CityPlace faces foreclosure lawsuit

Edition: Final

Section: A Section

Page: 1A

Source: By JEFF OSTROWSKI Palm Beach Post Staff Writer

Dateline: WEST PALM BEACH

 

The complex has fallen behind on its $150 million debt despite high occupancy.

A lender has filed foreclosure against CityPlace, the high-profile downtown shopping complex that’s facing financial woes in spite of its high occupancy.

CityPlace fell behind on its $150 million loan in March, and an entity affiliated with LNR Partners of Miami Beach filed a foreclosure suit Thursday in Palm Beach County Circuit Court.

Representatives of CityPlace and LNR couldn’t be reached for comment Friday, but real estate experts say it’s unclear whether the lender would seek to take back the property.

“I would think they’re going to try to work it out,” said Tom Prakas, a restaurant broker who has negotiated a number of leases at CityPlace.

The foreclosure suit names CityPlace Retail LLC, an affiliate of New York-based Related Cos. Related is led by Miami Dolphins owner Stephen Ross.

CityPlace’s retail occupancy stood at 93 percent this year, according to a report from Fitch Ratings. Tenants include Macy’s department store, Barnes and Noble Booksellers and Muvico Theaters.

Despite its high occupancy and bustling traffic, CityPlace hasn’t been immune to the effects of the economic downturn. A recent appraisal of the property listed its worth at $143 million, down from a boom-time value of $233 million.

CityPlace’s net operating income fell from $9.3 million in 2006 to $5.2 million in 2009, according to an analysis by Trepp LLC, a New York firm that tracks commercial real estate.

While CityPlace can boast high traffic and a healthy occupancy rate, real estate brokers say a number of tenants pay very little rent to occupy space. The move makes the center appear lively, but it doesn’t add revenue to CityPlace coffers.

CityPlace was built on land leased from the city of West Palm Beach, and CityPlace hasn’t missed any payments, city spokesman Chase Scott said.

Scott said he expects CityPlace to survive its financial issues. So does Joseph Schober, president of the CityPlace Tower Condominium Association.

“It’s not going to go away,” Schober said. “It’s a very viable place.”

Schober said the lack of a convention center hotel has robbed the center of much-needed traffic.

Sources close to CityPlace say its partners put at least $20 million in equity into the project, making them reluctant to walk away when the center began having problems paying its mortgage.

“They had real money in that place,” one real estate source said.

In fact, Ross was described as being “emotionally involved” with CityPlace, according to the source.

The source said every time Ross flew from Palm Beach County to Miami-Dade County for a Dolphins game, he would instruct his helicopter pilot to circle over CityPlace.

Staff writer Alexandra Clough contributed to this story.