Prominent Providence building on auction block
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By Paul Edward Parker PROVIDENCE, R.I. -- In another sign that the economy remains sluggish, a prominent downtown building is scheduled to be sold at a foreclosure auction on Tuesday. Gateway Center -- perhaps known better as the American Express Building across from the State House and next to the train station -- has been vacant since last fall, when Fidelity Investments finished moving its workers from Providence into offices at its Smithfield campus. "They've been trying to rent it and haven't been successful in finding a tenant since Fidelity left," said Todd D. Turcotte, vice president of Capital Properties. In a somewhat complicated financial arrangement, Capital Properties owns the land on which Gateway Center was built. Since 2006, RI Gateway Properties, a Delaware company with headquarters in Southport, Conn., has owned the building and leased the land from Capital Properties. When RI Gateway Properties acquired the lease, it borrowed $18.8 million from Wachovia Bank and secured the loan with a mortgage on the property rights it owned under the lease, according to Providence land records. The foreclosure auction scheduled for Tuesday is based on RI Gateway Properties' lease, not Capital Properties' ownership of the land. Legally, Capital Properties is not a party to the foreclosure proceeding. For nearly two years ending on 2006, the Rhode Island state pension system owned the lease on the building after the prior owner defaulted on its mortgage, which the pension system held. After becoming embroiled in U.S. Bankruptcy Court proceedings, the pension system sold the lease to RI Gateway Properties. The building was built in 1989, financed by $23 million in bonds issued by the state. The pension system bought the bonds and negotiated a new mortgage with the building's developer, Gateway Eight, of Boston, in 1999. The Providence market currently has a glut of Class A office space -- the category in which Gateway Center falls -- making it hard to attract tenants. Additionally, the building is configured for a single tenant, and few businesses are looking for offices as large as Gateway Center, which has 135,110 square feet of floor space. The foreclosure auction will be held at Gateway Center at 10 a.m. Tuesday. The auction is being conducted by Irving Shechtman & Co. 
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