NAPLES — Foreclosures aren’t just for homeowners.
Though residential owners and investors felt the brunt of the foreclosure crisis first, it didn’t take long to reach the commercial market, which is still feeling the pain years later from a boom gone bust.
“It was the investors that went first. Then the homeowners and then commercial properties went last,” said Jeff Tumbarello, director of the Southwest Florida Real Estate Investment Association.
In the past four years, some judgments in the multimillions have occurred for commercial property in Lee and Collier counties.
While there doesn’t seem to be a second wave of commercial foreclosures coming, at least in numbers, Tumbarello said he’s noticed some big ones in the past year.
“How do you eat an elephant? One bite at a time,” he said. “That is pretty much where you are.”
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Some lenders held off foreclosing on larger troubled commercial loans, but they’ve reached the point where they can’t or won’t do it anymore, Tumbarello said.
“They took the little bites first,” he said. “Now they are having to take the big bites in the end.”
One of those big bites came in October, when Variable Annuity Life Insurance Co. — a subsidiary of insurance giant AIG — took back the Riverview Corporate Center in Bonita Springs after getting a $50 million judgment. The nine buildings were owned by Riverview Properties of Southwest Florida LLC, with ties to McGarvey Development Co., the developer of the corporate park off U.S. 41, north of the Imperial River.
AIG took back several other McGarvey projects during the past eight months after swiftly getting hefty foreclosure judgments in Lee County. That included the Bonita Bay Executive Center, twin office buildings off Bonita Bay Boulevard just north of Terry Street, with a judgment of $9.3 million, and the Renaissance Center on Marketplace Road off Daniels Parkway in Fort Myers, with an even larger judgment of more than $14 million.
“Those are some big judgment numbers for Lee County,” said Paige Rausch, a Fort Myers real estate consultant.
There have been many more smaller judgments, in the range of $1 million to $5 million, she added.
Foreclosure activity in the commercial market has slowed noticeably in the past six months, despite the huge judgments, Rausch said.
“Since October of last year it has become obvious there are not as many commercial lis pendens actions being filed each month,” she said.
Lis pendens are default notices, the first step in a foreclosure.
Randy Mercer, a founding partner of commercial real estate firm CRE Consultants headquartered in Fort Myers, said his instincts tell him the bottom has been reached when it comes to commercial foreclosures. His firm is managing properties now owned by AIG, including Riverview Corporate Center. The focus now is on improving the buildings and attracting new tenants, not on reselling the property.
By the numbers
Some of the largest foreclosure judgments are in Lee County. The region’s largest came in 2010 and involved Grosse Pointe Development and three of its projects, including a waterfront community called Tarpon Point in Cape Coral. The lender, SNSPF Interim Finance B.V., foreclosed for a record $339.8 million.
“At some point in time down the road we will be involved in the disposition side,” he said. “When that is, I don’t know really. We haven’t had those discussions yet.”
Some of the most eye-popping foreclosure judgments have been in Lee County. The region’s largest came in 2010 and involved Grosse Pointe Development and three of its projects, including a waterfront community called Tarpon Point in Cape Coral. The lender, SNSPF Interim Finance B.V., foreclosed for a record $339.8 million.
Another big foreclosure came in 2010 when Bank of America filed a multimillion-dollar suit against the developer of the Oasis, a high-rise condominium in downtown Fort Myers. It resulted in a more than $154 million judgment against TRG Oasis Ltd., a subsidiary of The Related Group.
In Lee County, the market already has moved through about $600 million in foreclosure judgments on 200 commercial properties, which lenders took back and then resold for about $250 million, Rausch said.
She estimates there’s another $1.5 billion in commercial property that’s still bank or lender owned, or still in the foreclosure pipeline in Lee.
“To put that into perspective, the overall just value of properties in Lee County is $68 billion, according to the Lee County Property Appraiser’s calculations in 2012, and the market will simply see those assets recycled to new owners,” Rausch said.
By the numbers
In Collier, there have been some big judgments and new multimillion-dollar foreclosure cases continue to pop up. Several were filed this month, including one against Southern Development Corp. on a more than $4.6 million mortgage for two commercial buildings and land off U.S. 41 East.
In Collier, there have been some big judgments and new multimillion-dollar foreclosure cases continue to pop up. Several were filed this month, including one against Southern Development Corp. on a more than $4.6 million mortgage for two commercial buildings and land off U.S. 41 East. One of the buildings, at 13245 U.S. 41 East, is a 31,000-square-foot warehouse/showroom on 2.4 acres once occupied by Marco Building Supply.
Marc Shapiro, a Naples foreclosure defense attorney, is representing Southern Development in the action brought by Protective Life Insurance. He hopes to work out a solution to avoid foreclosure.
In some cases, it’s possible to negotiate more affordable mortgage payments or sometimes the commercial borrower will just give the property back to the bank, handing over the deed, just like some homeowners do, Shapiro said.
“Every bank is different,” he said. “Some banks work well with you, some don’t.”
Protective Life Insurance has asked a judge to appoint a receiver to take over the property and to collect rents. Southern Development filed for bankruptcy in U.S. District Court in Fort Myers, but the case was dismissed in January.
Another foreclosure case filed this month involves NNN Naples Laurel Oak LLC and a two-story building at 800 Laurel Oak Drive, off U.S. 41 near Pelican Bay. Its tenants are Hahn Loeser & Parks, a national law firm, and BMO Harris Bank, a Chicago-based bank. The mortgage claim is for nearly $11 million.
Two of the more high-profile foreclosures in Collier have involved Naples developer Jack Antaramian and his investments in the Naples Bay Resort project near Tin City and a failed project called Renaissance Village. The latter was to be built on the former Grand Central Station site in downtown Naples, at the northwest corner of Goodlette-Frank Road and Fifth Avenue South.
The lead lender on the two projects was Regions Bank. Lenders on the 19-acre Grand Central site were owed nearly $47 million; Regions got the property with a $100 bid at a November foreclosure auction.
The land has since been resold to a development group.
Though it appears the commercial foreclosure trend may be winding down with the local economy on the mend, there are sure to be more.
“There is always going to be somebody that doesn’t pay their mortgage no matter how good times are,” said Mercer with CRE Consultants. “There always will be some.”