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Northland Catches A Break

Gets Loan Extension For Hartford 21 Site; Foreclosure Averted

By Kenneth r. Gosselin

July 02, 2011

Northland Investment Corp., embroiled in two bitter office-tower foreclosures in downtown Hartford, has gotten a bit of good news: an extension on its loan on a third property in the central business district, the Hartford 21 complex.

Northland's $80 million construction loan that it took out to build the complex at the corner of Asylum and Trumbull streets - including the tower with 262 upscale apartments - has been extended through January 2013 by its lender, Citizens Bank, according to city records.

The construction loan, already extended a half-dozen times since it was first approved in 2004, matured earlier this year. A construction loan typically requires only interest payments and is converted to permanent financing once the building has sufficient cash flow to comfortably make principal and interest payments, plus carry operating expenses.

The extension is significant for Northland because it avoids another potential foreclosure, while it already is dealing with two others in nearby downtown towers. It also buys Newton, Mass.-based Northland time to continue pursuing leasing of retail and office space in the complex.

While Northland has touted the high occupancy of the Hartford 21 apartments, it has large chunks of retail and office space still vacant, five years after the completion of construction at the complex. Some progress has been made, with the leasing of office space for St. Joseph College's new pharmacy school and the recently opened grocery store, The Market at Hartford 21.

Northland, downtown Hartford's largest landlord, did not have a comment Friday on the extension.

Commercial real estate experts said Friday extensions of a construction loan over such a long period of time are unusual but may signal that the lender believes the troubles are more with the economic climate than Northland's efforts to lease the space.

"They are probably comfortable that Northland is doing everything it can to make it successful," said Bob Martino, a commercial real estate attorney at Updike, Kelly & Spellacy in Hartford.

The alternative of repossessing the property is not likely an attractive one, given the low prices that are being paid in distress sales.

In January, Northland and its chairman, Larry Gottesdiener, lost Metro Center on Church Street to foreclosure. Metro Center was Gottesdiener's first purchase in the city in 1997.

Two other high-profile office towers across Asylum Street from Hartford 21 and owned by Northland also are in foreclosure. CityPlace II fell into foreclosure in late 2009 and Goodwin Square the following June. In late 2008, Northland closed the Goodwin Hotel at Goodwin Square. It remains vacant.

The CityPlace II and Goodwin Square foreclosures have turned nasty, with Northland accusing the firm handling the foreclosures of acting in bad faith by improperly holding one office building hostage over the other as Northland tries to renegotiate its loans.

Office vacancies in downtown Harford are at the highest levels since the deep recession of the early 1990s.