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Foreclosure Sought for Ex-Borders Site

An entity backed by the servicer of a $6.3 million loan claims that the landlord is in default. It seeks foreclosure on the mortgage and sale of the property.

Foreclosure Sought for Ex-Borders Site Foreclosure Sought for Ex-Borders Site Foreclosure Sought for Ex-Borders Site

(This story was published on March 11, 2013 and subsequently updated)

A lawsuit filed seeks foreclosure on a large mortgage for the former Borders Books & Music site in Mount Kisco, claiming that its landlord, Mt. Kisco Associates, LP, is in default on a $6.3 million loan. A sale of the property to pay off the debt is also being sought.

The suit's petition (attached to this story as a PDF file) is dated Feb. 20 and was received on Feb. 27 by the New York State Supreme Court in White Plains. The plaintiff is an entity called GCCFC 2007-GG11 Kisco Retail, LLC, which is managed by Florida-based LNR Partners, LLC, a special servicer for the loan. The lawsuit states that Mt. Kisco Associates has not made required payments on the loan since April 6, 2012, with a default notice having been sent later that month. In November, the plaintiff claims, a letter was sent to the landlord requesting the full loan to be repaid.

As of the lawsuit's filing, the plaintiff claims that Mt. Kisco Associates still owes the entire principal balance. It is seeking to recoup the entire due amount, including interest, late charges, special interest incurred from default and attorney fees. The suit requests that the property be sold off as one or more parcels, depending on which arrangement can bring in the greatest value. If the sale's revenue is not enough to pay all of the money owed, the suit requests that the landlord and its guarantor be held liable for the difference.

The loan is dated Sept. 4, 2007 and has a maturity date of Sept. 6, 2017, according to the initial agreement. It has a principal amount of $6.3 million and an annual interest rate of 6.815 percent. Until Oct. 6, 2012, only payments on the interest were required, with principal payments also being mandatory after that point.

The plaintiff is also suing the guarantor of the loan, Support One, LLC, and multiple un-named defendants - they are called "John Doe #1 to John Doe #25" - who may have judgments and/or liens on the site. The property is located at 154-162 E. Main St. 

The site, according to village tax records, is 1.03 acres in size. In addition to the building, the property also includes a slice of a village-operated parking lot, which is located between the structure and the Green Street firehouse to the west. Mount Kisco has a lease on the parking space.

Reached for comment initially by Patch, Mayor Michael Cindrich was unaware and surprised about the foreclosure suit, adding that the people who own it “have substantial resources.”  

In a follow-up conservation, Cindrich believes that the village's connection with the parking on the site may be protected because it made an investment in the property, which included rebuilding the lot, installing parking meters and maintaining it.

Mount Kisco did not receive a notice about the lawsuit, Village Manager James Palmer said.

The building has been vacant since September 2011, when Borders closed due to its liquidation. Borders had a lease for the property since 1997. 

The vacancy is among the largest in downtown Mount Kisco. The absence of the book store, nearby merchants felt shortly after its demise, was believed to have hit their businesses.

Carl Austin, a co-broker for the building, said that an update on a prospective tenant for the building could come in the next few weeks. The building, which is about 22,500 square feet, has caught the interest of the undisclosed entity, which is seeking to lease the entire space.

A Long Financial Path

The loan has taken a long journey to its current state, one that involves a form of asset-backed securities connected to mortgages, investment instruments that have been widely reported on since the financial crisis of 2008-09.

The loan was taken out as a refinancing of the landlord's existing debt, according to court material. The lender was Greenwich Capital Financial Products, Inc., a subsidiary of the Royal Bank of Scotland Group, plc. Documents filed with the  U.S. Securities and Exchange Commission state that in the fall of 2007, an affiliate of the lender, Greenwich Capital Commercial Funding Corp., gathered the site's loan, several other loans from the lender and those from a commercial lending wing of Goldman Sachs, to be distributed into a trust.

The loans, including approximately 122 commercial and residential real estate mortgages, were then deposited into the trust, which was used as a vehicle to issue certificates, or ownership stakes. The certificates could then be purchased by investors. The closing date for the deal was Oct. 30, 2007, according to documents filed with the SEC. The total principal balance for the pool, according to documentation filed around the same time, was more than $2.6 billion. 

The Borders site loan and others in the trust were assigned to LaSalle Bank National Association, which served as trustee. LaSalle was acquired by Bank of America, which took over the loan. Bank of America then gave the loan last August to U.S. Bank. The loan was then assigned by U.S. Bank to the plaintiff just two months later in October. 

The site's estimated value has ranged wildly, according to figures given in recent years.

An appraisal done on Aug. 8, 2007 gave a value of $8.5 million, according to a prospectus for the securities proposal that was filed with the SEC. In contrast, Mount Kisco's property records currently only give it a full-market value, an estimate used to gauge a potential sale price, of $5 million, an amount far below the size of the loan. Palmer explained that the market value figure is used for assessment and tax levy purposes. 

It should be noted, however, that municipal market value estimates may not be supported by property owners. Property tax data are subject to challenges from owners.

The assessed value for the property is $972,500, according to village records. The landlord is current on its property taxes, the village confirmed.

Landlord is Linked to Large Real Estate Firm

Mt. Kisco Associates and Support One appear to be linked, or at least had been at a point in time, to commercial real estate firm Property Group Partners. The firm  spun off in 2011 from the Louis Dreyfus Group, a global commodities and energy firm. All three entities share an office address, which is 20 Westport Road, in Wilton, CT. Support One's guarantor contract also has the signature of William Louis-Dreyfus, who according to published reports has served as chairman of Property Group's former parent company.

The president of Property Group, Jeffrey Sussman, has a business interest in Mt. Kisco Associates, confirmed Carl Austin, co-broker for the Borders site. A copy of the 2007 loan, showing Mt. Kisco Associates' business structure at the time, also names Louis-Dreyfus as having a connection. Both he and Sussman were connected to it through a series of limited liability companies.

Sussman and Louis-Dreyfus could not be reached for comment. Also unsuccessful were attempts to reach plaintiff attorney Evelyn Seeler, the LNR asset manager for the loan and the LNR media relations department. Calls made to Property Group's Wilton address went unanswered.

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