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Harlem Developer Gives Up on Making Money to Save Projects

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The gentrification of Frederick Douglas Boulevard may be in full swing, but the speedy transformation hasn't helped the Gateway condo building up near 114th Street, which has been stalled at various stages since 2007. But the Gateway is back on track (fingers crossed!), albeit with major compromises?such as developer Steve Gaetano locking up additional financing that will wipe out any profits from future sales. The Wall Street Journal traces the saga of the Gateway and its sister building on West 112th Street, The Lore, which was halted at 90% completion:

Problems began in November 2008, after Washington Mutual, the Seattle-based bank that a year before had given Gaetano two construction loans totaling $21 million to build the projects, collapsed and was sold by the Federal Deposit Insurance Corp. to J.P. Morgan Chase & Co. The project's new loan officer at J.P. Morgan decided to stop funding the loan because the developer was in technical default, according to Mr. Gaetano. A J.P. Morgan spokesman declined to comment. Mr. Gaetano invested $4 million of his own cash into the Lore and $5 million into the Gateway in order to keep construction going, he says. But he soon ran out of money and mothballed both projects, he says.

Now Gaetano has locked up an additional $12.5 million loan with a much higher interest rate to finish the Gateway, and J.P. Morgan has agreed to extend the $13 million loan on The Lore, which had presold 65% of its 36 units before all the trouble began. Any buyers actually stick around? Speak up, Gold Coasters.
· Getting Deals Done, at a Cost [WSJ]