Tower's debt $17 million; 57 units left

Developers of the River Market Tower in Little Rock say there are 57 condominiums left to sell in the building, which opened in 2009.
Developers of the River Market Tower in Little Rock say there are 57 condominiums left to sell in the building, which opened in 2009.

Jimmy Moses, Rett Tucker and a group of investors owe about $17 million on two four-year mortgages on the River Market Tower in Little Rock, with 57 condominiums left to sell, Moses said Tuesday.

The condominiums are worth considerably more than $17 million, Moses said.

About 75 condos at the 20-story River Market Tower at 315 Rock St. have been sold at an average price of about $446,000, based on sales prices listed with Pulaski County's real estate division. As condos were sold, the investor group paid down debt on the building, Moses said.

If the investors sell the remaining condos, they likely will see a profit on the building that opened in 2009.

The first condo purchase was in April 2009. The most expensive condo was sold for $1.6 million in March of this year. Two buyers each paid $199,000 for a condo, the lowest sales price.

The sales price of the remaining condos will need to average about $300,000 to settle the debt.

The tower cost about $46 million to build. But there has been no write-down on the value of the building, Moses said.

A new investor group formed a separate entity and bought the first-floor retail space, which includes Dugan's Pub, from the original investor group. The original investors used that money to pay down another $1 million in debt, Moses said. The main reason for the spinoff was to raise money to pay down the mortgage, Moses said.

The River Market Tower loan was added to a group of nonperforming loans totaling $80 million that Metropolitan National Bank sold in January 2013, Moses said. The River Market Tower loan was not nonperforming, he said. A nonperforming loan is one that is more than 90 days past due.

Metropolitan sold the loans, including the River Market Tower loan, to the Broe Group of Denver, which sold it back to the investor group, Moses said. The $17 million is now financed through First Security Bank of Searcy and Citizens Bank of Batesville.

"This project was scheduled to sell out -- and we would have loved for it to sell out -- in 2012, but we had a little recession which turned the world upside down," Moses said.

Bob Birch, a regional president with Centennial Bank in Conway, was unfamiliar with the River Market Tower transactions, but he said the financing situation is common.

He gave an example of a bank deciding to sell a pool of 10 loans valued at $100 million. There could be any number of reasons to do this, including that a healthy bank may just want to get out of one area of lending.

The bank then puts up for bid the 10 loans valued at $100 million. The winning bidder might bid $50 million. So the bank takes a $50 million loss on the loans and the winning bidder gets them for $50 million, Birch said.

The bidder's goal then is to sell the loans individually, Birch said. He might get $7 million for each loan and make a $20 million profit on the loans.

"This goes on all the time," Birch said. "It's a constantly growing business. A lot of time the actual [original] mortgagee will turn around and buy their note back and repledge it to a bank for $7 million when the note with the original bank was $10 million. We're seeing a lot of that in our markets."

Business on 06/18/2014

Upcoming Events