When families go into default their homes can be sold on the courthouse steps.
The owners of San Leandro's Westgate Center narrowly averted that same indignity when they refinanced a $32.5 million loan just in time to avoid a January 2 auction outside the Alameda County Courthouse.
But according to Robert D. Scanlan of SKB-Westgate Investments, a Portland company that owns the property west of the Davis Street exit on Interstate 880, it wasn't like a home default.
"When you talk to someone in a bar and they hear that a property's gone into default they think it was because the poor guy didn't pay his mortgage," Scanlan said. "This wasn't like that. We were never in economic default."
Instead, the property flirted with foreclosure due to legal complications arising from a sale gone sour, according to Scanlan's account.
Commercial Real Estate 101
SKB-Westgate is a firm that raises money from investors and buys commercial properties. Over the past 20 years, SKB has bought and resold properties within three to five years, earning fast profits for the original investors.
SKB purchased Westgate Center in 2004 with the same timetable in mind. Then came the financial meltdown. Real estate prices plunged. It wasn't until spring of 2012, Scanlan said, that the firm felt like it could get a decent return on its investment.
So SKB found a buyer and entered into a deal to sell the property. But Scanlan said that deal went sour. The parties ended up in court. All of this happened at just the same time that the loan on Westgate Center was coming due.
Lender Plays Hardball
Former Mayor Tony Santos was among those who noticed the threatened sale. He emailed Patch Friday morning: "This should be a big story in town, but local press seem unaware of this, including you."
But Scanlan said the January 2 auction will not occur. His firm refinanced the $32.5 million loan to avert the technical default arising from the lawsuit and loan term coming at the same time.
Westgate's owners must still finish up the paperwork on their refinancing. Meanwhile, the auction has not been cancelled, merely postponed until January 16 -- in the unlikely event that SKB fails to dot all the i's and cross all the t's.
In that event, the giant shopping center could still be sold "at the Fallon Street emergency exit to the Alameda County Courthouse, 1225 Fallon St. Oakland," as the legal notice says.
If that comes to pass and you decide to bid, come with a big, registered check.
"I'd say this property is worth between $40 million and $45 million," Scanlan told Patch Friday.