Home Savings Sues Developer Over $250,000 in Missed Payments
Home Savings of America has filed suit to foreclose on a loan to a prominent development group secured by a landmark Glendale office building, alleging that no payments have been made since February.
City redevelopment officials said they were watching the legal dispute closely to make sure that it does not jeopardize plans by the same developers for two office buildings on Brand Boulevard.
In a lawsuit filed last week in Glendale Superior Court, Home Savings said Brand/Broadway Partners, including businessmen Michael A. Howard, Donald L. Platz and Greg R. Galletly, owe more than $250,000 in loan payments missed since Feb. 20.
Howard, managing partner of the Howard-Platz Group, said Tuesday that he and his associates plan to make the payments next week and avert foreclosure. He said all builders are having trouble raising cash.
“Times are tough,” Howard said. “Everybody knows that. People don’t pay rents when they’re supposed to. . . . We just had to make a decision about putting some payments off.”
He said Home Savings knew that his firm planned to catch up with its payments in August.
“They just chose to ignore that communication,” Howard said. “Savings and loans have their own problems these days. They have a real itchy trigger finger.”
Home Savings spokeswoman Samantha Davies declined to respond to Howard’s statements.
The lawsuit asks a judge to foreclose on a $5-million loan that Brand/Broadway Partners obtained in 1986, secured by the building at 100 N. Brand Blvd.
The six-story structure, built in 1923 and designated a city landmark, is occupied by Community Bank and various office tenants.
The suit asks a judge to appoint a receiver to oversee operation of the building and to order the building sold so that Home Savings can recover its funds.
Joseph L. Greenslade, attorney for Home Savings, said a court hearing is set Aug. 13 on the receivership issue. He referred all questions on the case to Home Savings. Davies said the Irwindale-based institution does not comment on lawsuits.
According to court records, several firms that worked for Howard-Platz on Glendale projects have also filed papers seeking overdue payments.
The development firm is among the defendants in an April 24 complaint by Otis Elevator Co., seeking $145,000 for work done on a high-rise at 500 N. Brand Blvd. At least two construction companies and Leason Pomeroy Associates, an architectural firm, have also gone to court over missed payments.
“The complaints are just for fees,” said Lance R. Cote, the Irvine attorney representing Leason Pomeroy. “Nobody’s saying anybody is doing anything shady. It’s just a question of fees. . . . These are not big cases.”
Nevertheless, the Glendale Redevelopment Agency will require the developer to present proof of full financing before the city issues a building permit for the complex that Howard-Platz wants to build at 400 N. Brand Blvd., said Jeanne Armstrong, the city’s redevelopment director.
Because of the uncertainties in the financial climate, she said her agency must be certain that the builder has enough money from reliable sources to complete the project.
The Redevelopment Agency, which has shaped the downtown area’s transformation into a bustling urban center, is monitoring the financial challenges affecting Howard-Platz.
“It’s not business as usual for any developer right now,” Armstrong said. “It’s becoming very hard to finance real estate projects--and not just in Glendale.”
Lenders who were generous with funding just a few years ago now require developers to pre-lease half of a proposed building’s office space before they can obtain construction money, Armstrong said. “I think the pendulum has swung to the other side,” she said.
The turnaround has been blamed on the large losses that many banks and savings and loans suffered on real estate loans in recent years. In addition, government regulators have imposed new rules that require lenders to be more cautious about the loans that they make.
Because of this change in the credit picture, Howard said he and his business partners, who have developed several high-profile projects in downtown Glendale, fell behind in paying their debts.
Howard said his plans to build another major office complex on Brand Boulevard have been delayed because nervous lenders are refusing to fund such projects.
His firm had hoped to begin building the 10-story office tower at 400 N. Brand Blvd. in May, he said, but is now aiming for later this year. Construction of the second phase--a 20-story office building--will not begin until early 1993, he predicted.
“The first phase has already been delayed a couple of months because the construction lending market has essentially dried up,” Howard said. “We’re set to go. The only problem is getting the construction loan. It’s almost impossible to get these days, even though we’re almost 25% pre-leased. It’s a weird market.”
Howard’s family has run a Glendale construction business for decades and once built more than 200 Bob’s Big Boy restaurants.
He insisted that his company’s newest office projects in Glendale are healthy. He said the 23-story high-rise at 500 N. Brand Blvd. and the smaller buildings in The Exchange complex at 130 and 138 N. Brand Blvd. are each more than 80% leased.
