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August 1, 2024 Deal Watch

Receiver appointed for 23-story Hartford office tower facing foreclosure

PHOTO | COSTAR The Stilts office building at 20 Church St., in downtown Hartford, is currently going through the foreclosure process.
By Michael Puffer

One of the most prominent office towers on Hartford’s skyline has been placed into the hands of a receiver as a foreclosure lawsuit against the building’s landlord continues.

Two years ago, Wells Fargo filed a foreclosure lawsuit in Hartford Superior Court, seeking to claim the 420,000-square-foot, Class A office tower at 20 Church St., commonly known as the “Stilts Building.” The bank alleged an affiliate of Shelbourne Global Solutions – downtown Hartford’s largest landlord – missed multiple payments on a $30.75 million mortgage.

Judge Matthew Dallas Gordon, on July 30, accepted an agreement between Shelbourne and Wells Fargo for the appointment of a receiver on July 30. That settled one dispute, but the foreclosure lawsuit continues.

Under the order, John Rothschild Jr., national director of real estate services firm Newmark’s special assets group, will “take immediate charge” and manage the building as receiver.

In February, Shelbourne filed a countersuit against Wells Fargo, as well as the bank’s special servicer – PNC Bank – and others. Shelbourne’s complaint alleges Wells Fargo and PNC’s Midland Loan Services arm were denying access to rents, putting at risk the ability to keep up with operating expenses at 20 Church St.

Shelbourne contended this was intended to force it to surrender the building.

Now, Shelbourne says it has consented to the receiver for the benefit of its tenants and the building.

In a statement released Thursday to the Hartford Business Journal, Shelbourne said it maintained the building’s Class A status, even as operating funds were choked off by Wells Fargo and its special servicer. Shelbourne said the settlement requires the lender to pay it for “outstanding obligations of the building.”

Shelbourne asserts Wells Fargo has agreed, through settlement agreements and the receivership compromise, to repay more than $1 million in building maintenance and operation costs incurred by Shelbourne at 20 Church St. during a period the building owner has not received rents. 

“We believe that Newmark and its representatives are highly qualified to maintain the standards that Shelbourne has set for 20 Church. Shelbourne will fully cooperate with Newmark to ensure a smooth transition and will work with the tenants in any way they or Newmark need to protect the property,” reads a portion of the Shelbourne statement.

Shelbourne said it will continue to “vigorously defend” its investment in 20 Church St. in court. The company also noted the dire condition of the U.S. office real estate market, which, it said, is prompting large institutional investors and smaller, private ones to simply abandon properties.

“Shelbourne is committed to Hartford and continues to invest and expand its assets in the city,” reads a portion of the statement. “The Hartford market is experiencing some of the worst of these trends, with effective vacancy rates above 35%. The state, city, Shelbourne and other owners in the central business district are working constructively to address these issues. This will take creativity, time and resilience, and we are up to the challenge.” 
 

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