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Lauth affiliate reaches deal to exit bankruptcy

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A once-mighty Indianapolis-based developer laid low by the credit crisis has reached a deal that will allow an affiliate to exit bankruptcy and retain control of most of its properties.

Attorneys for an affiliate of Lauth Group Inc. on Wednesday filed details of a settlement with Chicago-based Inland American Real Estate Trust in U.S. District Court for the Southern District of Indiana.

The parties had been feuding for almost two years over Inland's 2007 investment of $228 million in dozens of Lauth properties. Lauth defaulted on its agreement to pay dividends to Inland in late 2008, and multiple Lauth subsidiaries—representing about 60 properties—filed for Chapter 11 bankruptcy reorganization in May 2009.

Under the deal, Lauth will turn over control of six properties with about 700,000 square feet, pay Inland $1 million and cooperate to ensure an orderly transition of books and records, court filings show.

The properties Lauth is ceding control of include its former headquarters in Meridian Corporate Plaza, a Class-A office complex just north of Interstate 465 between Meridian Street and College Avenue. Other properties are in Illinois, South Carolina and Florida.

Meantime, a Lauth affiliate called Lauth Investment Properties LLC will retain 37 properties with a total of 5.1 million square feet of space, along with 20 development parcels with more than 1,000 total acres.

The parties reached the agreement with the help of a special mediator, achieving a result "in the best interest of the debtors and their estates," the filing says.

"Such a result greatly enhances the prospects for success in these Chapter 11 cases, reduces the overall administrative costs, thereby preserving the value of the debtors' estates," the filing says. "Consequently, if the settlement, which has been negotiated over the course of several months, is not approved, the parties likely will continue to litigate for the foreseeable future."

The court is expected to formally approve the settlement later this month, paving the way for the Lauth affiliate to exit bankruptcy.

"We are very pleased with the terms of the settlement and we are glad to finally put this process behind us," CEO Bob Lauth said in a prepared statement. "We can now focus 100 percent of our time on maximizing the value of this large portfolio of 'Class A' properties and providing exceptional value to our clients."

Lauth’s troubles began in early 2008 as demand dried up for the office, industrial and retail developments that had fueled its rapid growth. The company doubled its revenue from 2004 to 2005, then doubled it again from 2005 to 2006. During the same period, the value of Lauth’s project lineup jumped from $143 million to $592 million.

The company started 2008 with about 450 employees, but layoffs shrunk the staff to fewer than 40 in April.

Lauth Group still controls local office space at Intech Park and Clay Terrace, and its website lists 49,000 square feet of available space in the building it still controls at Meridian Corporate Park.

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  • Not a surprise
    Lauth always hired great attorneys and this case was no exception. Lauth was a great place to work and simply got too big too fast. It is hard to manage any development company that grows that quickly. Development fees and large commissions drove even the most ethical employees to produce (20% at best chance of leasing) letters of intent that were hopeless. You must be able to trust your people to make good decisions. Unfortunately, Lauth did just that and it was too late to turn the bus around once they realized that the buildings that they just built had no interest whatsoever from prospective tenants/buyers. I am confident that they have learned their lesson and hope that they can get back on their feet. Lauth brought a lot of jobs to Indy from their developments and their own business. It is certainly in everyone's best interests that they bounce back.
  • A Happy Ending
    Looks like Lauth will survive within its peer group...Hard times have hit all of the local players within this business sector, but, CRE is still the best hedge investment against the wave of inflation that it is about to hit this country!

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  1. Apologies for the wall of text. I promise I had this nicely formatted in paragraphs in Notepad before pasting here.

  2. I believe that is incorrect Sir, the people's tax-dollars are NOT paying for the companies investment. Without the tax-break the company would be paying an ADDITIONAL $11.1 million in taxes ON TOP of their $22.5 Million investment (Building + IT), for a total of $33.6M or a 50% tax rate. Also, the article does not specify what the total taxes were BEFORE the break. Usually such a corporate tax-break is a 'discount' not a 100% wavier of tax obligations. For sake of example lets say the original taxes added up to $30M over 10 years. $12.5M, New Building $10.0M, IT infrastructure $30.0M, Total Taxes (Example Number) == $52.5M ININ's Cost - $1.8M /10 years, Tax Break (Building) - $0.75M /10 years, Tax Break (IT Infrastructure) - $8.6M /2 years, Tax Breaks (against Hiring Commitment: 430 new jobs /2 years) == 11.5M Possible tax breaks. ININ TOTAL COST: $41M Even if you assume a 100% break, change the '30.0M' to '11.5M' and you can see the Company will be paying a minimum of $22.5, out-of-pocket for their capital-investment - NOT the tax-payers. Also note, much of this money is being spent locally in Indiana and it is creating 430 jobs in your city. I admit I'm a little unclear which tax-breaks are allocated to exactly which expenses. Clearly this is all oversimplified but I think we have both made our points! :) Sorry for the long post.

  3. Clearly, there is a lack of a basic understanding of economics. It is not up to the company to decide what to pay its workers. If companies were able to decide how much to pay their workers then why wouldn't they pay everyone minimum wage? Why choose to pay $10 or $14 when they could pay $7? The answer is that companies DO NOT decide how much to pay workers. It is the market that dictates what a worker is worth and how much they should get paid. If Lowe's chooses to pay a call center worker $7 an hour it will not be able to hire anyone for the job, because all those people will work for someone else paying the market rate of $10-$14 an hour. This forces Lowes to pay its workers that much. Not because it wants to pay them that much out of the goodness of their heart, but because it has to pay them that much in order to stay competitive and attract good workers.

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  5. It is sad to see these races not have a full attendance. The Indy Car races are so much more exciting than Nascar. It seems to me the commenters here are still a little upset with Tony George from a move he made 20 years ago. It was his decision to make, not yours. He lost his position over it. But I believe the problem in all pro sports is the escalating price of admission. In todays economy, people have to pay much more for food and gas. The average fan cannot attend many events anymore. It's gotten priced out of most peoples budgets.

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