Leader Building owner gets reprieve from foreclosure
In a new and rare public development during the real estate credit crunch, the lender that recently instituted a foreclosure action against the owner of the Leader Building in downtown Cleveland dropped the case in Cuyahoga County Court of Common Pleas. Abdi Mahamedi, president of Carlyle Development Co. of New York, said in an interview that its lender, Grand Pacific Finance Corp., had extended the $4.2 million mortgage on the 15-story Leader Building for two years. “We made the same offer we did before the filing with a little better guarantee,” Mr. Mahamedi said. He said his company pledged additional money, but would not disclose how much, to make improvements to the property and to pay brokerage commissions to woo tenants.
Grand Pacific, a Los Angeles-based lender that made the loan through its Flushing, N.Y., office, did not return three calls last week. Court records show Grand Pacific filed a terse notice of voluntary dismissal Feb. 16.
Alec Pacella, a vice president at real estate broker NAI Daus in Beachwood, said the agreement reflects the “extend and pretend” scenario that real estate experts say is occurring behind closed doors when property owners are behind on their mortgage payments or loans mature. Rather than foreclose or get the owner to turn over control of a property, the lender extends the loan to deal with the property later, hopefully in a better business climate.
David Browning, managing director of the Cleveland office of CB Richard Ellis, said the resolution holds no general lesson for the real estate market because each lender appears to be following a different agenda with respect to maturing or distressed loans. Some are extending loans, some are selling distressed loans, and some are pressing foreclosure to get control of the property, Mr. Browning said.
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