I recently read that the smaller local banks which had been exempt from the early fallout from the subprime home loan fiasco were now in trouble because of the tough market for builders who were their primary borrowers.
This is probably a major reason that local funds are not available for our beleaguered Town Center....and now, Devcon Construction Inc. has filed a $16.6 million mechanic’s lien against the property, one of more than a dozen such claims that have been filed with Santa Clara County in the last three weeks.
It was a rare step for Devcon, which has never filed a lien of this magnitude.
The Sunnyvale property is owned by two limited-liability corporations, Downtown Sunnyvale Mixed Use LLC and Downtown Sunnyvale Residential LLC. Both are affiliated with San Mateo’s Sand Hill Property Co. and Rreef Alternative Investments, a global investment-management business owned by Deutsche Bank.
The liens secure Devcon’s and the subcontractors’ ability to foreclose on the project and to sell the land and improvements to satisfy their claims.
The city of Sunnyvale announced March 11 that construction on the $750 million remake of the 36-acre center would slow because the developers were struggling to secure additional construction loans. The two limited-liability companies got $108.8 million in construction financing from Wachovia Bank in August 2007 to start the Sunnyvale project, according to public records, and Rreef and Sand Hill have invested more than $200 million in equity, according to the city of Sunnyvale. About 40 percent of the project is complete.
The property owners have paid Devcon through March, but neither Devcon nor myriad subcontractors have been paid for work completed in April, May, June or July.
In this terrible commercial real estate market...what bad news is next?
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