Update 14 December 2010 – Somersett has responded to the deficiency judgment claim, and there are some wild accusations. Lawyers are liars, but the response includes conspiracy charges, some info about the Roundabout Bistro lease, claims that the foreclosure was illegal, and then claims that the foreclosure was delayed causing $1M in additional financial harm.
If you have been following the fate of Somersett Town Center, you know that Somersett Development LTD lost the property to foreclosure on September 28. The latest development is that foreclosing party has just filed a $9.3M deficiency judgment law suit in United States District Court to recover their investment and costs. Not only does the suit name Somersett Development LTD as defendant, but also Somersett LLC, Smith Realty Finance, and the principles as individuals. Sometimes “personal guarantees” get personal.
Though the amount of the requested judgment is not discounted for the current market value of the Town Center, the net amount is still in the $5M range. Will this be the straw that finally pushes Somersett into bankruptcy?
REreno 
geopower said:
Man, their lawyers must have put in some billable hours writing that monstrosity. It does seem questionable to take over responsibility for leasing, refuse leases, then claim the leases are undersubscribed. Still, I’m doubtful the project would have achieved the other requirement for releasing the individual guarantees, “a debt service coverage ratio of not less than 1.25:1.00,” given the amount of the initial debt rolled over into the final loan.
I don’t know much about commercial real estate, but if they had a 8.7M loan balance, even given residential terms, I don’t see how they could have a monthly payment below 46K (which roughly works with the 500K of interest BB&T claim after about 11 months of non-payment.) Given 32,111 square feet of space, that would require rents of $1.80/square foot/month to cover 125% of debt service. My impression is that’s way over the current market rate in Reno. How far off am I?