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The Bay Area Real Estate Journal
Cupertino Square goes back to its New York Lender
Submitted June 24, 2009
Gramercy Capital Corp. has foreclosed on beleaguered shopping center Cupertino Square, bringing to a close another chapter in the life of a Silicon Valley mall in which many have seen potential but few have found success.
The two companies filed for bankruptcy in September 2008 to re-organize the mall’s finances. But, economic turmoil and a decline in the value of the center undermined a proposed plan of reorganization, forcing them to walk away, Lapping said. Gramercy subsequently foreclosed.
“It was always part of the bankruptcy process to pay off Gramercy but to get them to carry a smaller position,” Lapping said, “but when the economics no longer worked, our guys dropped out.”
Gramercy’s secured position against the mall at the time of the bankruptcy was about $130 million, he said. Under the re-organization plan, they would have been owed $105 million.
A call to Gramercy’s Chief Operating Officer Bob Foley, identified as the press contact, was not returned.
Gramercy is a New York-based real estate investment trust that specializes in financing real-estate related business ventures and securities, and owning commercial properties held for lease. The value of the company’s original loan against Cupertino Square was $195 million.
Gramercy is the same lender that took back and then sold downtown San Jose’s Montgomery Hotel.
Cupertino Square, once known as Vallco Fashion Park, has been the object of repeated attempts at revival. The most recent attempt began in early 2003 when a group of local investors acquired a portion of the 50-acre property for $80 million from a previous lender who also foreclosed on the site. Those investors, who included the valley’s Emily Chen and Alan Wong, spent heavily to re-invigorate the mall, putting as much as $100 million into the center to add a 16-screen theater and to make related improvements to its heating and ventilation systems and to add structured parking.
But that ownership group also ran into financial troubles and in 2007 sold all but a fraction of its interests to Cupertino Square LLC, a limited liability corporation controlled by OrbitResources Inc. Orbit is an international turnaround specialist with offices in Silicon Valley, Shanghai and Munich.
Gramercy has retained Jones Lang LaSalle Inc. to manage and re-tenant the center. JLL did not respond immediately to a request for comment. Long-time center manager Mike Rohde has left Cupertino Square and is now managing Milpitas’ Great Mall. Jones Lang is seeking his replacement.
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