Las Olas Riverfront in Limbo

FORT LAUDERDALE, FL-Madeleine LLC of New York, an affiliate of Cerberus Capital Management, has filed an emergency motion to halt the foreclosure sale of Las Olas Riverfront, a 246,000-sf retail complex so it can exercise its purchase right. An auction of the property scheduled Tuesday morning was abruptly halted, even after interested investors had already arrived.

Property owner Las Olas Riverfront Holdings LLC, made up of guarantors Brian Street and James Cohen of Boca Developers, defaulted on a $22-million loan from Wachovia Bank in March. Two months later, ACF Riverfront of New York purchased the loan from Wachovia and subsequently filed a foreclosure suit against the owners.

"The foreclosure sale was postponed based upon agreement between the senior lender, ACF Riverfront LLC, and the mezzanine lender, Madeleine, LLC, which provided certain mezzanine financing to the underlying borrower, Las Olas Riverfront Holdings, LLC," ACF and Madeleine clarified in a released statement, adding that no further comment is available at this time. Sources familiar with the transaction say the mezzanine lender did not want the foreclosure sale to go through because it plans to exercise the right to purchase the property at a reduced rate.

"The arrangement that was made to purchase the loan between ACF and the mezzanine lender was something we were not made aware of until the day before the scheduled emergency hearing at 8:30 a.m. the following day," according to the property owner's attorney, Richard Berman of Fort Lauderdale-based Berman Kean & Riguera.

"From a strict real estate point of view, it was a property that opened with great fanfare and just never took off," Marc Strauss, vice president of investments and senior director with Marcus & Millichap, says of the ten-year old property. "They were never able to maintain the type of high-end tenant that would sustain a property like that because they couldn't generate the traffic that was necessary."

The location in terms of aesthetics is great, Strauss says, but from a practical perspective the placement of that type of property just never worked. "It's become more of a nightclub-type scene, which isn't going to generate the revenues they had hoped," he adds.

Developers Street and Cohen planned to revitalize the property with its plans for New River Las Olas, a four-acre project to include an 270,000-sf class A office tower, a 33-story residential tower with 253 units, a 270-room hotel tower and 100,000 sf of retail space. When the owners defaulted on the mortgage for Las Olas Riverfront and the auction was announced, there was definitely a good amount of interest, according to local sources.