Seattle Bubble

Speaking of developers having financial trouble, the Puget Sound Business Journal has a story up today about a major local commercial developer on the rocks: Developer Mike Mastro’s troubles mount.

A longtime, prominent Seattle developer is facing a mounting string of legal actions as he struggles to pay off millions of dollars in loans at dozens of banks across the Pacific Northwest.

Michael Mastro Sr., for years among the most successful commercial developers in the Puget Sound region, is quickly becoming a source of concern at banks — both because of their direct exposure and because of what his troubles say about the potential pain still ahead in the commercial real estate market, according to people familiar with the matter.

Mastro, and his company, Mastro Properties, owe about $500 million to more than 25 banks in Washington and Oregon, including local banks, such as HomeStreet Bank, and national lenders such as Wells Fargo and Bank of America, according to a Mastro company associate and other people familiar with the matter.

Mastro values his assets at more than $600 million — more than enough to cover his debts — and he expects to recover. But court documents and people familiar with the matter indicate he presently appears to lack the cash flow to make loan payments.

It’s interesting to contrast today’s market with what we were seeing just three short years ago…

Spec development, as in constructing an office building without pre-lease commitments on the gamble that it will attract tenants upon completion, is the new buzzword among real estate developers in downtown Bellevue.

Developers of at least four different office tower projects proposed for the city’s central business district are scrambling to be next in line after Lincoln Square developer Kemper Freeman Jr. to begin construction.
…
With no new office buildings set to be ready for occupancy on the Eastside until at least the summer of 2007, available office space in downtown Bellevue will likely become even more difficult to find as the local economy continues to improve.

Incidentally, one of the specific projects mentioned in the 2006 article about Bellevue office space was in the news today as well.

2006: More downtown Bellevue builders gambling on spec development

The proposed 15-story, 311,000-square-foot Summit 108 Building (the project’s working title) would replace the much smaller six-story Summit Ridge building, which was built in 1971.

Canadian developer Bentall Capital is prepared to begin construction of the new Summit 108 Building as early as this coming June, said Gary Carpenter, the executive vice president who heads Bentall’s U.S. operations.

The new building could be ready for occupancy as soon as March 2008, he said.

“At the present time, we believe we will be going spec” with the project, Carpenter said.

“Any additional office building other than your own is a concern,” as a developer, Carpenter said. “Fortunately, the (Bellevue office) market has the strength to absorb it.” even if it must compete for tenants with several other new buildings, he said.

2009: Stalled Bellevue tower site won’t be eyesore

Developer Bentall Capital is halting work on Summit III, a 15-story office building in downtown Bellevue, and says construction may not resume for two or three years.

But the developer vows the site won’t become another unsightly hole in the ground. It might even be attractive.

Between now and mid-September, Bentall plans to finish all the tower’s street-level surroundings according to plan — sidewalks, street trees, a plaza, fountains, flagpoles, benches, a sculpture.

Only the footprint of the tower itself will be fenced off, said Gary Carpenter, executive vice president, and that fence won’t be chain-link but an architect-designed, 10-foot wall.

How quickly things can change.

(Kirsten Grind & Jeanne Lang Jones, Puget Sound Business Journal, 07.10.2009)
(Eric Pryne, Seattle Times, 07.10.2009)