Connecticut Lender Pays $1.7M to Keep Ocean Club Property

-By Seth Daniel

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A foreclosure auction of prime Revere Beach property ended up where it started last Thursday morning – back in the hands of a national construction financing company.

The vacant land at 526 Boulevard – directly across from the Beach – was the former site of the now-defunct Ocean Club project. The former developer of that project, Steve Fustolo, still has dreams of bringing back the Ocean Club if times get better, but last week, his former pre-construction lender (Patriot Group LLC) outbid all other interested parties, paying $1.7 million to retain the property.

Several e-mails to the Patriot Group LLC, based in Darien, CT, were not returned.

One representative of the company sent and e-mail to the Journal saying he could not discuss the matter.

“We appreciate your interest, but The Patriot Group is a private entity and does not comment on its activities to non-shareholders,” wrote Bill Cargill, who works in the real estate division of the company.

An attorney at the auction representing Patriot, Barry Braunstein, said he was not authorized to speak for his client.

So, it is not certain why Patriot wants to retain the property and what it is that a national construction finance company would want to do with it.

Patriot has taken possession of other failed projects, including a project in downtown Los Angeles in 2009.

The auction came about as Patriot Group had foreclosed on a pre-construction loan that was given to Fustolo’s company, Revere Beach Holdings, in 2007. The amount of the loan was in excess of $13 million.

A previous foreclosure auction last year ended up in default, which was why another auction had to be held last week.

Many large-scale developers like Fustolo often seek pre-construction (or what is known as mezzanine) financing in order to get started on a project prior to securing a major construction loan from a larger lender.

The auction last week was a veritable who’s who in the Revere Beach development world. Gathered on the sidewalk in front of the former project site – where only large, unused drain pipes sit amongst weeds and rocks – was Waterfront Square developer Joe DiGangi, Beach attorney Harry Pass, Riverside developer Jay Epsimos, Surf Site developer Charlie Lightbody with his new partner, Ray Nickerson (of Casa Lucia), and Beach realtor Jodi DiLorenzo – amongst a host of others.

It appeared as if one of those developers might wrestle the property away from the former Ocean Club and its lenders – perhaps with an eye to do something new with the property in the near future.

Auctioneer Jeff Mann of Sapperstein Auctions conducted the proceedings, starting the bidding at $500,000.

Bidders were slow to start, but once they did, several in the crowd showed a serious interest.

Offers quickly eclipsed the $1 million plateau and Patriot Group topped it off with the $1.7 million bid. Lightbody and Nickerson appeared to think hard on a counteroffer, but chose to stand pat.

“Going three times,” said Mann. “No last minute offers? Ok, sold to the mortgage holder.”

Patriot Group will now hold ownership of the prime Revere Beach property, and virtually everyone agrees that it is a complete mystery as to why they would want to own the property for such a large sale price in such a miserable construction climate.

“It’s a great piece of land and someday it will be a valuable piece of land,” said Mayor Tom Ambrosino. “At $1.7 million, it might turn out to be a bargain some day.”