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One local developer emerged from bankruptcy and another fought off growing financial woes as the commercial real estate market remained challenging.

Lauth Group Inc. reached a deal in September allowing an affiliate to exit bankruptcy and retain control of most of its properties.

Meantime, two banks in May filed lawsuits that claim Broadbent Co. President George Broadbent defaulted on loans and owes more than $2.6 million.

Two of Broadbent’s larger properties in the Indianapolis area—Clearwater Crossing along East 82nd Street and Greenwood Place on South U.S. 31—were ensnared in the litigation.

All told, financial institutions were seeking to collect $13 million from the 38-year-old firm, long one of the city’s biggest developers of shopping centers.

Broadbent, like scores of commercial real estate developers, was dealing with the lingering effects of a recession that boosted vacancy rates and shrank property values.

“The problem is large, and it’s anticipated we’ll see more defaults,” Debbie Caruso, a local bankruptcy lawyer and trustee who is not involved in the Broadbent case, said in May.

In the case of Lauth, 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 settlement deal, Lauth turned over control of six properties with about 700,000 square feet, paid Inland $1 million, and agreed to ensure an orderly transition of books and records, court filings show.

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.

One booming corner of the commercial real estate market was auctions.

Dozens of properties, including a former spa and plastic surgery center in Carmel’s Village of West Clay, a nine-hole golf course and driving range in Lebanon, and a chain of car wash and lube centers in five Indiana cities, hit the auction block.

The wave of auctions suggested banks and other underwater real estate owners finally were poised to let go of a glut of properties.

Auction sales—often at a 50-percent discount to the loan value—helped provide a baseline for valuation and could mark a bottom for the real estate market, observers say.

The pitch to potential sellers from Chris Carbone, managing partner of Indianapolis-based Gallivan Auctions & Appraisers, went like this: The market is so flooded with available properties that traditional real estate listings aren’t getting much attention from today’s buyers.•