PORTLAND – The city’s first private housing development for college students is at risk of foreclosure, less than two years after it opened.

The developers of Bayside Village have defaulted on the mortgage for the 100-unit complex at 132 Marginal Way, according to a lawsuit filed in U.S. District Court.

Officials at KeyBank sued last week, and have asked a judge to give control of the property to a local management firm. The bank has not started foreclosure proceedings.

In court documents, KeyBank officials say Bayside Village is 60 percent vacant, and that the developers have failed to make loan payments.

“Defendants are unable to properly fund, manage and care for the property,” Natalie Herald, vice president of KeyBank National Association, wrote in an affidavit filed Wednesday. “It is critical that the property have stable management over the upcoming months during the period that students and their parents will be making decisions about housing for the upcoming school year.”

Bayside Village owes the bank the full $20.82 million that it borrowed in July 2007, plus more than $30,000 in interest, the lawsuit alleges. The bank wants Morris Fisher, president of Boulos Property Management, to be appointed as receiver for the property.

Herald said in court documents that the bank may seek to foreclose on the property in the coming months. In the meantime, Fisher should be authorized to take financial control of Bayside Village, Herald argued, to protect the property’s value. Bayside Village has until June 23 to respond to the bank’s motion.

Joseph Cloutier of Rockport, the lead developer and manager of Bayside Village Student Housing LLC, did not return a call seeking comment Thursday. Attempts to reach John Kaminski, a Portland lawyer who represents Cloutier’s company, also were unsuccessful.

When Bayside Village was being built in 2007, Cloutier billed the project as an innovative option for college students in Greater Portland. The idea was to provide an upgrade from dormitories, but retain the college feel with features such as Wi-Fi Internet access and resident advisers.

The building, with its multicolored facade and prominent location off Interstate 295, was seen as an important element in the transition of Bayside from an industrial area to a mix of residential and commercial properties.

“Bayside Village is the first and only off-campus community designed specifically for students in Portland,” reads the website for Bayside Village. “You can have the privacy and lifestyle you deserve in a student community that is conducive to achieving academic success.”

But the opening of the complex in the fall of 2008 was marred by the rowdy behavior of some tenants. Police responded to nearly 60 calls for service at the building in a two-month period, with many of the complaints for loud parties and minors drinking. That situation calmed down after the management evicted some tenants and changed some of the rules governing visitors.

Each unit at Bayside Village has four bedrooms and two bathrooms, a small living room and a kitchen with a table and chairs. The monthly lease includes furnishings, Internet access, basic cable television and all utilities. The lease was advertised as $725 per bedroom when the property opened. According to the website for Bayside Village, that rate has been dropped to $575 per month.

Kevin Donoghue, the city councilor whose district includes Marginal Way, said he had heard that Bayside Village’s occupancy rate wasn’t good.

Donoghue said he had doubted that the venture would succeed, because of the lease prices and the availability of apartments elsewhere.

He was not on the council when it approved the project in 2006. He is concerned that if the student housing experiment fails, options for other uses of the building will be limited.

“The unit type is very inflexible; they are essentially four-room dorm quads. To convert them into normal apartments would take significant work,” Donoghue said. “How do you repurpose the building in a way that it does not become a drag on Marginal Way? How do you finance a conversion out there? There are no easy answers.”

According to court documents, Bayside Village has not paid property taxes for the fiscal year that ends June 30. It owes $198,367 for the year. The company would have been responsible for $318,367, but it receives a $120,000 annual tax break from the city.

Gary Wood, the city attorney, said the first step for Portland is to recoup the overdue taxes, from Bayside Village or the bank.

 

Staff Writer Trevor Maxwell can be contacted at 791-6451 or at:

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