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Bankruptcy Filed by Developer of W Hotel & Residences in
Boston Puts $10.5 million City Loan at Risk

By Donna Goodison, Boston HeraldMcClatchy-Tribune Regional News

June 8, 2010 --Three properties that the bankrupt developer of Boston's W Hotel & Residences put up for collateral to land a $10.5 million city loan also have gone belly up.

Boston's generous investment -- doled out when even big banks wouldn't help SW Boston Hotel Venture LLC finish the $234 million project -- is now at even greater risk.

A subsidiary of Sawyer Enterprises, SW Boston filed for bankruptcy protection last month with $220.5 million in liabilities so it could attempt to restructure $180.8 million in debt owed to Prudential Insurance Co. of America.

Companies tied to Sawyer filed Chapter 11 bankruptcy petitions on Friday for the additional properties to stave off foreclosures threatened by Prudential, according to Evelyn Friedman, director of the city's Department of Neighborhood Development. Prudential holds the first mortgages on the properties, which have an appraised value of $6.88 million.

The companies filed Chapter 11 "to become part of the comprehensive restructuring of the Prudential indebtedness," said Harold Murphy, SW Boston's attorney.

"We're really confident that no one is going to lose money in this process," Murphy said. "This is the best way to protect the city. Otherwise the senior creditor (Prudential) could potentially foreclose out the junior creditor (the city)."

There's no guarantee that SW Boston will be able to restructure its Prudential debt and emerge from bankruptcy, however. If bankruptcy sales should occur, Prudential, as the senior secured creditor, is first in line to recoup its debt ahead of the city, which holds the second mortgages on the properties. They include a multi-family building at 25-27 Pinckney St., a commercial building and parking lot on Arlington Street.

But Friedman believes the city is "well-protected."

"We're watching it closely, but we're confident that this will be worked out, and the city will be in a good position," Friedman said.

The city also has $4 million in cash collateral against the loan and a second mortgage on the W development. SW Boston also put up two other properties valued at $18.95 million combined as collateral.


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