Foreclosure Auction for Franciscan Site Canceled
Federal regulators called off this week’s scheduled foreclosure auction of the 45-acre site of the former Franciscan Ceramics factory after the assets of its primary creditor, the ailing Crossland Savings, were seized.
The land was scheduled to be sold at an auction Monday to repay Crossland, which loaned nearly $50 million to a now-bankrupt development company that planned to build a shopping center on the site.
However, officials from the Federal Deposit Insurance Corp.--which took over the New York-based Crossland on Jan. 24--ordered the bank to stop all foreclosure proceedings until they can review all of Crossland’s assets and liabilities.
“That’s normal protocol,” after a government takeover, said FDIC spokesman David Barr. Barr said the delays give time for “the government to be familiarized with the particulars of each case.”
Barr said he did not know whether the government’s new bank management would change its plans to auction the now-vacant Franciscan property, at 2901 Los Feliz Blvd.
John Sullivan, senior vice president for real estate asset management at Crossland, said the postponement would allow “the issues to be reviewed” before a sale. But he indicated that the auction would probably go forward in March.
The FDIC took over Crossland Savings and immediately invested $1.2 billion into the company two weeks ago after federal officials determined that the bank was insolvent.
Barr said that the FDIC decided that it would be cheaper to pump new money into the bank and continue operations, rather than to sell it immediately. The new management will try to bring Crossland back to health, then sell it in about two years.
Crossland’s financial problems stem primarily from poor-quality commercial real estate loans, Barr said. Most of those loans were in Manhattan, but the bank had others--such as the loan to Franciscan Promenade--across the country.
Franciscan Promenade, a subsidiary of the Los Angeles-based Schurgin Development Co., borrowed $21 million from the bank to buy the former Franciscan Ceramics site in 1988.
The cost of cleaning up the toxic contamination of 80 years of ceramic production and asbestos from the buildings escalated beyond the initial the $6 million estimate, and Crossland loaned an additional $23 million to keep the project alive. The Los Angeles Community Development Department also loaned $9.5 million for the project.
The land is now available for development, but saddled with debt.
The developer filed for bankruptcy last February. City officials said they do not think that the takeover of Crossland by the federal regulators will improve the city’s chance of recovering its money. As the secondary creditor, the city could only collect from proceeds of a sale after Crossland recovered its $50 million.
It is doubtful that the property will sell for more than $50 million, they said.
