Quote
Developer's Struggle Shows
How Real-Estate Crunch
Hinders Urban Renewal
By MAURA WEBBER SADOVI
March 5, 2008; Page B6
Cameron Kuhn, who has emerged in recent years as a major developer in downtown Orlando and Jacksonville, Fla., is under siege on numerous fronts, raising questions about the revitalizations of these two city centers.
Late last year, Mr. Kuhn defaulted on about $31 million in loans on land in Orlando and three of his Jacksonville properties, including his high-profile redevelopment of the SunTrust building into office condominiums. In January, Barclays Capital Real Estate Inc. filed a foreclosure action against the garage of his $140 million Plaza development, billed as the largest mixed-use development in downtown Orlando's history.
(http://s.wsj.net/public/resources/images/MK-AO494_KUHN_20080304185343.jpg)
Mr. Kuhn's holdings include the SunTrust site.
Mr. Kuhn also is in danger of losing his house in Windermere in a foreclosure, and faces numerous lawsuits from contractors, companies that occupy his developments and others.
Mr. Kuhn, 48 years old, a Chicago-area native who began to make his mark in Orlando in the mid-1990s, blames the slowing economy and credit crunch. But he also accepts some of the blame for overextending himself as he tried to move into Jacksonville even as he had his hands full with projects in Orlando. "We bit off more than we could chew," said Mr. Kuhn.
Mr. Kuhn's struggle is being mirrored throughout the country by other high-flying real-estate developers. His problems show how developers' struggles are threatening the revitalizations of downtowns that pinned their hopes to developers' investments.
Since 2002, downtown Jacksonville has gained some momentum, as the number of residential units has doubled to 2,100 and the area attracted the Super Bowl in 2005. Since 2005, downtown Orlando has seen 36 projects valued at $1.1 billion completed or under construction, and the city is moving forward with a $1.1 billion plan for entertainment venues including a new performing arts center and a new arena for the Orlando Magic basketball team.
As the residential market in Florida has collapsed and the economy has downshifted, new development in both Orlando and Jacksonville has slowed. In Jacksonville, about half of some $3.4 billion in infrastructure and development projects planned as of 2006 has been canceled or put on hold, according to the city's economic development commission.
Before moving to Orlando in 1991, Mr. Kuhn converted warehouses in Chicago's Loop to residential properties. By 1994, he had begun accumulating older buildings and property in Central Florida, many that he would convert to new uses.
He also branched off into Jacksonville in 2005, where one of his biggest bets was his purchase of the SunTrust Tower, a 23-story office building that he purchased for about $37.5 million. He planned to use it to anchor a larger mixed-use project dubbed River Watch at City Centre. The project was to include a parking garage and a residential condominium tower, neither of which have been constructed. Meanwhile, Mr. Kuhn has been unable to sell about 200,000 square feet of the office condominium space in the tower.
The Orlando Plaza project, located on a formerly blighted block near the planned Orlando Magic arena and the new performing arts center, is credited by city officials with jump-starting Orlando's downtown redevelopment. But after defaulting on loans late last year, Mr. Kuhn missed a scheduled payment of $180,000 to the city of Orlando for street improvements made around the Plaza project, according to a spokeswoman for Orlando mayor Buddy Dyer. Mr. Kuhn says the city is in error and that he has made the payment.
Mr. Kuhn said he is working hard to escape his financial woes and has made progress with Chicago-based JDI Realty, the lender of the $31 million in loans that are now in default. He says JDI has agreed to release him from the loans and halt the foreclosure action on his home in exchange for $2 million, his equity stake in the SunTrust tower, two other Jacksonville properties and a piece of Orlando property. JDI couldn't be reached for comment.
Mr. Kuhn said he is working on a deal to sell the loan on the parking garage, which would stop the Barclays foreclosure action. Barclays declined to comment.
Despite the credit crunch that has left him fighting to lease buildings and sell space in what has become a tenant and buyers' market, Mr. Kuhn said he remains confident he can put enough deals together to survive.
"Those guys left standing are going to be able to rebuild more quickly," Mr. Kuhn said. "I plan on being one of those guys."
Write to Maura Webber Sadovi at maura.sadovi@wsj.com
bump...mentioned on the front page of "marketplace" section of Wall Street Journal today...the story was inside
I've been wondering the same things Stephen. There was just too much going on behind the scens to figure out whom is at fault for the slowed negotiations, Kuhn or the City. Based on what we saw with the Sleiman vs COJ negotiations I am forced to believe that the city got greedy and Kuhn was left to bite the bullet when the bubble finally burst.
There is no reason for me to believe that if the city would have hastened negotiations with Sleiman, Kuhn, Landmar, the schoolboard, as well as themselves, we would likely see a nearly completed courthouse and some follow on office buildings, a renovated Landing, a tower or two at the Shipyards site, a nearly completed Riverwatch Tower, completed Barnett renovation, commencement on the Trio, and possibly some site work at the JEA site. Couple all of that with some accomodating streetscaping and the core would be a completely different place.
Kuhn, however, could have been trying to take the city to the cleaners and may have been reasonably dealt with, but something tells me that it all falls back on the city.
This is a great example of why the City should always strike while the iron is hot as opposed to sitting around and causing unnecessary delays. One would think a "businessman" like Peyton would instinctively know this. Apparently not.