Thoughts about Northland

[grock]

I think Northland has been great for downtown, but there are few things I think they should do.

They need to fill their retail space to attract new business. Why cant they get the stores that used to be in the mall to come back? TJ Maxx was the only place downtown to buy stuff for apartments like sheets and stuff. What about a Johnny Rockets? There needs to be a sports bar or casual place for UConn games. It is sad to see Pratt Street empty and the Civic Center shops empty. Obviously it is the rents, and I know a few people who live at Hartford 21 who are upset that what they were promised is not happening. They were told there would be shops downstairs and there is nothing.

[HartfordTycoon]

It's has to be the rents. Northland needs to get real about that and also about realistic options. This is a city. We need all sorts of places to open up. I hope that they are not shunning the less exclusive retailers and holding out for everything that Blue Back has or something.

[The Voice of Reason]

I think everyone knows its the rents, but it is also a belief that LaryG holds about Hartford.

The biggest obsticle is that any company that opens in his retal needs to be open on weekends.

I know there are plenty of potential tenants that have been turned down, and it actually does not bother me that he held his ground, but I think the Saturday rule added to the high rents is the killer.

If he were to lower those rents and work with tenants more, The Saturday thing would not be as much of a deal breaker.

I really think that we are at the very edge of some kind of retail success downtown. Obviously there are a ton of if-thans, or maybe we will just call them limiting factors.

As we emerge from this recession there will be a bunch of new storefronts opening up in Hartford. I think 410 Asylum and 915 Main Street are going to lead the way in attracting new retail downtown. Both seem to be aggressive in negotiating and luring small businesses. I have no doubt that a slew of new eateries and bars will open up as well.

In fact I can guarantee that by next spring store fronts will look quite a bit different around here. Will there be big national brands moving into spaces? not likely, and honestly thats fine with me.

Its the next phase of downtown development that will bring the dealbreaker retailers.

IF (IF) [iF] Northland ever builds the YMCA condos, and IF 95-101 Pearl Street are converted to housing, and IF The Goodwin reopens in some for of hotel or residential fasion, momentum will push downtown into the next phase.

right now, even though its lightyears ahead of where it once was, Downtown is made up of a few random-ish clusters.

There is a nice little cluster of life centered around Citysteam. You have the community college, the Mariott, Sage Allen, and 915 Main. With the exception of 915 Main, the retail spaces are generally filled in this area, and almost everything here adds to the life of the area. bars resturants, coffee shots etc...

The next cluster is On Trumbull down by the park.

With The bushnell towers right there, Trumbull on the park, LV on the Park and Hartford 21, the high end residential clump kind of focus on the Trumbull on the park retail area plus TK and starbucks etc. This cluster is not complete. If 95-101 Pearl were converted, I think this area would come together better. (tiny step, big effect)

The 3rd cluster is not really a cluster at all. The Allyn Street/Ann Street entertainment district has no real housing, so its just a bar scene, but it is likely Hartfords busiest. It will be interesting to see how things change when 410 Asylum opens. 410 Asylum, The Bond Hotel, the holiday inn, Union place and the Capitol View Apartments will have a central location to gather. The retail space in 410 Asylum will have bother additional entertainment and food options, but also services, so I think this location will draw from the existing energy at Union Place, but also add a community to the area. Still there are a couple of empty buildings there, but by bringing 410 to life, there will be much less emptiness. not to mention what will happen IF/When the commuter rail opens.

Without looking at megaprojects like YMCA, I think just a few small projects could really strengthen some of these clusters. 95-101 Pearl. These dead buildings take quite a bit away from the area, but more so, bringing in a few more residents and livening up their retail could make a huge positive for lower Trumbull

370 Asylum, and the building next to it in High street. are dead spots and anything would be an improvement, and the blackbear building, while awsome is 99% empty. If that were residences, the Untion Station area would really start to become inviting.

2010 I Think will be an interesting year in Hartfords progress 2011 will be a good year

[jcrc]

I think everyone knows its the rents, but it is also a belief that LaryG holds about Hartford.

Personally, I don't think it is belief, I think it is dilution. But it's not just Northland, Hartford's landlords big and small all think they can charge beaucoup bucks for their spaces which is why most of them are vacant. They don't get it, it's a buyer's market.

I really think that we are at the very edge of some kind of retail success downtown.

Why do you think that when more places closed than opened? Rumor has it, a few places big and small are in trouble.

IF (IF) [iF]...

That is like saying IF (IF) [iF] I have a million dollars I'll be a millionaire. The fact is pace of development in Hartford is snail pace at best, and if when a develop was done it was usually scaled back from original concept. Be it YMCA/Pearl Street/Goodwin, even though I am not from Missouri, I'd have to say show me.

[Theophrastus Bombastus]

Personally, I don't think it is belief, I think it is dilution. But it's not just Northland, Hartford's landlords big and small all think they can charge beaucoup bucks for their spaces which is why most of them are vacant. They don't get it, it's a buyer's market.

Why do you think that when more places closed than opened? Rumor has it, a few places big and small are in trouble.

That is like saying IF (IF) [iF] I have a million dollars I'll be a millionaire. The fact is pace of development in Hartford is snail pace at best, and if when a develop was done it was usually scaled back from original concept. Be it YMCA/Pearl Street/Goodwin, even though I am not from Missouri, I'd have to say show me.

I don't care what kind of spin you put on it (see Metro Center foreclosure), this is getting ugly.

Hartford's CityPlace II In Foreclosure

http://www.courant.com/business/hc-hartford-cityplace-ii-foreclosure-1210,0,3631263.story

[LOV]

i'm no financial wizard but it seems pretty bad to me.

article says they haven't been repaying since june 1, that's 5 month of no payments. that's essentially a 5 month period where they should have been looking for new loans and seems they haven't found something yet and need even more time?

either way, i hope for hartford's sake it all works out.

I don't care what kind of spin you put on it (see Metro Center foreclosure), this is getting ugly.

Hartford's CityPlace II In Foreclosure

http://www.courant.c...oreclosure-1210,0,3631263.story

[The Voice of Reason]

I certainly do not have all the answers regarding this kind of stuff, but what I do know is this, when a mortgage is repackaged and securitized, identifying the owner is nearly impossible. In order to get things out in the open investors stop making payments on purpose. think about it, even if Northland were coming up short every month, they would just fall behind on payments they might be 1 month behind for every 6 months or something. its not like the building is vacant, and no leases have been canceled right? Northland woulnd not stop cold turkey. just my opinion, but, its a negotiating tactic. When other developpers went through the exact same thing a few months ago we just accepted it as what it was.

Hell, commercial mortgages are completely dead in the water, so who knows what will happen, but I would be greatly suprised if thing are as bad as assumptions can lead you to believe. This kind of foreclosure is totally different than a residential foreclosure. there are huge massive leases that are fairly public knowlege, so we know the approximate income and the approximate mortgage, and we know the spread is likely thin or maybe negative, but not so bad that they would let themselves lose the building.

Larry G might sell a stake in the firm though, thats not impossible. he might sell some properties too, you never know.

[MichaelQReilly]

This is getting more worrisome. CityPlace II is now in foreclosure as well. Northland is saying that these foreclosures are negotiating tactics. I was inclined to believe that it was a smart tactic when it was one property in foreclosure, I am a bit more inclined to believe that it is wishful thinking on their part now. It's looking more and more like Northland was leveraging their property to drive expansion (in and of itself no surprise), but now their revenues can't cover their obligations. Before credit went bust, it wasn't unrealistic to believe that they could keep refinancing their loans as needed, but the situation is entirely different now. It could very well be that the recent leases and other rumors of retail tenants are a sign that they are lowering their requirements in an attempt to generate more cash flow to cover their mortgages.

One doesn't become a multi-billion dollar real estate developer by being a bad businessman, but Larry G wouldn't be the first smart guy to be overwhelmed by the current economy because he couldn't conceive how bad things would get. It will be interesting to see how this plays out.

[jcrc]

I am not understanding this negotiation logic. If Northland is as financially sound as folks there claimed, wouldn't its creditors know it? If those creditors know then why would they leave the money on the table? If they ignore Northland's tactic, what will Northland do, default on the buildings? Or pay up? I don't understand the commercial real estate business, but no business I know go into foreclosure if it can be avoided. Think about it another way, if I were Northland's tenant and I want to renegotiate my lease, the best way to get it done is to stop paying my rent?

[The Voice of Reason]

Jo, Its a totally crazy world, and again my understanding is not complete, and every company is different, but maybe this will help.

Here is the approximate corporate structure of Northland.

At the top, there are investors. these are not individuals, these are pension funds and insurance companies. We know, for example that Aetna invested in Northland IV fund which built Hartford 21.

OK, so there are a good number of these institutional investors who gave money to Larry G, or Northland Investments to make the money. each fund has its own promises. so Dund I, II, III, IV, V etc (I have no idea how many there may be) each pay different returns to their investors. these are guaranteed, so basicly Northland said.. sure I can make you 6% (although its likely 12%)

right?

ok, now, Northland has say 20 million in fund I

"fund I" goes and buys Metro Center I for 10 Million back in 1997. and borrows some monty to do so. then it buys some other properties too...

"Fund I" now owns say 5 properties, and each one is its own LLC. so each is its own company right, and each are set up to pay their mortgage

Northland does not hold the mortgage as much as 227 Trumble Street LLC owns the mortgage. this property is likely leveraged at say 4 to 1 as are all the others

so that origonal 20 million invested now is broken amongst 5 buildings/companies that cost approximately 100 million in total.

After bringing a big tenant in(Lincoln Financial) Metro Center is now worth a bunch more that the 10 million paid, so they refinance and use the 20 milloin equity pulled out to buy another 100 million inproperties. Fund I now Owns 200 million in properties, and is still paying 6% to its investors(aetna) 20 million. If the mortgages are being paid all is well, and if the investors are getting their 6% they are happy, but after a while, and 5 other funds, Northland has 2 billion worth of property, and a few properties that now have larger mortgages that back in 2006 seemed like a good idea lose some tenants.

these buildings/companies begin to struggle making morgage payments, and also making a profit that is needed to pay the 6%, they can likely make payments, but innorder to appease investors, Northland, the parent company needs to refinace that mortgage(from 12 to 9%) so they can continue to pay 6% to investors.

I hope that makes sense, its definately pretty complicated, but thats pretty accurate for Northland.

to further complicate these things, commercial mortgages were repackaged.

This needs to be explained because it is critical to understanding why Northland would allow Metrocenter LLC to be foreclosed on...

but in short, google investopedia, then look up tranches and securitized CMO (commercial mortgage obligations) as well as SIV(special investment vehicles)

they take a bunch or commercial mortgages, decide how well rated the owners are in terms of creditworthyness, they they combine them into a security, and clice it into layers. cream on the top, and sludge on the bottom. they then sell interest in each tranch to investors(think goldman, Lehman, Merril, JP Morgan Deutch Bank ING, USB, BOM, etc...) and yes this = your 401K. investors can buy any ammount of any tranch they want, so ING might buy 100k of 500,000,000 top rated tranch. the next day they can sell that to someone else. So these mortgages are splintered in so many different pices and spread around like the wind. as it turns out the "most credit worthy" are not that healthy and some have troubles.

since these tranches are owned by god only knows who(bought and sold daily TRUST ME ON THIS) no one cares what your CMO it is made up of untill some of the underlying assets degrade. that loan has a problem. sooooooo Northland in order to have Fund I, continue to satisfy investors, makes the decision to have MetroCenter LLC stop paying its mortgage. This Mortgage which is serviced by some lawyer on behalf of the securitized and sliced CMO no gets some serious attention, and everyone that owns a little piece of it now take note. it takes a while, but the SIV needs to figure out what to do about its no performing asset(the mortgage on MetrocenterI) it does not want to own the building, it does not want to lower the mortgage, but something has to give.

does this help?

I have had a holiday party and a few beers, but I know most people dont get to know all this mess, and yes its a mess. so well, its even more messed up than what I wrote, but I hope it makes enough sense that you guys get it.

seriously investopedia is a great source of info on how these things are done. most entries link to associated securities and definitions.

I used to use it alot 3 years ago when I was learning this stuff.

so, wait, did you get it that your 401K might own a teeny tiny sliver of Metro center I?

crazy crap

[jcrc]

It make sense if you don't care about your company's credit worthiness and reputation. If you are a lender, will you talk to Northland knowing somewhere down the line they are going to stop paying their loan in order to extract better term?

[The Voice of Reason]

I totally agree. the problem is that the banks that made the mortgages (UBS, HBOS, HSBC, CIT, et) made the loans planning on immdeiately slicing them and selling the pieces. so the loan wether good or bad in the long term is off the books immediately as part of a security. the bank does not care about the companies past or future since their responsibility last only a short time.

This is in essence why we are having the beginings of a commercial mortgage melt down.

all these guys want to refinance, and they cant get ahold of whomever owns the loan to negotiate. so they stop paying which forces the owners to take action, and its always with a legal action. then negotiations begin, and hopefully everything works out in the end.

the only times it does not is when properties were grossly over leveraged (it seems Northland did not do this in general) or when the parent company has more bad deals than good deals. I am fairly cetain They are making a killing on some of the big multifamily developments that they own like the pavillions in Manchester, and I bet pretty much everything they bought in Austin.

if they can get their few bad loans refinanced, and they can stabalize and come out of this recession in one piece, I would not be suprized to see Northland grow quite a bit larger down the road.

so it definately behooves them to let a little blood now to save the future.

[beerbeer]

If you believe the Courant, this is a necessary step to re-negotaite the mortgages.

[The Voice of Reason]

If you believe the Courant, this is a necessary step to re-negotaite the mortgages.

Beerbeer, I do not believe the courant, but since they borrowed this info from the Hartford Business Journal, It is a truth.

in fact this is often sited as the way commercial properties are refinanced in industry publications like Multifamily executive, and the NE realestate Journal etc... I swear I dont just think something and post a huge diatribe about it for nothing I actually read way too much.

The HBJ actually put some good info in their article including followup with a realestate lawyer from Hartford familiar with the process.

[jcrc]

I totally agree. the problem is that the banks that made the mortgages (UBS, HBOS, HSBC, CIT, et) made the loans planning on immdeiately slicing them and selling the pieces. so the loan wether good or bad in the long term is off the books immediately as part of a security. the bank does not care about the companies past or future since their responsibility last only a short time.

You are assuming future loans are going to be easily packaged by banks and sell to investors. Giving the current CMO fiasco, I am not at all certain banks can flip their loans like they once did. Also, who is going to buy Nortland's paper when they know Northland likes to go into foreclosure? Would you buy it? I mean how many suckers do we have out there anyway? Plus, if Northland is financially sound, then why would investors want to negotiate for something less favorable? Investors are into profit maximization not taking hair cut. The question is can Metro Center and CityPlace II fetch for $25 million each in the market today. If they can, investors will be crazy to let Northland screw them.

[The Voice of Reason]

You are assuming future loans are going to be easily packaged by banks and sell to investors. Giving the current CMO fiasco, I am not at all certain banks can flip their loans like they once did. Also, who is going to buy Nortland's paper when they know Northland likes to go into foreclosure? Would you buy it? I mean how many suckers do we have out there anyway? Plus, if Northland is financially sound, then why would investors want to negotiate for something less favorable? Investors are into profit maximization not taking hair cut. The question is can Metro Center and CityPlace II fetch for $25 million each in the market today. If they can, investors will be crazy to let Northland screw them.

actually I am not assuming future loans are going to be easily packaged, I was more explaining how we got where we are. you see its harder to get that loan now because it is harder to sell off the packaged loans and therefore harder to get off the books, and therefore there is a greater need for creditworthiness by the lender.

but the second part of that you said is unrelated.

going into foreclosure is not a black mark on your record. being foreclosed on is. if to renegotiate, Northland has to enter foreclosure proceedings to find out who to talk to (but not be foreclosed upon) life is good. if Northland can get a new loan, the old one is paid off, and the investors are content. maybe not thrilled, but content is a good place to be in december 2009. the new loan is assumadly a better deal for the borrower, and therefore a safer investment however less profitable.

think of it this way. many of these commercial loans pay really nice returns. the securities are often in the 12% area. so if they renegotiate, the new rate is likely still concidered to be pretty good return. treasuries are the safest investment and are paying 1/3rd of that.

but generally, everythig you say is quite true in my eyes. I personally would not budge, but I also would be psyched to own one of those buildings. Maybe the CALPERS, or whomever the investors are have no interest in owning property. I can only assume that this is the primary issue.

[jcrc]

I personally would not budge

Yeah, if the investors call Northland's bluff, then what? It's interesting Dubai World got beaucoup bucks from Abu Dhabi so it won't go into default where as Northland embrace it.

[The Voice of Reason]

Yeah, if the investors call Northland's bluff, then what? It's interesting Dubai World got beaucoup bucks from Abu Dhabi so it won't go into default where as Northland embrace it.

JCRC, its actually very simular.

If Larry G had a wealthier uncle to refinace his loan, he would have run to him I assure you.

[jcrc]

Looks like Morgan Stanley is doing it too.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aLYZhnfoXOSk&pos=5

[Theophrastus Bombastus]

Is Larry G goin' down or what?

http://www.courant.com/business/hc-northland-goodwin-square-0322,0,5363948.story

Northland Investment Corp. is at least 30 days past due on its loan for Goodwin Square on Asylum Street, which includes the now-closed Goodwin hotel and a 30-story office tower, according to Trepp LLC, which tracks commercial mortgages.

[soxfan427]

Is Larry G goin' down or what?

http://www.courant.c...win-square-0322,0,5363948.story

Northland Investment Corp. is at least 30 days past due on its loan for Goodwin Square on Asylum Street, which includes the now-closed Goodwin hotel and a 30-story office tower, according to Trepp LLC, which tracks commercial mortgages.

HBJ had it first http://www.hartfordbusiness.com/news12419.html

[beerbeer]

"But the high cost of doing business in Hartford is making it impossible to produce a profit in the office sector," Gottesdiener said. "These conditions are making the refinancing of existing commercial mortgages problematic at best."

How many times do we have to hear this before it sinks in? The Connecticut global warming bill makes our energy costs very high, our taxes hinder business, and of course unions. When is the last time a union CREATED a job? Never is the answer. Yet, unions drove the Goodwin Hotel out of business.

Solve those problems and the city blooms.

[MadVlad]

Bad management drove the Goodwin out of business, blaming the Unions for it was just a convenient excuse. Unions don't create jobs, they create fair work environments...

[The Voice of Reason]

a massive recession didnt help anyone either.

again, Larry is not going down, but he is sweating his commercial properties for sure!

lets not forget that Northland is more of a residential company these days than commercial.

Here is their residential portfolio (most of it picked up at discounts as the econemy tanked)

AZ

Hilands, Tucson

Promontory, Tucscon

Valley View Tucson

RI

Northgate , Middletown

SC

Madison at Park West, Mount Pleasant

FL

Ballantrae Sanford, FL 32771

Bel Air St. Petersburg, FL 33716

Del Oro Plantation, FL 33313

Greentree Fort Lauderdale, FL 33334

Monterra at Bonita Springs Bonita Springs, FL 34135

Park Lake at Parsons Brandon, FL 33511

Plantation Club Melbourne, FL 32940

The Brittany Indialantic, FL 32903

The Commons Tampa, FL 01375

The Promenade at Reflection Lakes Fort Myers, FL 33907

The Quarter at Ybor City Tampa, FL 33605

The Royal St. George West Palm Beach, FL 33409

Via Lugano Boynton Beach, FL 33436

MA

Cliffside Sunderland, MA 01375

Endicott Green Danvers, MA 01923

Tatnuck Arms Apartments Worcester, MA 01602

The Boulders Amherst, MA 01002

The Highlands at Faxon Woods Quincy, MA 02169

The Residences at Westborough Station Westborough, MA 01581

CT

Bigelow Commons

Hartford 21

The Pavilions

NC

Governors Point Raleigh, NC 27613

Randolph Park Charlotte, NC 28211

Riverbirch Charlotte, NC 28210

The Park Charlotte, NC 28205

The Summit at Avent Ferry Raleigh, NC 27606

Windemere Raleigh, NC 27612

TN

Hickory Farm Memphis, TN 38115

Kimbrough Towers Memphis, TN 38104

Rosecrest Memphis, TN 38104

Stone Ridge at Germantown Falls Memphis, TN 38115

The Crossings at Fox Meadows Memphis, TN 38115

TX

Bay Club Corpus Christi, TX 78418

Candlewood Corpus Christi, TX 78412

Canyon Creek Austin, TX 78759

Channing's Mark Austin, TX 78759

Coppermill San Antonio, TX 78238

Country Club Villas Abilene, TX 79606

Great Hills Austin, TX 78759

High Oaks Austin, TX 78759

Lodge at Lakeline Village Cedar Park, TX 78613

Madison at Scofield Farms Austin, TX 78727

Madison at Stone Creek Austin, TX 78729

Madison at the Arboretum Austin, TX 78759

Madison at Walnut Creek Austin, TX 78758

Madison at Wells Branch Austin, TX 78727

River Stone Ranch Austin, TX 78749

Royal Crest Tyler, TX 75703

Sedona Springs Austin, TX 78749

Stanford Court Dallas, TX 75287

The Arboretum at Stonelake Austin, TX 78759

Village Oaks Austin, TX 78759

And we hear about the commercial stuff, because its what is struggling, but as you can see they have really diversified into residential.

but just for good measure here is the commercial portfolio

Commercial/Office

1 Moody Street Waltham, MA 02453

10 Forbes Road Woburn, MA 01801

156 Oak Street Newton, MA 02462

160 State Street Boston, MA 02109

241 Needham Street Newton, MA 02464

250 Summer Street Boston, MA 02210

281 Needham Street Newton, MA 02462

325 Dan Road Canton, MA 02021

400 Atlantic Avenue Boston, MA 02111

55 Tower Road Newton, MA 02462

59 Temple Place Boston, MA 02111

600 Washington Street Boston, MA 02111

80 Cambridge Street Burlington, MA 01803

82 Cambridge Street Burlington, MA 01803

Bedford Executive Office Park - Building 1 Bedford, NH 03110

Bedford Executive Office Park - Building 2 Bedford, NH 03110

Bedford Executive Office Park - Building 3 Bedford, NH 03110

CityPlace II Hartford, CT 06103

Goodwin Square Hartford, CT 06103

Hartford 21 Hartford, CT 06103

Kimbrough Center Memphis, TN 38104

Linens N’ Things Newton, MA 02462

Metro Center Hartford, CT 06103

Northland Building Newton, MA 02462

The Crosthwaite Building Hartford, CT 06103

The Standard Building Hartford, CT 06103

[jcrc]

Cliffside Sunderland, MA 01375

The Boulders Amherst, MA 01002

Don't know about others, but these two are dumps for UMass kids to trash. Hardly comparable in term of cash flow and property value to high profile class A commercial places that he is not paying.

Also, we only know about his commercial holdings in Hartford are in default/foreclosure. What about his commercial buildings elsewhere? What about his residential holdings? No one but him knows for sure what shape he is in.