Westshore Boulevard projects hammer bank
Tampa Bay Business Journal - by Janet Leiser Staff Writer
TAMPA — Four loans on commercial properties within two miles of each other on Westshore Boulevard have gone into default, and Bank of America is involved in all either as the lender or through its acquisition of LaSalle Bank.
Three of the loans totaling more than $224 million have gone into foreclosure.
Another for $962.5 million is secured by the Westshore Yacht Club, plus numerous other properties. It isn’t in foreclosure, but developer WCI Communities, one of Florida’s largest homebuilder, has sought bankruptcy court protection while it reorganizes.
The limited liability company that owns The Cove, a 52-building apartment complex at
4003 S. Westshore Blvd. bought in July 2005 for $61 million, sought bankruptcy protection on Dec. 29. LaSalle Bank, trustee for the equity fund that loaned $57.5 million for the property, filed a foreclosure lawsuit in November, alleging payments haven’t been made since August.
Westshore Cove Acquisition Group LLC, controlled by M. Steven Sembler and James Chadwick of the St. Petersburg-based Ballast Point Group, owns the development. Neither Sembler, nor his attorney, Amy Denton Harris of Stichter Riedel Blain & Prosser PA, returned calls.
Seemingly a path to success
At the peak of the housing boom in 2005, Westshore Boulevard in South Tampa seemed like a good bet with its easy access to downtown, Florida’s largest business district, two popular malls and Tampa International Airport. Property along Tampa Bay offered the type of Florida living portrayed in magazines and television commercials: Amazing bay views complete with stunning sunsets.
Developers scrambled to buy large tracts of waterfront property at record setting prices that surprised longtime brokers. They planned to build and sell luxury condos and homes, some for millions.
Over the past couple years, plans for most of those developments collapsed with the housing market, leaving investors upside down by tens of millions of dollars. Only Westshore Yacht Club has homes and residents
The bank is now trying to sell the property for $60 million. Several brokers said it’s only worth $25 million to $30 million in today’s depressed market.
BofA also is in litigation on the $69 million mortgage on New Port Tampa Bay, a redevelopment south of Gandy that was to include condominiums, stores, restaurants and a marina.
Word in the brokerage community is that a buyer is trying to work out a deal with BofA and the Oppenheimer Fund, which owns most of the $50 million community development district bonds on the vacant 52-acre site. Some commercial real estate insiders contend the property is worth less than what’s owed on the bonds.
Lacking geographic diversity
Deeds show that the price per acre for the four boulevard properties increased dramatically between August 2004 and July 2005.
WCI Communities (Pink Sheets: WCIMQ), bought a large parcel for redevelopment and paid $282,000 an acre in 2004. Eleven months later, the Ballast Point Group entity paid $2.4 million an acre for The Cove.
The four properties are within miles of each other — posing a geographic risk banks would refuse to take today, said Owen LaFave, a commercial banker at Mercantile Bank in Tampa.
While Bank of America (NYSE: BAC) appears to be the hardest hit on the Westshore properties, it’s not the only one facing losses. Other lenders, including investors in Lehman Brothers commercial mortgage backed securities, will suffer, too.
Large commercial loans typically involve three to four banks as lenders.
“It’s widespread,” LaFave said of nonperforming loans. “It’s systematic. Everybody got caught up with the go-go days. It’s not just Bank of America. The market was so good for so long we got away from the fundamentals.”
Camille Roberts Lamar of Lamar Investment Properties Inc., which brokered WCI’s acquisition of the former Hendry shipyard for Westshore Yacht Club, said banks don’t comprehend the losses they’re facing. “They can’t possibly know the depth of their bad loans or know who’s going to go out of business,” Lamar said.
Lamar expects more large commercial loans involving Westshore properties to go into default.
As the economy deteriorates, commercial loans, especially those for the development and construction of residential communities, are likely to suffer.
Comptroller of the Currency John Dugan warned bankers a year ago that more than 60 percent of Florida’s banks had CRE loans exceeding 300 percent of capital.
“Unfortunately the overall market continues to deteriorate,” LaFave said. “We all underestimated just how drastically the market would fall off as well as the duration of the market.”