Novare Group, an Atlanta developer that was involved in downtown Tampa residential tower projects like Element and SkyPoint, is facing possible default on “a substantial” amount of debt.
As with many developers, the residential market has been anything but kind to Novare lately. And, in its financial statements obtained by sister paper Nashville Business Journal, the company says the impact of the financial crisis on banks has not helped.
“We have endured down markets before, although none like this, and we will emerge from this one as well,” Novare Chief Executive Jim Borders said in a letter to the Atlanta Business Chronicle, also a sister paper. “While these are obviously not the best of times, we are playing through it the only way we know how: With honesty, transparency, dedication, execution and optimism.”
Last year, Novare suffered a net loss of $61 million, and in the first quarter of this year, it recorded a $47 million loss, the company’s financial statements show.
Novare has stopped making payments on $48 million in debt owed to Lehman Brothers Holdings Inc. Novare says it is negotiating a transaction with Lehman that would largely eliminate its credit facility with the investment bank, which filed for bankruptcy last year.
Novare is no longer making scheduled interest payments on loans secured by projects in Tampa, Charlotte, Atlanta and Houston. Novare suspended the payments as lenders consider a request to restructure those loans, which total more than $57 million.
No properties have been foreclosed upon, Borders said in an e-mail to the Atlanta Business Chronicle, “but there are near term and past due maturities that could result in that.”
In its opinion on the company’s financials, Novare’s independent auditor, Deloitte, said defaults and $280 million in debt maturing this year “raise substantial doubt about the company’s ability to continue as a going concern.”
Novare says in the financial statements that it is seeking opportunities to reduce debt and, in some cases, will have to transfer properties to lenders, including Lehman, to satisfy its debts. Novare reduced salaries by 10 percent across the board in the second quarter and reduced its head count, including some members of senior management.
Large presence in Tampa
Novare worked with intowngroup to build two multifamily towers in downtown Tampa — the 32-story SkyPoint condominium tower and the 35-story Element, built as condos but later converted to rental units after the housing market crashed.
SkyPoint has sold 341 of its 380 units since opening in 2007 with 17 sold this year alone, according to Hillsborough County property records. The most recent sale came Thursday with a $303,000 unit purchase.
SkyPoint LLC, the limited liability company linked to Novare-intowngroup, built the tower using a $64.1 million loan secured through Freemont Investment & Loan of California in May 2005, according to property records.
SkyPoint received an additional $10.5 million investment from Jamestown, a real estate investment and management company in Atlanta, in March 2006.
Element Properties LLC, the Novare-intowngroup company that built Element, did it with an $84.3 million loan from Corus Bank in December 2006.
There has been no other significant activity surrounding the Novare-intowngroup properties, outside of a sale June 19 of land where a parking lot sits just north of SkyPoint to Teco Properties Corp. for $2.75 million. Novare-intowngroup had purchased the land through its Tampa Ashley Block limited liability corporation in September 2006 for $7.5 million from Teco Properties.
Novare also has interest in other properties in the Tampa region. Much of it has not been used for residential construction but instead is being used as parking lots.
Greg Minder, principal for the Tampa-based intowngroup, was out of the country when reached Friday and asked to be contacted when he returns next week.
Values no longer there
Novare has been hurt by the dramatic decline in the condo market, which has left the company unable to sell units at a profit, according to documents obtained by reporters.
The company also has spent money for future development on land and architectural plans that “are worth substantially less, and in some instances, worth nothing in a world where development is nearly impossible,” Novare’s Borders wrote in a letter to investors.
Tampa Bay Business Journal staff writers Michael Hinman and Janet Leiser, Nashville Business Journal staff writer Turner Hutchens and Atlanta Business Chronicle staff writer Douglas Sams contributed to this report.
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