Wrightwood sues McLean over Atlanta loan
(Crain's) — Real estate investment firm Wrightwood Capital LLC has sued Chicago developer Daniel McLean, seeking to recover a $5.75-million personal guaranty on an allegedly past-due loan on an Atlanta apartment complex.
Dan McLean
In another sign of how the global financial crisis is hitting commercial real estate, a venture co-owned by Mr. McLean was unable to refinance a $24-million loan on the 342-unit complex when it came due Feb. 1, according to a lawsuit filed Oct. 17 by a Wrightwood affiliate in Cook County Circuit Court. But the litigation is also another reminder to lenders like Wrightwood that the dangers of high-leverage loans are magnified when lending markets seize up.
To intensify the pressure on Mr. McLean, the Wrightwood affiliate filed a second lawsuit seeking to foreclose on a Streeterville penthouse that Chicago-based Wrightwood says is the developer's "personal residence."
After the loan on the Atlanta apartment complex matured, Mr. McLean obtained several short-term extensions that pushed back the due date to Jan. 5, 2009, the first complaint says. Wrightwood sued after interest payments totaling $429,100 that were due Sept. 1 and Oct. 1 were not paid, that complaint alleges.
In June, to obtain one of the extensions, Mr. McLean agreed to give Wrightwood a second mortgage on the Streeterville condominium unit as security for the guaranty payment, the complaint alleges. On Oct. 30, the Wrightwood affiliate filed a foreclosure lawsuit on the unit as part of its bid to collect the $5.75 million.
Through a spokesman, Mr. McLean, president and CEO of MCL Cos., declined to comment. The developer is likely to be working on deal to refinance the Atlanta property and pay off Wrightwood.
Attorney Eric Macey, a partner in Chicago-based litigation law firm Novack & Macey LLP, which represents the Wrightwood affiliate, said there have been no negotiations with Mr. McLean since the first lawsuit was filed.
The Wrightwood loan financed the $25-million purchase in July 2006 of the Forest Hills at Vinings apartment complex in southeast Atlanta. Whether Mr. McLean's plan was to convert the complex, at 3900 Paces Walk S.E., into condos could not be determined.
The loan accounted for nearly 88% of the total acquisition cost of nearly $27.4 million, which also included fees and a $1.1-million interest reserve, according to a copy of the budget. The buyer was a venture controlled by Mr. McLean that is also owned by a local Atlanta developer.
Wrightwood, to protect itself in the event of a default, required that Mr. McLean personally guarantee 25% of the $24-million loan, or $5.75 million.
