The Housing Chronicles Blog: Developer defaults on $365 million Beverly Hills land loan

Monday, November 3, 2008

Developer defaults on $365 million Beverly Hills land loan

Robinsons-May Outlet Center, anyone? Perhaps that may be the solution at the now closed-down department store site in Beverly Hills that was planned for luxury high-rise condos. But with the developer defaulting on a $365 land loan, now the entire project is in peril.

Hmm, I wonder who did the market study justifying the price paid for the land to get the loan? It would be interesting to see what assumptions were made and if any outside consultants could be on the legal hook for any obviously optimistic recommendations made only to ensure the clients paid the consulting fees (I have some ideas who the scofflaws might be).

In many cases, if one wasn't willing to cooperate and recommend certain prices and absorption levels, one didn't get the consulting gig. To stay open and keep staffs busy, some of the larger shops simply looked the other way (and likely swallowed Ambien to sleep at night).

From a Wall Street Journal story:

Underscoring the deepening woes in commercial real estate, a high-profile British developer has defaulted on a $365 million loan for prime land it bought in Beverly Hills last year as part of a plan to build luxury condominiums.

In recent weeks, CPC Group Ltd., founded by Christian Candy of London's Candy & Candy development-management firm, has been roiled by the collapse of its partner in the project, Iceland's Kaupthing Bank, which was taken over by the Icelandic government. It also has faced a lack of construction financing as banks have pulled back from a fast-deteriorating market...

CPC bought the eight-acre site, wedged between Wilshire and Santa Monica boulevards, for $500 million in April 2007. Just four years earlier, the parcel had traded hands for less than $50 million.

So the land went up in value by a factor of 10 in four years?? How can that be justified using any sane economic fundamentals? Like I noted before, Ambien.

Click here for full story.

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