East Side Office Portfolio in Foreclosure
- Jun 08, 2012
In 2007, Gotham King Fee Owner L.L.C., a joint venture of Gotham Realty Holdings of New York and Beachwood developer and broker Donald King, paid $140 million for nine office buildings in the eastern suburbs of Cleveland. The joint venture acquired the Gotham King portfolio from Duke Realty Corp., an Indiana real estate giant that at that time hoped to shed its Cleveland-area properties, paying what is now considered a record price for a portfolio of office buildings in Northeast Ohio’s suburbs.
Though one of the region’s commercial real estate trophies, the Gotham King portfolio was hit hard by the recession and went from king to beggar in a short period of time. Cuts were made everywhere, office vacancy rose and the lack of income made it impossible to pay off debt. The owners defaulted on a $135 million mortgage last year, and it could now be foreclosed upon and sold for much less than the amount paid for it.
Dallas-based Orix Capital Markets L.L.C. has filed to foreclose on the properties in the Cuyahoga County Common Pleas Court and has asked that the buildings be sold to pay off debt, interest and fees. Orix is the special servicer in charge of the loan. A Cuyahoga County judge recently approved the appointment of a receiver to manage the properties as the case works its way through court. If Orix succeeds, the buildings might be sold off for less than half the prior price.
The nine buildings are spread among Beachwood, Highland Hills, Mayfield Heights and Pepper Pike. The portfolio comprises 1 million square feet of office space and includes newer office buildings, like the Metropolitan Plaza or One Harvard Crossing in Highland Hills, as well as buildings like Corporate Circle I, II and III in Pepper Pike, which date back to the 1980s.
Image of the Metropolitan Plaza courtesy of http://www.thekinggroup.com.