The developer of an unfinished medical office complex on Binford Boulevard has filed for Chapter 11 bankruptcy protection in hopes it can retain control of the property and resume construction later this year, four years after the principal lender went bankrupt and sent the project into limbo.
Binford Medical Developers LLC filed for Chapter 11 bankruptcy reorganization early this month to prevent a forced sale of the 17-acre property at 65th Street and Binford Boulevard to collect unpaid property taxes. The move buys time for the developer to close on a settlement with its original construction lender and a new loan to finish the first building in the so-called Binford Medical Complex, company principal Ken Schmidt said.
The first building in the $32-million, five-building complex was about 95 percent complete when lender USA Capital filed for bankruptcy in April 2006. By that point, USA Capital had provided only $7.4 million of an $8.5 million loan it had promised.
Schmidt hasn't paid interest on the loan since 2006, as he awaited a settlement. The biggest hurdle to reaching terms: USA Capital was funded by thousands of small investors, and 92 of them are listed on the title for the Binford Medical property.
The developer has landed a new loan that will set aside $1 million to finish the first building, along with funds to settle with the 92 investors in the original loan. Schmidt said the investors agreed to take less than they're owed, but he declined to provide details.
Schmidt hopes to reach a separate settlement with county officials over an unpaid $129,000 tax bill. He plans to dispute the assessed property value, arguing the property has sat mostly vacant.
The 47,000-square-foot existing building has only two tenants: a 4,300-square-foot urgent care center that continues to pay rent but has not been open for business, and Seward Sales Corp., which occupies about 2,200 square feet.
Schmidt, who has developed 22 smaller office and industrial buildings in the area, said he has leases lined up for 75 percent of the building once it is complete. He also has a commitment from one tenant to take an entire new building in the complex.
Future buildings in the complex would be built as soon as financing and demand come together. Medical office has been a strong sector of commercial real estate, and the project should benefit from its location on a major corridor not far from Community North.
"I buried my own money ($6 million) in this project," he said. "The only way I can get my money back or a portion back is to build out, lease up and get the whole project completed."
The Chapter 11 case was filed in the U.S. Bankruptcy Court for the Southern District of Indiana on Oct. 6. Binford Medical Developers lists assets of less than $50,000 against liabilities between $1 million and $10 million.