NEWARK — The address 744 Broad St. has been a beacon of Newark's resurgence since that autumn day a decade ago when a switch was thrown to bathe the city's tallest skyscraper in light after a historic $55 million makeover.
The lights still shine. The Stars and Stripes still fly high atop its crown. But in a New Jersey courtroom, a shadow has descended on the landmark art deco tower, the result of a foreclosure action filed against the "shining jewel" of the downtown skyline.
In a complaint filed in Superior Court, Bank of America is demanding payment of $72 million, asking the court to direct a sale of the building and appoint a receiver to collect rents from its many commercial tenants.
The foreclosure is the second developer Arthur Stern’s Cogswell Realty, whose luxury Eleven80 residential tower around the corner fell into default in the face of $6.7 million in construction liens.
"We are confident that, with the court’s assistance, the banks will cooperate and accommodate the current economic conditions," said Richard Trenk, the attorney representing the Cogswell affiliate that owns 744 Broad. "Current ownership is fully committed to protecting this important asset and safeguarding the tenants’ interests."
Those "economic conditions" could be what James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, calls the second wave of a credit crisis that first hit homeowners amid the Great Recession.
"The second wave involves the refinancing the mortgages of commercial properties, which usually have a five- to seven-year length," Hughes said. "The value of those mortgages was based on unrealistic boom-year valuations premised on unrealistic expectations of sustained growth of rents in the future.
"Now that rents have declined, in many cases the properties are underwater, with the face value of their mortgages far higher than the properties are worth," he said. "744 Broad probably falls into this category and may be the tip of a very large iceberg."
In the foreclosure complaint, filed Feb. 25, Bank of America says it twice extended the June 13, 2008, maturity date of the loan secured by 744 Broad and that it tried to negotiate a loan modification agreement, to no avail. Finally, on March 31, 2009, the maturity date came and went, the complaint says. Only after the unsuccessful loan-modification talks, Bank of America says, did it file.
"They’ve been in default for over a year. They failed to pay off the loan at maturity," said Shirley Norton, a spokeswoman for Bank of America.
But Trenk questioned the default claim, saying 744 Broad is still making regular monthly payments of principal and interest — $1.8 million so far this year.
"There is absolutely no reason why all the parties can’t work together," Trenk said. "We’re confident that’s what is going to occur. ... This is a very, very viable project. ... A tremendous amount of effort has been put into restoring this building to its original grandeur. We’re going to protect that to the greatest extent possible."
The 33 floors of the tower, also known as the National Newark Building, are largely occupied with rent-paying commercial tenants, among them the Newark Regional Business Partnership, MCI Telecommunications and PSE&G.
Miles Berger, whose extensive holdings include the 22-story office tower 60 Park Place, across from Newark’s Military Park, expressed regret with the setbacks.
"I’m sorry to hear of it. Arthur Stern came to Newark from New York and accomplished two tremendous projects," Berger said. "He restored 744 Broad, the premiere of Newark office buildings, to its once great stature and began to occupy it with many, many companies moving into the city of Newark. As to Eleven80, which is probably the nicest residential tower in the city, he took what was a dilapidated old office building and renovated it into 320 units of a first-class nature."
The defendants in 744 Broad are to appear in court July 16 to make a motion for more time to answer the foreclosure complaint. The case of Eleven80, a trial, delayed several times, is now scheduled for Sept. 14.