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Order moves portfolio closer to auction sale

A court decision has moved beleaguered Webster real estate investor Jason Palmer’s Encore Property Management of New York LLC a step closer to going on the auction block.

The Encore Property Management portfolio is involved in a $52.8 million foreclosure action filed in June by Wells Fargo Bank N.A., which complained that Palmer had failed to make payments on a $49.1 million loan since the previous November.

The portfolio, which has been under a receiver’s management since June, includes the Blossom Business Center on University Avenue, the Imperial Manor apartments in Greece, commercial buildings on Mt. Read Boulevard and apartment buildings on Alexander Street.

After a hearing last week on Wells Fargo’s motion seeking summary judgment and foreclosure, state Supreme Court Justice Kenneth Fisher signed an order appointing Rochester lawyer James Nobles to referee a sale.

Nobles is to compute amounts due on several mortgages that were combined to make up the $49.1 million loan Wells Fargo alleges to be in default and to determine whether the 13-parcel group of properties should be sold individually.

Court records show no defense offered by Palmer at the hearing Nov. 18. Earlier this year, the investor submitted an answer to the foreclosure complaint, asserting that the mortgage holder had triggered the default by improperly calculating escrow payments.

Palmer’s attorney at the time, Robert Gitlin of Rochester, subsequently withdrew from the case, stating in an affidavit that Palmer, who faced a contempt citation alleging that he had failed to cooperate with the receiver, had not supplied supporting documents, including a power of attorney showing that he had legal control of Encore Property Management. Fisher later found Palmer in contempt.

The recent Encore Property Management ruling comes a week after a different lender, holding a $16.3 million mortgage on properties owned by a Palmer-controlled real estate firm called Titan Properties Two of Rochester LLC, started foreclosure proceedings against the Titan portfolio.

Fisher, who also is presiding over that action, put the Titan group, which includes the East Avenue Commons apartments, into a separate receivership.

The holder of that mortgage, a Miami-based company affiliated with Blackacre Institutional Capital Management LLP, started foreclosure proceedings at the urging of Rochester officials.

City officials had long stated concerns about Palmer’s apparent inability to address problems at the 267-unit East Avenue Commons, in the city’s East End neighborhood. Court records show no defense so far in that case from Palmer, who could not be reached for comment this week.

Palmer started assembling the Encore Property Management portfolio in 2004, eventually consolidating separate mortgage loans in amounts ranging from less than $2 million to more than $20 million into a single $49.1 million loan.

Originally borrowed from several separate lenders, the loans were sliced into mortgage-backed securities. Court documents identify Wells Fargo, the plaintiff in the June foreclosure action, as the trustee for Credit Suisse First Boston Mortgage Corp., commercial mortgage pass-through certificates series 2007-C5.

The foreclosure complaint’s $52.8 million total included interest charges then totaling more than $3 million. The loan originally carried a rate of 6.31 percent but shot up in May to a default rate of 11.31 percent, adding $15,444.70 a day in new costs, the complaint states.

Palmer also owns other Rochester-area commercial buildings, including the former Rochester Community Savings Bank headquarters on Franklin Street, an elaborately decorated 1929 structure that the Landmark Society of Western New York calls "an outstanding example of 20th-century Byzantine architecture (exemplifying) the temple of commerce theme."

11/27/09 (c) 2009 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail rbj@rbj.net.



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