Three local strip centers owned by longtime Indianapolis developer Centre Properties are the target of a $43 million foreclosure lawsuit brought by the real estate firm’s lender.
Boston-based U.S. Bank filed the complaint in Marion Superior Court this month and is asking a judge to appoint a receiver to manage the properties until they are sold.
The properties involved are the 130,000-square-foot Centre North Shops at 8510 E. 96th St. in Fishers, the 17,900-square-foot Southport Shops at 7225 U.S. 31 South, and the 13,300-square-foot German Church Shops at 10935 E. Washington St.
U.S. Bank said it lent Centre Properties’ subsidiary Centre East LLC $36 million in December 2005. As of Nov. 1, the balance on the note totaled $43.3 million, including principal, interest and late fees, the suit said.
It’s not clear whether Centre used loan proceeds for projects other than the three strip centers named in the suit. It’s also not clear from the filing how much Centre East has paid in principal. Calls to Centre Properties’ office at 9333 N. Meridian St. were not returned.
Tenants at German Church Shops include a Cardinal Fitness gym spared from a company downsizing announced Nov. 2 that included the closing of six Indianapolis-area locations.
Centre North Shops’ tenants include a Panera Bread eatery and a Beauty Brands Salon Super Store. Among the stores in Southport Shops are Malibu Tan, Cartridge World and Once Upon A Child.
Centre Properties, founded in 1985 by Craig W. Johnson and James F. Singleton, has developed more than 2.2 million square feet of retail space in the Indianapolis area, according to the company’s website.
High-profile tenants at its properties include such national retailers as Walmart, Starbucks and Bed Bath & Beyond.
In 2008, it developed Centre West, a shopping center at I-65 and Lafayette Road that includes a Best Buy and Walmart Supercenter.
The company is among a long list of local retail developers hit with foreclosure lawsuits in the aftermath of the 2008 financial crisis.
“In the climate we’re in, nobody is immune to it,” said Eric Hillenbrand, an independent commercial real estate broker. “All of this has to be worked through the system, but it’s going to be sloppy for a while.”
Also under siege is The Broadbent Co., a strip center specialist whose lenders are attempting to foreclose on its downtown headquarters as part of a $25 million lawsuit.
The Huntington National Bank and PNC sued in July, charging Broadbent defaulted on various construction loans and mortgages dating from February 2007.
Broadbent also hasn’t paid four court judgments totaling $17.3 million that PNC or Huntington have won against the company. The judgments involved project loans the banks made for strip developments.
Other privately held retail real estate firms in Indiana and across the country are under similar strain.
“The commercial real estate sector is the most active sector in the insolvency practice locally right now,” said George Hopper, a local bankruptcy attorney representing Huntington.
In August, Merrill Lynch Mortgage Trust filed a foreclosure lawsuit against Greenwood strip developer Presnell Cos. alleging it’s owed $16.8 million.
The properties involved in that suit include County Line Corners at 1285 N. State Road 135 in Greenwood, The Center at Shiloh Crossing at 10224 U.S. 36 in Avon, and Greensburg Crossing Shopping Center in Greensburg.
Hillenbrand said developers are being forced to reduce rents to fill vacancies, which, in turn, reduces the value of the real estate that serves as collateral on the loans.
“It makes it difficult for landlords to survive,” he said.•