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Banks suing Broadbent, pushing one strip center into bankruptcy

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Locally based Broadbent Co.’s legal battles with lenders have escalated, pushing one of its 34 strip malls into bankruptcy and prompting Huntington National Bank and PNC Bank to sue to collect principal owed on loans tied to four more.

The suits collectively involve more than $10 million lenders say is owed by the 38-year-old firm, long one of the city’s biggest developers of shopping centers.

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Click here for details on troubled Broadbent properties.

The legal spats come at a time the recession has sapped demand for shopping center space and reduced the value of the underlying real estate. Listings on Broadbent’s Web site show one-fifth of the company’s 3.6-million-square-foot portfolio as immediately available for lease. The problem is most acute at five strip malls that are less than half full.

Broadbent’s Wadsworth Crossing in Westminster, Colo., for example, is empty, and its Fleming Island Retail Shoppes outside Jacksonville, Fla., has 50-percent occupancy. Locally, occupancy is 31 percent at Washington Place, 34 percent at Plainfield Village, and 41 percent at Clearwater Crossing.

 

Broadbent Co. President George Broadbent

The firm, originally known as Skinner & Broadbent, prospered for years by snapping up land and building shopping centers near regional malls. The 120-employee company has developed self-storage facilities and strip malls in six states. Twenty-six of its centers are in the Indianapolis area.

The court fights began in August, when Broadbent sued Huntington and PNC, charging they were wrongly attempting to restrict its access to a $50 million credit line.

Broadbent claims the banks had refused to advance $3.7 million it was entitled to for construction of Fleming Island and the renovation of the Greenwood Place strip center at U.S. 31 and Stop 11 Road.

The banks countersued in November, seeking to collect $1.1 million in principal, interest and late fees they allege Broadbent owes on the 362,136-square-foot Greenwood Place.

On Jan. 5, Huntington filed a separate suit against Broadbent over $1 million in principal, interest and fees it claims the developer owes on a $4 million loan it brokered in 2001 and later refinanced twice.

That loan is tied to two Broadbent projects: the 130,181-square-foot Clearwater Crossing near Keystone at the Crossing, and the 103,934-square-foot North Willow Commons at West 86th Street and Ditch Road.

On Jan. 20, a Broadbent subsidiary that owns Greenwood Point, a 135,865-square-foot strip mall across the street from Greenwood Place, filed for Chapter 11 bankruptcy protection. The petition lists assets of $3.6 million and liabilities of $7.2 million.

Boston-based CWCapital Asset Management LLC, which holds the property’s $6.9 million mortgage, in January sued for foreclosure and asked the court to appoint a receiver. The Broadbent unit declared bankruptcy in response.

Early this month, PNC filed a fresh suit against Broadbent, alleging the company owes $1.2 million on a 2007 loan tied to its Coliseum Shoppes strip mall in Fort Wayne.

Broadbent declined IBJ’s request to comment for this story, as did its attorney, Erick Ponader of Taft Stettinius and Hollister. Both banks also declined to comment.

Broadbent likely filed its original suit against the banks pre-emptively, said Henry Efroymson, an Ice Miller LLP partner who chairs the firm’s creditors rights and bankruptcy practice group. Efroymson is not affiliated with Broadbent or its lenders.

“Litigators will often say it’s important to be the first to sue, rather than wait and put up defenses that can be seen as reactionary and desperate,” Efroymson said. “Instead, Broadbent sues to give an appearance of legitimacy of its claims against the banks. It’s probably a smart litigation approach.”

Efroymson said Broadbent’s problems reflect a foreboding trend. Depreciating commercial real estate prices and the flight of tenants to centers with lower rents are spawning battles between developers and lenders nationally.

During the next 18 months, Efroymson said, approximately $2 trillion in U.S. commercial real estate loans will come due for renewal. Many of the borrowers will end up in the same position Broadbent is in, with banks believing commercial properties are worth less than they were appraised before the recession.

Developers and other landlords will struggle, as Broadbent has, to refinance with their current lenders or secure new loans elsewhere, leading to lawsuits and bankruptcies.

“There are hundreds of companies like Broadbent across the country that are facing the exact same situation,” Efroymson said. “The economy looks like it’s starting to improve. But there’s this huge lingering cloud on the horizon, the gigantic amount and number of commercial real estate loans coming due. It’s kind of a perfect storm.”

Even low occupancy rates may not show the full extent of developers’ woes, said Ken Newcomb, immediate past president of the Indiana Commercial Board of Realtors. He said that when leases come up for renewal, most landlords have to give major rent concessions or watch tenants move elsewhere.

He said it’s a shame to see Broadbent’s borrowing woes escalate into the hostility of suits and countersuits. He noted the company has been a strong corporate citizen for decades.

“I think that lenders ought to be negotiating and working with developers to restructure, instead of putting them out of business,” Newcomb said.

“Nothing good can come out of that type of lender/developer client relationship.”•

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  • Pall Mall
    aren't malls slowly going the way of the phone booth?
  • More to Come
    Four years ago, if a strip center appraised for $5M, the bank loaned $4M on it. Those loans mature in 5 years with a payoff that will be in the $3.7M range. The problem is, that same center, even if it has managed to maintain its tenants, now appraises for $3M - $3.5M. Something's got to give. The bankers and developers all just seem to be kicking a can down the road, waiting for values to come back, but that's not going to happen any time soon. Scary.
  • Tennant
    I am a lessee with Broadbent. I have 3yrs left on the lease. Broadbent cannot renegotiate my lease to help my small business unless the Lenders work with them. The trickle down effect is what is going to destroy what is left of our fledging economy. We all must work together to rebuild our community.

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