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The failure of Walt Bowen’s Block 216 office, hotel and condo building in Portland’s West End is reverberating through the real estate industry, court records show.
Ready Capital, the lender that foreclosed on Block 216, knew the 35-story tower was in financial trouble but didn’t tell shareholders in Broadmark Realty Capital Inc., a firm Ready Capital was angling to purchase in 2023, according to court filings.
Brian Grant, a Broadmark shareholder, sued Ready Capital, Broadmark, and board members at both firms in U.S. District Court for the Western District of Washington in May, alleging that they didn’t disclose risky loans, including the one on Block 216, in a proxy describing the merger between Ready and Broadmark, which closed in May 2023.
Grant reiterated those allegations last month in response to a motion to dismiss the complaint, filed by Ready Capital and the other defendants.
“Undisclosed in the proxy, and thus unbeknownst to Broadmark investors at the time, it is now clear that Ready Capital stood on the brink of catastrophic failure in the months leading up to the merger,” Grant’s filing says. “The Ready Capital shares that Broadmark shareholders received in the merger ultimately plunged from $10.11 per share on the day the merger closed to less than $2.50 per share, indisputably harming former Broadmark shareholders.”
The loan that funded Block 216, the 251-room Ritz-Carlton Hotel and 132 Ritz-Carlton residences, was originally made by Mosaic Real Estate Investors, based in Calabasas, Calif. New York-based Ready Capital acquired the $460 million loan when it bought Mosaic in 2022.
The loan grew after Ready Capital agreed to lend Bowen’s company another $47 million to finish construction, “despite the fact that the Portland project was underwater,” Grant’s argument against dismissal of his suit says.
“Ready Capital’s post-merger legal filings reveal that defendants knew that the loan was problematic from its inception and became out-of-balance just before the merger” with Broadmark, Grant’s filing says.
Ready Capital foreclosed on Block 216 last July.
Grant seeks class action status for his complaint. Lawyers for Ready Capital didn’t immediately return emails seeking comment on the matter.
