Exactly a month after Bank of America filed a notice of foreclosure on U Street’s The Floridian, the Goldstar Group scooped it up in what it calls an “unconventional” transaction.
The Bethesda-based company and its recently formed financing arm, Metropolis Capital Finance, purchased the 118-unit condominium building for less than the $31.8 million on the note with the hopes of lowering unit prices and moving the remaining 86 condos off the shelf.
The long-quiet company says this purchase is the first of many residential and office projects it hopes to buy over the next year — and yes, they have the cash flow to make it happen.
For The Floridian transaction, Goldstar relied on private capital available through a number of East Coast capital partners including Marc Solomon of the Spectrum Partners.
Goldstar’s financial group, headed by former Transwestern Senior Managing Director Cliff Mendelson, couldn’t outline details of the deal because of a confidentiality agreement with Bank of America and Sovereign Bank, but said it was not an all-cash transaction, as is usually the case in such rapid sales.
“We have access to private creative capital sources that have certain needs and desires. This deal fit the bill and it has a financial structure that’s very different than what people are used to seeing with typical institutions,” Mendelson said.
The eight-story condo building with its upscale finishes, balconies and floor-to-ceiling windows stands above Florida Avenue as a symbol of everything developers hoped the U Street Corridor would be — and of pipe redevelopment dreams rocked by the financial collapse.
Lanham-based Kady Development assembled the land at 915, 917, 919 and 929 Florida Ave. NW for $6 million in 2004. It borrowed $44.8 million from LaSalle Bank to build the project and started sales in July 2005.
The Floridian delivered in 2008, but contractor liens on the property between May 2008 and January 2009 held up settlements and just 30 units sold. Despite interest from at least 50 potential buyers, the project’s lenders determined that the sales pace was not rapid enough and began foreclosure proceedings.
Bank of America acquired the note on the property when it bought LaSalle in October 2007 and has since passed it on to Sovereign Bank.
Though executed in less than 30 days, Mendelson said the Jan. 8 purchase of the note had been brewing since the summer when the bank reached out to a number of firms about its plans to sell.
Eric May, senior vice president at Goldstar had a relationship with the lender and brought the deal with him when he joined the firm from Urban Realty Advisors.
“Both banks determined that given the situation and the circumstances, it was best to sell and we really liked the property, the location, the finishes. This building was unfortunately a product of the economic times at hand. It was built at a time when the developer felt you could go high-end and get sales numbers and unfortunately it didn’t play out the way they hoped,” May said.
Where Kady tried to sell units for more than $500 per square foot, Goldstar says that for the deal it cut on the note, it can start prices in the low $400s. The Floridian includes units ranging from 500-square-foot studios to over 1,400-square-foot penthouses.
“I think the biggest thing is that we’ll change the pricing structure to make it more affordable for the area and for new prospective purchasers than it was originally financed for. That was where the prior owner faced headwinds. We are in the position now to meet the market,” said Michael Brodsky, founder of Goldstar.
Goldstar will keep the project’s current sales and marketing company, D.C.-based UrbanLand Company, on board.
Originally published on bizjournals.com