The St Regis Residences (former Whiskey Priest site) | 150 Seaport Blvd | Seaport

jdrinboston

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think i was right, heard that the mortgage holder might be prepping to put it up for sale... if so good night and good luck cronin. on the upside cheap units in seaport when the lender takes title on delivery and firesales this stuff?
Can you elaborate a bit on how this would work? Admittedly, I’m a neophyte, but I’m not sure how Cronin could be in default on a construction loan when work is in progress and the project is still 18-24 months from completion? Wouldn’t a default be the only way for the lender to swoop in and take things over?
 

stoweker

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Can you elaborate a bit on how this would work? Admittedly, I’m a neophyte, but I’m not sure how Cronin could be in default on a construction loan when work is in progress and the project is still 18-24 months from completion? Wouldn’t a default be the only way for the lender to swoop in and take things over?
yea sure. lender wants to unload the loan because they're looking at it and think it's impaired in someway. they'd have to wait for a default to occur, once that does it's gameover. Cronin could 100% default prior to project completion, they could trip liquidity covenants, have cost overruns and no ability to recapitalize, any number of things. I've spent a big chunk of my career buying distressed condo notes and the general theme is (1) dude builds something, doesn't really know what he's doing (2) doesn't have enough money to finish the deal, things look like they're going sideways, and he can't find any rescue capital (3) lender sits on the sideline watching it all go down and as soon as covenant gets tripped that the equity can't reasonably cure, they foreclose on the project.

It happens with high rise condos with more frequency than you would think (especially in NYC in last cycle); credit hedge funds and diversified CRE opportunity funds buy these notes then sit around like vultures waiting for the day to come that they can take control, firesale stuff and hit a 20+ return. sometimes you have to finish building the building, sometimes you're collapsing a bunch of chattel loans on units and selling them. either way it's kind of fun complicated legal heavy work that makes for a fun fight.
 

whighlander

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yea sure. lender wants to unload the loan because they're looking at it and think it's impaired in someway. they'd have to wait for a default to occur, once that does it's gameover. Cronin could 100% default prior to project completion, they could trip liquidity covenants, have cost overruns and no ability to recapitalize, any number of things. I've spent a big chunk of my career buying distressed condo notes and the general theme is (1) dude builds something, doesn't really know what he's doing (2) doesn't have enough money to finish the deal, things look like they're going sideways, and he can't find any rescue capital (3) lender sits on the sideline watching it all go down and as soon as covenant gets tripped that the equity can't reasonably cure, they foreclose on the project.

It happens with high rise condos with more frequency than you would think (especially in NYC in last cycle); credit hedge funds and diversified CRE opportunity funds buy these notes then sit around like vultures waiting for the day to come that they can take control, firesale stuff and hit a 20+ return. sometimes you have to finish building the building, sometimes you're collapsing a bunch of chattel loans on units and selling them. either way it's kind of fun complicated legal heavy work that makes for a fun fight.
Stoweker -- sounds as if you do a lot of "bottom fishing" -- I think the words St. Regis Residences are still money in the bank for Cronin
You have to remember its right next door to Vertex and I don't see Vertex closing-up shop anytime soon
 

stoweker

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Stoweker -- sounds as if you do a lot of "bottom fishing" -- I think the words St. Regis Residences are still money in the bank for Cronin
You have to remember its right next door to Vertex and I don't see Vertex closing-up shop anytime soon
first to make it clear i'm not a hater on this project - aesthetically it adds a lot to the neighborhood and would be great to see it succeed. that being said -

i do bottom feeding and this property is a textbook example of how stuff ends up in distress (and that's without corona getting thrown into the mix). (1) inexperienced sponsor / small inexperienced team (2) with a project much larger than they're used to / outside of their strike zone and (3) with not a lot of outside equity to feed the beast (4) with a very high debt load (~3.5MM/unit) on smallish units giving limited flexibility to flex pricing down ESPECIALLY in an environment where sales might slow and interest carry will eat them alive. vertex won't be closing up shop, but neither will the sales office at this thing. (5) floated by a debt fund that has no problem taking the keys back or selling the loan to a hedge fund / private equity shop that will. (6) i also heard some good intel that the only reason they found a lender in the first place was because they used the same guys who built the Tishman Speyer deal so the lender had faith in the GC's ability to execute even if they had limited faith in the sponsor's ability to execute.

wanna make a $100 bet that this thing isn't called the St Regis residences in 5 years? I will set a reminder in my calendar 5 years from today to reach out to you for a venmo exchange of money for the winner.
 

Rover

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So I'm a little confused. Is work currently going on at this site or not?
 

shmessy

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So I'm a little confused. Is work currently going on at this site or not?
Per Gunner02's pics, it's kind of obvious that it is, no? I count at least six construction workers in that last pic along with some sort of new vertical screen that wasn't there in Beeline's pics from yesterday introduced via the crane in both pics.
 

Rover

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Per Gunner02's pics, it's kind of obvious that it is, no? I count at least six construction workers in that last pic along with some sort of new vertical screen that wasn't there in Beeline's pics from yesterday introduced via the crane in both pics.
Couldn't see the actual workers. So my next question is if the developer is out of money how is construction proceeding? Are they working for free?
 

Johnnyrocket891

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Couldn't see the actual workers. So my next question is if the developer is out of money how is construction proceeding? Are they working for free?
I thought construction financing works through phases?
Banker/Investment financing goes through a process to keep the funds in line.
Foundation- 5-Million
Structure- 10-MIllion
Interior- 20 mIllion
Exterior - 20 million
Ect---

Not all funds are released only by different timelines.
 

Gunner02

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Gunner - Great pic's of the ongoing slurry wall construction, they must be close to wrapping this up now?
I’ve been thinking they must be close for a while now. I think they started before one congress too, who is rising already and 400 feet taller.

My office is (was as of July 15) in WTC, actually right above the old Dunkin’. I feel that it’s the same as being at the beach trying to dig a hole as the ocean keeps coming in. It’s been a hell of a time, as far as I can tell.
 

stoweker

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I thought construction financing works through phases?
Banker/Investment financing goes through a process to keep the funds in line.
Foundation- 5-Million
Structure- 10-MIllion
Interior- 20 mIllion
Exterior - 20 million
Ect---

Not all funds are released only by different timelines.
so the way development loans typically work is that the developer pays for 100% of invoices until they have spent all of the money budgeted for the developers equity, then the lender will pay. If a project costs say $100, and the development loan is for $70, the lender won’t start to pay invoices until the developer has paid for the first $30. If the budget goes up over the course of the project while the lender is funding (say to $120), the lender will stop funding until the developer pays for another $20 of invoices.

A development loan is itemized Into a bunch of different buckets. every month you package all of the invoices together with “conditional lien waivers” (which just say that the contractor won’t put a lien on the property once they get paid for the invoice) into a draw package which walks down how much money is being spent this month and from which bucket. So long as there’s enough money in each of the categories, the lender will pay all of the invoices. If there isn’t enough money in the budget for a line item in the draw the lender (with developer input) RE-allocate money from contingency (or in some instances another spend category if the work is done and you aren’t going to draw). Once the lender gets the monthly draw, they’ll send an inspector out to confirm that the invoices are real, and the inspector will substantiate that the projection for how much is left to spend on the project is still valid. If the inspector & lender come to believe that the project will cost more than the loan allows, they’ll typically require the developer to RE-balance the loan by putting more equity into the deal (ie pay next couple of months of invoices...) before the lender will start to allow a draw again.

edit - also someone up thread asked how a lender can foreclose before a project is delivered - this is how it happens, the developer needs to rebalance the loan mid project and doesn’t have the cash. Happens when you’re undercapitalized, have some sort of major unforeseen budget bust, and don’t have the cash to induce the lender to continue to fund so the lender comes in and takes your stuff.
 
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jl326

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Hmm.. Sounds like now may be the time to sell if one is sitting on some property in the Seaport.

so the way development loans typically work is that the developer pays for 100% of invoices until they have spent all of the money budgeted for the developers equity, then the lender will pay. If a project costs say $100, and the development loan is for $70, the lender won’t start to pay invoices until the developer has paid for the first $30. If the budget goes up over the course of the project while the lender is funding (say to $120), the lender will stop funding until the developer pays for another $20 of invoices.

A development loan is itemized Into a bunch of different buckets. every month you package all of the invoices together with “conditional lien waivers” (which just say that the contractor won’t put a lien on the property once they get paid for the invoice) into a draw package which walks down how much money is being spent this month and from which bucket. So long as there’s enough money in each of the categories, the lender will pay all of the invoices. If there isn’t enough money in the budget for a line item in the draw the lender (with developer input) RE-allocate money from contingency (or in some instances another spend category if the work is done and you aren’t going to draw). Once the lender gets the monthly draw, they’ll send an inspector out to confirm that the invoices are real, and the inspector will substantiate that the projection for how much is left to spend on the project is still valid. If the inspector & lender come to believe that the project will cost more than the loan allows, they’ll typically require the developer to RE-balance the loan by putting more equity into the deal (ie pay next couple of months of invoices...) before the lender will start to allow a draw again.

edit - also someone up thread asked how a lender can foreclose before a project is delivered - this is how it happens, the developer needs to rebalance the loan mid project and doesn’t have the cash. Happens when you’re undercapitalized, have some sort of major unforeseen budget bust, and don’t have the cash to induce the lender to continue to fund so the lender comes in and takes your stuff.
 

Vivanna

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There's a HUGE American flag hanging off one of the cranes here this weekend, very cool!
 

stellarfun

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I don't think it is in anybody's (developer / lender) interest to stop work on this until the foundation and related sub-grade work is done, and the project reaches street grade. All the work being done now is value added. Pause / stop at this point risks value being lost to the sea.
 

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