Real Estate & Retail

MSA condos co-developer calls it quits: CTE 2nd partner to abandon $140M project; remaining firms expect new designs in June

May 30, 2005

With a deadline looming for a redesign of Market Square Towers, another of the project's developers has pulled out and has filed a claim on the property for $3.2 million it says it's owed by Market Square Partners.

Chicago-based Consoer Townsend Envirodyne Engineering Inc. filed the lien April 8 to secure its claim on money the company said it spent on design and engineering services and other preliminary project work.

CTE, whose representatives once served as the public face of the MSA redevelopment, is no longer involved, the company and Market Square Partners said.

CTE follows Brookline, Mass.-based developer Diamond & Co. in leaving the $140 million multi-use project, which includes 175,000 square feet of retail space and twin 29-story condo towers. Still involved in Market Square Partners are Columbus, Ohio-based Smoot Construction Co. and Crossroads Development, a local firm headed by former Deputy Mayor William Shrewsberry. The group late last year hired Chicagobased Mesa Development LLC to provide its expertise on a fee basis for a redesign of the project's 450-unit condominium component.

Touted in Market Square Partners' original bid as much of the team's financial firepower, CTE was removed as a limited guarantor of the redevelopment this spring, when the city and Market Square Partners amended their project agreement to extend construction deadlines.

"Market Square Partners con- vinced the city we could provide those guarantees in the agreement," said Mark Cain, development manager of the MSA project and president of Smoot Construction's Washington, D.C., office.

CTE left the project, Cain said, because the company "really looked at the project differently than us as some of their corporate folks got involved."

The MSA developers and CTE are in discussions to settle the $3.2 million, both companies said. Cain said the developers are in the process of resolving exactly how much is owed to CTE and are meeting with its officials on a regular basis.

The money represents preconstruction costs CTE paid on behalf of the project. Cain said he didn't have a recent figure available for the total amount Market Square Partners has spent to date, but said it is much more than the money CTE says it is owed.

CTE filed the lien "to protect our legal position," said company spokeswoman Alexandra Spencer.

Generally speaking, the presence of a mechanic's lien "doesn't necessarily affect the viability of a development," said David Jurkiewicz, a partner at local law firm Bose McKinney & Evans LLP. Owners of a property on which a lien has been filed have several remedies to obtain financing on an encumbered property, including posting a bond to cover the amount of the lien or forcing the lien filer to prove its claims, he said.

In the case of Market Square, the lien "won't impact our progress," Cain said, adding he expects the matter to be resolved quickly.

The property covered by the lien includes the fouracre parcel Market Square Arena sat on, plus the former Bank One operations center and parking garage. The city still owns the former MSA site. Market Square Partners acquired the Bank One properties in 2004.

The lien was filed against Market Square Partners and related entities and against the city's Department of Metropolitan Development.

The city is being apprised of progress on the MSA project but is not actively involved in the settlement discussions between CTE and Market Square Partners, said city spokesman Justin Ohlemiller.

Market Square Partners plans to unveil new designs for the Residences at Market Square and the Shoppes at Market Square next month, Cain said. The developers plan to meet with the city in mid-June to brief them on the changes, then unveil the plans to the public shortly thereafter.

Construction on the first $70 million phase, including 225 condos, was to have begun last fall, but developers asked for more time to tweak the design following slow presales of the condos, marketed at prices ranging from $180,000 to $1 million. As the construction deadline approached, the firm had sold only 41 units, far short of the 113 required to obtain construction financing and begin the project.

Those 41 buyers will be contacted first to review the floor plan changes and will be given the first opportunity to buy units, Cain said. Locally based Flock Real Estate Group will continue to market the condos. A new public marketing campaign will be unveiled by the end of July, he said. Developers had been working with locally based Hetrick Communications, but will work with Bloomington-based Hirons & Co. going forward.

The outside appearance of the project will change little from previous designs, which call for two 29-story towers, two midrise buildings and retail space, Cain said. There will be more parking and additional elements to the project, but Cain declined to elaborate until the city is briefed on the changes in June.
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