Bill Mays’ attempt five years ago to help out a struggling friend, auto dealer Payton Wells, just keeps turning into a bigger and bigger mess.
PNC Bank last month sued Mays, one of the city’s most prominent black businessmen, charging he defaulted on a $3.5 million loan he received in 2008 that has an unpaid balance of $2 million.
The legal imbroglio is an outgrowth of what by all accounts was a benevolent act: Mays’ decision in 2006 to lend Wells $1.2 million at a time he was trying to save his business and banks wouldn’t extend him more credit.
“No good deed goes unrewarded,” Mays said this month, with more than a little sarcasm.
Mays later tossed in millions more and now owns the North Meridian Street property that had housed Wells’ flagship dealership for nearly three decades.
He’s fuming that the Pittsburgh-based bank won’t cut him slack as he tries to find new uses for the real estate in a difficult market.
“If they would quit badgering me, and give me a little time to work through this, they would get all their money,” he said.
A PNC spokesman declined to comment.
Wells was perhaps the city’s best-known black auto dealer before his empire—the Chevy dealership at 1510 N. Meridian St. in Indianapolis and Chrysler and Ford dealerships in Anderson—collapsed in January 2007.
Mays was not first in line among lenders holding the Indianapolis real estate as collateral—leaving him in the potentially perilous position of getting little or nothing if the holder of the first mortgage failed to maximize the value of the real estate.
So in early 2008, Mays borrowed $3.5 million from PNC’s predecessor—National City Bank—to buy out the holder of that mortgage, Sand Capital.
Sand is a distressed-asset affiliate of Sandor Development that had bought the mortgage from the original lender, Regions Bank. Mays’ purchase price was roughly equal to the amount of a judgment Sand recently had won against Wells.
In buying out Sand, Mays upped the ante while also putting himself in control of six acres of real estate—nine parcels along both sides of Meridian Street that appeared to have lots of redevelopment potential.
At least they appeared to when he closed the deal in April 2008—just before the onset of the financial crisis, which decimated the commercial real estate market.
“I think he was just trying to figure out how to recoup his money, and at the time he did this deal it probably looked like it made sense,” said a real estate observer tracking the machinations. “The problem was the timing, which is unfortunate for him.”
But Brian Epstein, a principal with Urban Space Commercial Properties who is trying to sell the former WXIN-TV Channel 59 studios immediately to the south, said finding a new use for the parcels never was a slam dunk.
“Certainly, a car dealership is a pretty one-user-type building,” he said. “That’s a pretty big challenge regardless of what the economy is doing, and the economy didn’t help.”
National City lent the $3.5 million—substantially less than the underlying real estate appeared to be worth at the time—as part of a broader settlement of a dispute over whether the bank or Mays was ahead of the other in repayment priority. Under the deal, after Mays collected the full amount of the mortgage he bought from Sand, he and PNC would split proceeds.
The idea was to unload the property quickly. But buyers have been scarce. The only deal struck so far—which resulted in construction of a CVS drugstore on the southeast corner of Meridian and 16th streets—shrunk the principal on Mays’ loan to $2 million.
Mays said he has shown his good faith by fencing the property, paying for security, paying property taxes, and paying the bank $288,000 to buy out its right to a share of proceeds from future parcel sales.
PNC’s suit seeks a judgment against Mays for $2.1 million—the unpaid principal, plus accrued interest and late penalties that have piled up since the loan went into default in December. It also asks the court to foreclose on the real estate and sell it via sheriff’s sale.
Mays, 65, calls that strategy shortsighted, likely yielding artificially low prices. While he says he could pay whatever balance remained on the loan after the sale of the properties, he feels he’s being punished for trying to help his friend and trying to make positive things happen in a key part of the Meridian corridor.
It all works out well for PNC, Mays noted, since he has millions of dollars in resources while the original property owner, Wells, had nothing.
“I thought I would get an attaboy rather than a kick in the butt,” he said.•