The developer of the Columbus on Fifth apartment building in Miami’s Little Havana neighborhood was slapped with a $14.7 million foreclosure suit, the second such case to embroil the property in three years.
Columbus Apartments, tied to Miami-based Suncoast Construction Group, is accused of defaulting on a loan it took out to build the 72-unit Columbus on Fifth apartments at 514 Southwest 22nd Avenue.
COF Investment sued Columbus Apartments in Miami-Dade Circuit Court last month alleging it is on the hook for $9.7 million in principal; $61,730 in accrued interest; and $4.9 million in default interest as of late 2021, with a 24.5 percent annual interest rate on all amounts in default, according to the complaint.
Columbus originally had scored a $9.3 million construction loan in 2017 from Ocean Bank to build the eight-story apartment building. It was completed in 2019 on 0.6 acres.
COF Investment bought the loan in December from Ocean Bank and filed to foreclose shortly after that.
Mortgage foreclosure filings have become more frequent over the past year, but have mainly been focused on hospitality properties, many of which are yet to show a strong comeback following the 2020 lockdown and in light of the new Omicron variant. By contrast, the South Florida multifamily market has prospered because of high demand that has pushed up rents.
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The mortgage foreclosure suit comes on the heels of a lien foreclosure case that led to Columbus Apartments losing ownership of the property, but it is fighting it on appeal.
In that case, Miami-based construction company MJM Structural sued in Miami-Dade Circuit Court in 2019, claiming it was owed $18,900 for work it did on Columbus on Fifth. MJM sued Suncoast Construction, Columbus Apartments and other affiliates that previously owned the property.
A July auction in that case led to the sale of the Columbus on Fifth to Lake Worth Development Trust for $502,000, court records show. In October, Judge Beatrice Butchko ordered a writ of possession in favor of Lake Worth Development.
As the new owner, Lake Worth Development also is named as a defendant in COF Investment’s mortgage foreclosure suit. COF claims that it has an interest in the apartment building that supersedes that of Lake Worth Development.
Still, the ownership is under dispute as Columbus Apartments is appealing Butchko’s orders.
Justin Kaplan, an attorney for Columbus Apartments, acknowledged that the entity did default on the loan, because once it lost ownership of the property “it made no sense” to keep paying.
Lake Worth Development has a “potential problem,” in light of both the appeal of its ownership and because it was sued by COF Investment, Kaplan said. Lake Worth Development likely would need to take out a loan to pay off the defaulted mortgage, but it will be difficult, He said.
“Very few lenders, if any, would lend against a property that a borrower may not properly own. While this foreclosure lawsuit and the appeal are working their way through the courts, default interest is increasing by more than $6,500 per day. The longer this goes on, the higher the probability that any equity in the property will be extinguished,” Kaplan said.
It is unclear who leads Lake Worth Development, because it is not registered in state corporate records, although its address ties to a Delray Beach apartment complex owned by Dallas-based Crow Holdings.
Lake Worth Development attorney Cory Carano declined to disclose the entity’s principals, and said the trust had been “diligent in its efforts” to pay off the mortgage. But once COF Investment bought the loan from Ocean Bank, issues arose.
Lake Worth Development “has been and remains ready, willing and able to assume the loan or satisfy same, but since the loan was assigned to COF Investment a dispute has arisen concerning the correct amount of interest due on the loan,” Carano said in an emailed statement.
COF Investment’s ownership is also unclear, Carano said, as it remains to be determined “whether it is in any way related to the previous owner, Columbus Apartments.”
COF Investment is not registered in state corporate records.