Foreclosure 'blindsided' his company, says Corcoran
The chief executive of the Corcoran Jennison Companies (CJ) says his company remains committed to advancing its development plans on Columbia Point, despite the loss of control over the 20-acre Bayside Expo Center.
In an interview last week in his fifth-floor office at 150 Mt. Vernon Street, Joseph E. Corcoran acknowledged that the plans are currently "on the shelf" due to the current economic downturn, but he is hopeful of reviving them within two years.
Bayside Expo was in the financial news last month when it was revealed that the holder of an $18.5 million note had foreclosed and auctioned the property. The note holder, LNR Property Corporation, was high bidder for the property and took possession of it last month from a Corcoran Jennison subsidiary, Hub Expo Corp. The new owner said it has hired a private event manager and expects to resume hosting public shows there, perhaps as early as next month.
Corcoran said he had been blindsided by the foreclosure action, and had expected to renegotiate the ten-year note when it matured earlier this year. The note was bundled with a group of others in a mortgage-backed security (CMBS,) a debt obligation pooled by bankers and other lenders. Most CMBS are issued by Ginnie Mae, Fannie Mae and Freddie Mac, the troubled government-sponsored enterprises.
"This loan ran out, and we looked to what we thought was the asset manager. Unbeknownst to us, they [LNR] had bought the notes. They bought all these notes in a whole bundle of properties at a big discount," Corcoran said.
"We thought we were dealing with someone who was representing the investors. We said, "˜Look, time's up, but we can't refinance this, we'd like you to extend the loan.'
Their comeback was, "˜We'll extend it "“ at 17 percent,' " Corcoran said. "That was completely unworkable because we needed time for this thing to bail over. We intend to build some portion of this new development; we had a food store to go in here. We had lined up a couple of them that were interested. We need some time, and told them, "˜If you extend the loan at 7 percent, we'll be okay and we'll be able to put this deal together. We'll get the food store and then we'll be able to buy you out because the food store had triggered the thing.'"
"We couldn't deal with them. "˜No, no,' they said. 'Seventeen percent, take it or leave it.' So we had to leave it."
The CJ companies own or manage some 200 properties, including the adjacent Harbor Point community and Peninsula apartments, and in Pittsburgh, Washington D.C. and New Haven. "We have never missed a payment on any loan we have ever done," he says. When the ten-year note on the Expo Center matured, he said his firm had hoped to continue it at the same 7 percent rate.
"CMBS now are all in jeopardy because people are walking away, because that was the terms of the deal. Developers all over the country are doing that now. "We have never walked away from any loan because usually you can work out a deal," he says. "But these people had no interest really in working out a deal. They probably bought all of these loans "“ there might be 20 "“ at 50 percent or less of the stated value, all lumped together. If they had kept going like we wanted to they would have had a nice loan. But they were looking for bigger things."
At last month's auction, CJ made an attempt to seize back control, bidding $11 million, but LNR outbid them.
For now, CJ continues to own the 20-acre Mt Vernon site that houses its office building "“ the Reporter's offices are also located there "“and an adjacent Doubletree Hotel. Together with the 50-acre Harbor Point community, and the five acres that are the site of 300 apartments at the Peninsula buildings at the top of Mt. Vernon St. next to UMass, the company remains a significant owner on Columbia Point. But Corcoran hopes to see through his concept of developing the Expo site into a modern multi-use neighborhood, with a mix of small retail, restaurants, and housing. He expects the new owner to find, as he did, that the times have changed, and it will be difficult to profitably operate the Expo facility. LNR has contracted with a former Corcoran Jennison employee, Tom Ballantine, to manage the venue. Ballantine, who managed Bayside Expo in the mid-1990s, now owns his own expo management firm based in Virgina.
"They're going to try to bring in shows," says Corcoran. "We had a number of things going against us "“ this big mortgage, which they don't have. We paid almost a million bucks in real estate taxes; that's more than Fenway Park.
For many years, CJ's Expo center hosted "high end" events, like the New England Flower Show, the Auto Show, and last year's visit by Cirque de Soleil. But no more. The Flower Show has ended, the auto show has moved on. And the Cirque de Soleil? "I think they went somewhere else in the city," Corcoran says.
"All the good shows are gone; they've gone to the convention center. So what [Ballantine] gets, he might try to use some more creative things, and that's we're concerned about. There are a lot of shows we wouldn't take over the years"”carnivals, for example. They were always trying to put carnivals in here. We saw that as an invitation to bad elements that would cause problems."
In an interview with the Reporter last month, Ballantine said that his company believes that the Bayside can still fill a niche in the region's consumer and specialty show market. Two shows "” the Home Show and the Snow and Ski Expo"” are slated for the Bayside in the fall.
"I've been very pleased with the level of interest and people reaching out to us," Ballantine told the Reporter. "There are shows that have been there for a number of years but for a few months didn't think they had a home."
Corcoran says that his company had been "very happy" in the expo business, but "at the end of the day, we had hoped there would be a higher and best use. Now that we have taken that turn we would like to see our plan come to fruition."
"That would be our hope and we're going to stay here in this location. We love being here. We'd like to be party to [what happens], but if we're not able to be the developer, we're going to be watching it carefully on our end to make sure it's a positive thing."
Corcoran muses: "At some point, we think we would be the best buyer for the property, when they want to cash out."