Revere?s Ocean Club Heads To Auction Block
from B&T:
Revere?s Ocean Club Heads To Auction Block
Steven Fustolo's Ocean Club condominium development in Revere went from record-setting market-mover to the auction block in under two years.
The 242-unit project had promised to bring Miami to Revere Beach Boulevard. Barring a late bankruptcy protection filing, an auction set for Wednesday morning will relegate the Ocean Club to the commercial real estate scrap heap. When Paul E. Saperstein Co. auctions off the doomed development's 2.1 acres of oceanfront property, the Ocean Club will officially become another victim of the commercial downturn.
"It was the most gorgeous thing to ever happen to Revere Beach," said Lynne Breed, a broker who handled marketing for the project. "People loved the site. It was perfect in every way. It was just that the timing was not right."
Fustolo spent roughly $5 million assembling a 2.1-acre parcel towards the northern edge of Revere Beach. He envisioned a gleaming 13-story complex with pools, gardens, floor-to-ceiling windows, bamboo floors and first-rate finishes.
Fustolo kicked off the sales efforts in the summer of 2006, with a buzzed-about beach party on the roof of the Ritz-Carlton, and pre-sales activity was brisk. One penthouse unit went for $3.25 million, and another was snapped up at $1.5 million. Previously, no one had ever paid $1 million for a condo in Revere. Fustolo's sales team got commitments for 40 percent of units, many at above-market rates.
Interest from the lending community didn't match the enthusiasm from potential buyers. Fustolo was in the market for a $100 million-plus construction loan in the spring and summer of 2007 - right when credit markets began to seize, CMBS spreads blew out, and Wall Street's securitization machine showed the first signs of grinding to a halt.
Several industry sources told Banker & Tradesman they believed Fustolo did nothing wrong at Revere - he just needed a sizeable condominium construction loan at the very moment when big lenders were turning against new residential construction.
The finance window closed quickly. Other just-opened large-scale condo developments secured their construction financing months before Fustolo needed his.
The Abbey Group, developers of the 138-unit 45 Province St. tower in downtown Boston, got a $120 million mortgage from German Lender Helaba in September 2006. Related and the Beal Cos., developers of the Clarendon Back Bay, closed on a $175 million construction loan in December 2006. Sawyer Enterprises closed on a $120 million construction loan for its W Boston tower in January 2008; Sawyer needed an emergency $10.5 million bridge loan from the city of Boston to complete construction. And Vornado and Gale International broke ground on their $700 million Filene's project in February 2008, only to have financing fall apart that autumn.
Fustolo was able to obtain a $12.7 million pre-construction loan from Connecticut-based lenders The Patriot Group in March 2007. The Patriot Group later increased that amount to $13.6 million. He also managed to put a $1.1 million second mortgage on the property three days after Lehman Brothers filed for bankruptcy. But the construction loan never came. And now The Patriot Group is foreclosing on the 2.1-acre development site.
Fustolo could not be reached for comment. The development's website, liveatoceanclub.com, remains online, though the phone at the sales office has been disconnected.