Posted on May - 29 - 2010
Landmark commercial foreclosures unsettle New Jersey State
Unlike generally reassuring patterns in home foreclosures across the United States in the first part of 2010, the commercial foreclosure trend in New Jersey did not likewise improve, according to statistics just received from the New Jersey Judiciary. The State saw 499 business property repossessed in the first third of the year, virtually identical to the 503 in the same period in 2009.
The foreclosure filing of the 650,000 square foot triple-tower Continental Plaza apartment, shopping and office complex on Route 4 through Hackensack was something of a milestone this year. The $88 million mortgage was called in by the lender this February after it became clear to the parties that this was the only viable alternative.
The buildings were valued at $109 million when the mortgage was secured in 2004 – since then commercial properties in the area have fallen in value by a median 20%.
The impasse was reached after re-financing of the original 2004 interest-only mortgage could not be obtained by the return date of September 2009, and the lender and the borrower consortium of Morgan Stanley and Normandy Real Estates failed to reach a restructuring agreement.
The fundamental problem is that the landmark 650,000 square foot triple-tower Continental Plaza apartment, shopping and office complex is underwater. It will either become the property of the lender, or of a new owner, who may or may not turn out to have secured a good investment. Unless, of course, the State of New Jersey elects to drag out the foreclosure process in the hopes that commercial property value recovers.
The New Jersey Judiciary’s data is frustratingly vague. Everything is lumped together and it is impossible to separate out trends for apartment, hospitality, retail, office and industrial sectors. The information also does not detail ownership and type of borrowing.
A second landmark foreclosure action affected the King of Kings International Full Gospel Church on Hackensack’s State Street. Bishop Isiah McKinnin attributes his flock’s financial woes to shrinking participation in the child-care facility and school resulting in a close to 50% income drop between 2007 and 2008.
“We’ve been hit very hard by the recession,” McKinnon told me. “A lot of people have lost jobs and parents couldn’t afford parochial school.”
While President and Chief Executive Officer of the Church’s lender Community Bank of Bergen refuses to be drawn to conversation, the Bishop is incensed by the foreclosure action, which followed failed modification negotiations over a delinquency of $100,000. “I feel absolutely betrayed,” he said. “We’ve been loyal depositors at this bank for 32 years.”
At www.foreclosuredatabank.com
we are beginning to wonder whether there ever was a genuine bond between banks and their investors. When the market turns, will the same game be played?
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