The Block 216 tower that holds Portland’s Ritz-Carlton hotel encountered “catastrophic setbacks from the beginning” and is now only worth $425 million — far short of the $510 million owed on a loan that funded its construction, a lender says in new court documents.
That’s why Ready Capital is seeking to take over the gleaming downtown skyscraper that opened in 2023 with hotel rooms, multimillion-dollar condos and offices that failed to draw enough interest to financially stabilize the property, according to records filed in a lawsuit between Ready Capital, the developer and another lender.
Ready Capital is a defendant in the New York Supreme Court suit, filed last month by a smaller lender that helped finance the tower and alleged it was being sidelined on the deal to hand over the property to Ready Capital to avoid a foreclosure.
Ready Capital and the borrowers were planning what’s called a deed in lieu of foreclosure to basically hand over the keys without a foreclosure auction, court documents say. But the smaller mezzanine lender, which loaned $49 million, has asked the court for an injunction to halt the transfer.
Broadway EB-5 Fund sued claiming Ready Capital and entities tied to Block 216 developer BPM Real Estate Group were working behind its back to render its “rights and interests” in the property worthless.
In a Friday statement filed in court, Ready Capital Managing Director Alex Ovalle refuted that characterization, saying that his group complied with all its contractual obligations and tried to “salvage the Project and preserve value for all parties, including the mezzanine lender.”
Ovalle said his company obtained an appraisal that valued the building at just $425 million, about $85 million short of its construction loan.
“Ready determined it would not make financial sense to pursue any further financial restructuring,” Ovalle wrote, “including by making any refinancing or other loans to the Senior Borrowers or to further forebear on the Senior Loan.”
Ovalle says his camp is pursuing the deed-in-lieu option to stanch further losses.
A spokesperson for BPM Real Estate did not immediately have comment on Tuesday.
Ready Capital disclosed in March it was considering seizing the 35-story tower, telling investors during fourth-quarter earnings that about a dozen of the building’s 132 condos had found buyers and only 23% of the office space was leased.
Ovalle shed more light on the bookings and condo slump last week.
The Ritz-Carlton “has lost significant bookings both of event space and hotel rooms because guests are unwilling to book a vacation stay, wedding reception or conference with a hotel whose ability to provide services is uncertain,” the managing director says in court documents. “Likewise, the sale of residential condominium units and the lease of office space has been depressed by the Project’s uncertain financial situation.”
Even before the building opened, Ovalle wrote, COVID-19 restrictions resulted in construction delays, volatile protests in downtown Portland “impeded” the project’s development and a water leak caused “substantial damage.”
“These unprecedented events forced the parties to reevaluate both their original funding plan and the expected timeframes to complete the Project,” Ovalle wrote.
If the deed-in-lieu doesn’t go through, he wrote, Ready Capital could sustain nearly $11 million in damages between lost revenues and the cost of court proceedings.
— Jonathan Bach covers housing and real estate. Reach him by email at jbach@oregonian.com or by phone at 503-221-4303.
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