Lender to Ritz-Carlton Tower Says Foreclosure Best Option for $503 Million Loan

The lender to Block 216, Walter Bowen’s gleaming West End skyscraper, sounded an ominous note about the property in an earnings report Monday.

New York-based Ready Capital said the best strategy for its $503 million construction loan would be to take possession of the property, instead of waiting for repayment.

“Ownership is [the] best net present value outcome for RC,” Ready Capital wrote in a 25-page supplement to its fourth-quarter earnings.

Ready Capital CEO Thomas Capasse went into more detail on a conference call.

“While the original strategy was to refinance the construction into a bridge loan, the current appraisal and other factors favored ownership and serial asset disposition on the components as the best net present value outcome,” Capasse said, according to a transcript of the call.

Translation: foreclose on the 35-story building and sell it in chunks.

Block 216 has ground-floor retail, five floors of office space, a Ritz-Carlton Hotel and Ritz-Carlton Residences. Ready Capital acquired the Block 216 loan in March 2022, when it bought Mosaic Real Estate Credit LLC, the building’s original construction lender.

Like so many downtown towers, Block 216 has struggled to land office tenants. Just 23% of the office space is leased, according to Ready Capital. Nor has Bowen been able to sell many of the 132 Ritz-Carlton condominiums. Only 8% have sold, according to Ready Capital’s earnings report, at an average of $1,105 per square foot.

The hotel is underperforming, too, Ready Capital said. Its average revenue per available room was $188 in 2024, compared with $343.28, the average for all Ritz-Carlton hotels during the same period. The chain is owned by Marriot International Inc., which provided the average figure in its full-year earnings report.

Ready Capital said it plans to stabilize the three components of the angular glass tower—commercial, condo and hotel—then sell the office space and hotel portion within two years. Unloading the condos will take three years, Ready Capital said.

Neither Block 216 management nor Bowen’s company, BPM Real Estate Group, returned calls and emails seeking comment. Ready Capital’s press office didn’t return an email. Nor did its chief financial officer, Andrew Ahlborn.

One bright spot: Block 216’s retail space, where a food hall called Flock opened in January, is 100% leased, Ready Capital said.

The earnings report spurred a 27% decline in Ready Capital shares on Monday, mostly because the company halved the quarterly dividend it pays to investors to 12.5 cents a share to “better align the dividend with projected cash earnings in the short-term and to preserve book value,” Capasse said on the conference call.

Concern about the Block 216 loan also may have also weighed on the stock. In addition to the $503 million loan, Ready Capital also owns $62 million of preferred equity in the project, for a total of $565 million.

Ready Capital said it has set aside $130 million to cover the declining value of Block 216. Given that reserve, Ready Capital values it at about $435 million. At that valuation, Block 216 accounts for about one-quarter of common shareholders' equity in Ready Capital.

Ready Capital shares closed at $4.95 today, down from $8.39 a year ago.