Business leaders battle over real estate left behind by Payton Wells

June 9, 2008

The Malibus and Impalas disappeared from Payton Wells Chevrolet more than 18 months ago, and the collision repair center lot now is servicing weeds instead of cars.

But the controversy over the defunct dealership at 1510 N. Meridian St. is far from being in the rearview mirror for some of the city's top businesspeople and developers. A court battle over the dealership's properties could determine when and how the roughly six acres of prime land are redeveloped.

The lawsuit, originally brought by Regions Bank to foreclose on a $3 million loan to Wells dealerships in Indianapolis and Anderson, has ensnared prominent local businessman Bill Mays, developer Sid Eskenazi of Sandor Development, National City Bank and a series of potential buyers, including M&I Bank and Gershman Brown Crowley Inc., a lead developer of Hamilton Town Center, court records show.

Three of the Wells properties were scheduled to hit the auction block in April, but last-minute legal maneuvers put that sale on hold indefinitely. At issue: a mess of mortgages that could take a while to unravel.

Court fight

Parties involved either declined to comment, did not return calls, or could not be reached. However, Marion County court records show that the holder of the first mortgage on the Wells properties, Regions Bank, sold its interest earlier this year to locally based Sand Capital, a division of Sandor Development Co. that snaps up underperforming mortgages. Sand won a judgment against Wells but quarreled with National City Bank, which held a junior mortgage on some of the properties thanks to defaulted loans to Wells.

National City wanted to sell the properties individually to establish values for each parcel, but Sand fought to sell the parcels as a package, perhaps so it could apply the amount it was owed toward the purchase of all the parcels. The bank alleged the strategy would allow the privately held Sand to pick up the properties at a bargain price, a charge Sand denied.

But Sand didn't stick around to fight. On April 2, it sold its position to Bill Mays, president of locally based Mays Chemical Co. and a prominent black business leader.

For Mays, buying the first mortgage doesn't appear to be as much of an opportunistic play as a strategy to recoup a loan he made to Wells, one of the region's few minority car dealers.

Mays lent Wells $1.2 million in August 2006, drawing up a promissory note and a mortgage on the North Meridian real estate as collateral. But the mortgage has problems. Notably, it doesn't mention Payton Wells Motors, the title owner of the real estate, and it identifies Wells as both the owner and borrower, court records show. And the document includes a hand-circled legal description.

Mays told the court the intent of the mortgage was clear, but National City argued it was outside the "chain of title."

Buyers in waiting

National City, for its part, is trying to collect on a debt that had grown to $4.8 million by September 2007. The bank lent to Wells so he could stock his dealership in Indianapolis and two dealerships in Anderson with Chevrolets, Fords and Chryslers.

The Wells dealerships closed in January 2007, but there were some signs of trouble before. Vendors had filed mechanic's liens against Wells in 2004 and 2005.

Wells took out a $3.1 million loan from Regions in January 2004, offering his dealerships as collateral. The bank claimed in its foreclosure filing last year that he missed payments in December 2006 and January 2007.

The North Meridian dealership has attracted a healthy amount of interest from potential buyers, although a sale isn't likely until the legal action subsides.

And there are other challenges: Most buyers would be interested in some but not all of the parcels. There also are concerns about environmental problems with some of the land, said Chris Barnett, the economic development coordinator for Near North Development Corp.

"At a minimum, no one plans to commit a pile of money to it without learning the environmental status," he said.

Court records show M&I Bank (then known as First Indiana Bank) offered $2.8 million in February 2007 for some of the properties, including the dealership's main building, and Gershman Brown Crowley offered $3.15 million for three of the properties in June 2007. An offer from drugstore chain CVS surfaced in September 2007.

National City and Mays recently reached an agreement that would allow the local office of St. Louis-based Colliers Turley Martin Tucker to auction most of the Wells properties. The proceeds first would cover Colliers' costs (4 percent and $14,500 for marketing) and unpaid property taxes. What remained then would go toward paying the $3.4 million judgment Sand won before selling its position to Mays. If anything was left after that, National City would get 62.5 percent and Mays 37.5 percent, up to what they are owed. If that didn't empty the coffers, the judge would distribute any surplus.

But Wells objected to the arrangement, arguing the deal would settle amounts Payton Wells Motors owes to its lenders, including Mays--sums the dealership disputes. The next hearing in the case is scheduled for July 24.

Plenty of potential

The Payton Wells properties could play a critical role in a third round of development for the neighborhood, Barnett said. The area transitioned more than 100 years ago from agricultural to residential, then some properties switched to factories--mainly for car companies. Lately, the push is toward a mix of retail, office and residential.

A new Walgreens and a White Castle opened last year, and WFYI Teleplex moved into a new headquarters along Meridian north of 16th Street. CVS hopes to build a pharmacy at the southeast corner of 16th and Meridian streets that would replace an IHOP and a former Osco Drugstore that now serves as a probation office. The new drugstore would take a small sliver of the Wells property that was not part of the auction offering.

The developer of the CVS, Bruce A. Bodner Co., plans to redevelop an existing CVS at 18th and Illinois streets with retail or medical offices tied to the neighboring Methodist Hospital.

Bodner also tried to buy the former WFYI property, at 1401 N. Meridian St., in part so he could relocate the probation office, but he dropped out of the running a few weeks ago after the state opted to go another direction.

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