owes should have a higher interest rate than what Astani has said he can pay.)
Meanwhile, at a City Hall subcommittee meeting last week to discuss City Councilwoman Jan Perry's motion to challenge the FDIC over possible delays in finishing Concerto, Brenda Rodriquez, a rep for Astani, told the committee members: “There has been no dialogue with Starwood/FDIC since late May or June." Marino declined to comment on Perry's motion.
3. Terranea Resort in Rancho Palos Verdes: Developer Lowe Enterprises defaulted on the loan for this $475 million resort, Mediterranean-style resort when it was still owned by Corus Bank. At this point, ST Residential hasn't foreclosed, according to Marino. A representative for Lowe Enterprises issued the following statement: “We continue to work closely with our lenders and equity partners and are engaged in productive discussions regarding the recapitalization of Terranea.”
4. And let's not forget these guys: On two projects financed by Corus in Pasadena and Rolling Hills Estates (Vista Del Arroyo and Silver Spur, respectively), the loans were renegotiated and the projects auctioned off via a Kennedy Wilson-led event. Additionally, driving by the Glencoe Lofts project two weeks ago, it looks like that development is still sitting empty.
And once again, it's worth reading that Bloomberg story to understand the FDIC's approach, a complex deal which affects both local developers and taxpayers. In a video interview with Jonathan Keehner, the Bloomberg reporter who covered the story, Keehner admits there are "some perverse effects" to the FDIC loan packaging deal.
UPDATE: From an older post, some of the LA-area loans given out by Corus since 2002. We took this information off the web site for Corus when they were still up and running. it's not clear what the status is of all these loans, but obviously some developers repaid the loans or bought the loans--and moved on.
West Ocean Phase II, $53.176 million
Evo, $141.375 million
Solair, $127 million
Glencoe Lofts, $39.2 million
Wilshire Boulevard Condominiums, $81.8 million
120 Rose Street, $35.2 million
Concerto, $190 million
G2 Lofts, $46.83 million
Terranea Resort, $150 million
Lofts at Studio City ,$19.692 million
Cove, Marina Del Rey, $80 million
Little Tokyo Lofts, $41.5 million
Sunset & Vine, $72 million
*Bank Lofts, San Pedro, $25 million
· In Florida, Vestiges of the Boom [NY Times]
· FDIC Selling Corus Loans Means Betting on Failed Condo Projects [Bloomberg]