The local developer of The Precedent Office Park, Mount Comfort Commercial Park and several upscale residential communities in Hamilton and Johnson counties is winding down operations in an out-of-court restructuring.
The Precedent Cos. has turned over hundreds of residential lots to lenders, shrunk its staff to about 25 employees from a peak of more than 100, and is selling many of its commercial properties to a newly formed entity owned by the same principals as Precedent.
The remaining operations of the company—which traces its roots to Howard Peterson’s development of the massive Castleton Commercial Park in the 1960s—will fall under a rebranded umbrella know as The Peterson Co.
The Peterson Co. itself will focus on construction, property maintenance and property management, while a new subsidiary called Peterson Property Group will own commercial properties and handle potential future development, said Larry Siegler, the company’s chief operating officer.
“We had a lot of different companies and a lot of different assets and we’re about 75-percent finished with a very orderly wind-down of The Precedent Cos.,” Siegler said. “We have really started up and re-emerged as The Peterson Co. from a services point of view.”
Precedent is the latest once-mighty Indianapolis developer to be dragged down by the sharp decline in commercial real estate values and collapse of the housing market. Almost every major privately held commercial real estate company has lost properties to lenders since the financial crisis began in 2008.
Eventually, Precedent will cease to exist, but that process could take years, Siegler said. The company still has about 30 acres to sell in its Precedent South industrial park just east of Interstate 65 along Main Street in Greenwood, and more than 100 acres at the Mount Comfort Commercial Park.
Among the residential developments Precedent has returned to lenders: Fox Hollow at Geist, Slater Farms in Noblesville, and Viking Meadows in Westfield. The company has begun selling lots in bulk at Timberstone in Fishers, and is looking for buyers interested in taking over University Park and Woodfield in Greenwood.
Precedent has avoided a bankruptcy filing and has managed to exit most of its properties without being dragged into court. One exception involves the Pines of Greenwood project, in which Precedent partnered with locally based Arbor Investments.
Arbor claims in a Hamilton County lawsuit that Precedent “misappropriated and stole” $788,000 allocated for the project. Siegler said the company is “working through” its issues with Arbor.
Precedent has been winding down various parts of its business for about three years, Siegler said. The company laid off 50 employees in 2008 as it closed a dirt-moving operation that supported its developments.
The most recent round of layoffs, about 10 people, came this year as Precedent closed its residential development unit. (The company over the years had developed more than 5,000 residential lots.)
The Peterson Co. has acquired three Precedent buildings in Mount Comfort and one in Greenwood at prices above the loan balances. Another building in Mount Comfort is scheduled for closing soon.
The new company has contracts to perform maintenance on more than 50 buildings.
The recession and steep downturn in residential and commercial development were factors in the changes at Precedent, but not the only ones. The company’s construction operation had struggled to bid on work for companies with “competing” properties, Siegler said. Another factor: “The Precedent” brand has stuck with office parks that aren’t affiliated with the local company anymore, creating some market confusion.
What would become The Precedent Cos. began in the 1960s, when Wisconsin native and contractor Howard Peterson began building the Castleton Commercial Park on East 82nd Street between interstates 465 and 69.
Peterson sold the park in 1985 for $73 million, then set about to build The Precedent Office Park just north of Keystone at the Crossing. He sold the 190-acre, 19-building park for an estimated $95 million in 1998. It sold again in 2005, to an affiliate of locally based HDG Mansur, for $143 million.
The newly formed company will have the same chief executive as Precedent, Tim Peterson, and the same chief financial officer, Don Piggush. Tim’s brother Bart, an executive at Eli Lilly and Co. and former Indianapolis mayor, had been a partner in Precedent before he entered politics and remains part-owner of some properties (but not the construction and property management operation).
Several local real estate firms have bulked up their property management divisions as leasing and investment commissions shriveled.
Because of its modest size, The Peterson Co. likely won’t compete for large portfolios of properties—the business CB Richard Ellis, Jones Lang LaSalle, Cassidy Turley and other firms fight over—but it should stack up well against competitors looking to manage smaller and owner-occupied buildings, said Darrell Pike, who worked in leasing at Precedent for 38 years.
Pike left about a year ago to start his own firm focused mainly on tenant representation for office clients, since Precedent had fewer properties available for lease.
“It was bad times for a lot of folks—everything just came to a halt,” Pike said. “You can’t go out now and build buildings with the lending the way it is. There aren’t a lot of banks willing to partner. It’s a different world.”
Out-of-court reorganizations like the one at Precedent are becoming more common since the bankruptcy process is so expensive and cumbersome, said David Theising, a partner at locally based Harrison Moberly LLP and chairman of the firm’s bankruptcy practice.
There are several ways for companies to restructure without filing for bankruptcy, including an influx of capital, reallocation of assets, or a “friendly foreclosure” structured similarly to a short sale, said Theising, who is not involved in the Precedent case.
“Depending on the nature and number of creditors, it can be a lot more efficient and less expensive to deal with them directly out of court than through a formal bankruptcy process,” he said.•