A prominent local homebuilder and commercial developer owes $12.8 million on two loans he took out to buy property on Indianapolis’ south side that now are in default, according to a lawsuit filed by the company’s lender.

J. Greg Allen is the target of the complaint from M&I Bank, which alleges the Greenwood-based businessman failed to pay the loans he received in May 2008.

Allen borrowed the money to purchase two tracts of vacant land—59.7 acres and 13.3 acres—on the northeast corner of Emerson Avenue and County Line Road, the suit said.

As of June 24, Allen owed the entire $9 million balance on one loan and $3.8 million in principal on another $5.5 million loan, according to the suit. In addition, M&I claimed the builder owes $323,876 in interest on the two loans.

Milwaukee-based M&I is asking a Marion Superior Court judge to foreclose on the properties and issue a court order to sell the real estate to pay the judgment.

“Despite demand by M&I, the guarantor has failed and refused to honor his obligation to M&I pursuant to the terms and conditions of his guaranty and the other loan documents,” M&I charged in its suit.

But J. Greg Allen, who also operates a commercial division that developed downtown’s Allen Plaza, said he’s already come to an agreement with M&I to work out the debt and that he expects the suit to be withdrawn soon.

“I’ve been with that bank [formerly First Indiana Bank in Indianapolis] for 25 years,” Allen said, “and we’re in good standing with them.”

A spokeswoman for the bank declined to comment on the lawsuit.

J. Greg Allen Builder and Princeton Homes, both owned by Allen, folded recently after he filed suit against two longtime executives. Allen alleges in a suit filed in Johnson Superior Court that the two stole nearly $1 million “over a long period of time” from the companies. One of the executives has denied wrongdoing; an attorney for the other did not return a call from IBJ.

J. Greg Allen Builder, founded in 1986, ranked ninth among Indianapolis-area custom home builders in IBJ’s most recent Book of Lists with $5.7 million in revenue in 2009. It closed on 12 homes that year with an average sale price of $525,000.

Princeton Homes was the area’s 10th-largest home builder in 2009 with 30 permits filed.