August 20, 2014

Cityplace

Cityplace development overleveraged

Mike Vogel | 11/23/2011
CityPlace
The owner of CityPlace in West Palm Beach fell behind on a $150-million loan.
[Photo: Palm Beach CVB]

In 1986, wealthy Palm Beach investor Henry Rolfs quietly began buying 77 acres of dilapidated properties around Okeechobee Boulevard on the edge of downtown West Palm Beach. He razed the rundowns to make way for Downtown/Uptown, his private urban redevelopment of grand scale. Leverage did him in, however, and the project failed by the time Rolfs died in 1994. From his lost holdings in 2000 came CityPlace, the showcase mixed-use project developed by a group led by Stephen Ross, majority owner of the Dolphins, and his Related Cos. of New York.

Stephen Ross
Stephen Ross [Photo: Michele Eve Sandberg/Newscom]
But this year, CityPlace followed its predecessor's distressed path. While it looks great and is largely leased up, its owner wasn't able to drive leasing rates upward and fell behind on a $150-million loan. "It hasn't been generating enough revenues to cover its debt service," says Manus Clancy, senior managing director for Trepp, a New York commercial mortgage research firm. "Like many other properties in 2007, it was saddled with more debt than it could support." A foreclosure suit was filed in September.

Owner CityPlace Partners has gone to the debt's special servicer, Miami Beach-based LNR Partners, for a new deal. (Like so much debt in the last decade, the CityPlace loan was part of a commercial mortgage-backed security.) Meanwhile, CityPlace's value has fallen from $225 million in 2007 to $143 million. CityPlace Partners says, "It is our sincere hope to continue discussions in good faith in an effort to ensure the long-term success of CityPlace."

Says Clancy: "There's a good chance they'll get a modification."

Tags: Southeast

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