IBJNews

Lauth Group leads slide in commercial real estate

Back to TopCommentsE-mailPrintBookmark and Share
Year In Review

The outlook for commercial real estate development continued to worsen in 2009, as one major name faltered and other companies scrambled to redesign their business models and capitalize on the carnage.

Each of the city’s major development firms shed employees as demand and financing for speculative projects disappeared. Simon Property Group Inc. CEO David Simon went so far as to say, in a conference call with Wall Street analysts, that new retail developments are “dead for a decade.”

The most prominent local victim of the downturn was Lauth Group Inc., the once-mighty developer of more than $3 billion in projects. The company filed several subsidiaries for Chapter 11 bankruptcy protection in May. Company officials blamed the impatience of a major lender, Chicago-based Inland American Real Estate Trust, for the filing.

But the company, which grew rapidly to keep pace with an insatiable demand for new office, industrial and retail developments, simply could not go on once the projects dried up. Lauth started 2008 with about 450 employees but had fewer than 50 late in 2009, as the company’s principals sought to renegotiate with lenders and emerge from bankruptcy protection as a mostly property-management-oriented company.

Few commercial property owners had any equity left in their buildings, let alone enough to meet the higher thresholds banks were demanding. And funding from commercial mortgage-backed securities—a $1 trillion funding source just three years ago—had disappeared entirely. With so many commercial properties under water, real estate players in 2009 began positioning themselves to take advantage of what they saw as an inevitable shakeout.

Those seemingly best positioned to take advantage of the downturn included real estate investment trusts such as Simon that had access to public capital. Simon in December agreed to acquire Prime Outlets in a $2.3 billion deal and was setting itself up for a possible bid for its largest U.S. competitor, Chicago-based General Growth Properties.

Meanwhile, smaller local development firms had to find other ways to bring in revenue as they waited out the market. Condo and retail developer Kosene & Kosene, for one, opened a residential brokerage operation.•

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. From the story: "The city of Indianapolis also will consider tax incentives and funding for infrastructure required for the project, according to IEDC." Why would the City need to consider additional tax incentives when Lowe's has already bought the land and reached an agreement with IEDC to bring the jobs? What that tells me is that the City has already pledged the incentives, unofficially, and they just haven't had time to push it through the MDC yet. Either way, subsidizing $10/hour jobs is going to do nothing toward furthering the Mayor's stated goal of attracting middle and upper-middle class residents to Marion County.

  2. Ron Spencer and the entire staff of Theater on the Square embraced IndyFringe when it came to Mass Ave in 2005. TOTS was not only a venue but Ron and his friends created, presented and appeared in shows which embraced the 'spirit of the fringe'. He's weathered all the storms and kept smiling ... bon voyage and thank you.

  3. Not sure how many sushi restaurants are enough, but there are three that I know of in various parts of downtown proper and all are pretty good.

  4. First off, it's "moron," not "moran." 2nd, YOU don't get to vote on someone else's rights and freedoms that are guaranteed by the US Constitution. That's why this is not a state's rights issue...putting something like this to vote by, well, people like you who are quite clearly intellectually challenged isn't necessary since the 14th amendment has already decided the issue. Which is why Indiana's effort is a wasted one and a waste of money...and will be overturned just like this has in every other state.

  5. Rick, how does granting theright to marry to people choosing to marry same-sex partners harm the lives of those who choose not to? I cannot for the life of me see any harm to people who choose not to marry someone of the same sex. We understand your choice to take the parts of the bible literally in your life. That is fine but why force your religious beliefs on others? I'm hoping the judges do the right thing and declare the ban unconstitutional so all citizens of Wisconsin and Indiana have the same marriage rights and that those who chose someone of the same sex do not have less rights than others.

ADVERTISEMENT