D.M. parking garage receivership hearing scheduled for Tuesday
The receiver ‘is acting as an asset manager,' says UNI professor
KATHY A. BOLTEN Sep 28, 2020 | 8:58 pm
3 min read time
742 wordsAll Latest News, Government Policy and Law, Real Estate and Development
Work is continuing on a parking garage at Fifth Avenue and Walnut Street in downtown Des Moines. Bankers Trust Co. filed a foreclosure petition on the property on Sept. 14. Photo by John Retzlaff
Arguments are expected to be heard at a Polk County District Court hearing Tuesday about why a receiver should be appointed to manage property at Fifth Avenue and Walnut Street on which construction of an 11-story parking garage is underway.
Bankers Trust Co., in a foreclosure petition filed on Sept. 14, claims that 5th and Walnut Parking LLC and developers Justin Mandelbaum and Sean Mandelbaum are in default on a $48 million construction loan that was due to be paid off on Aug. 31.
The bank has asked the court to appoint a receiver to manage the property and construction project while the foreclosure petition weaves its way through the court process.
“Receivers are appointed to look out for the interests of whoever is being damaged,” said Arthur Cox, University of Northern Iowa finance professor and director of the university’s Center for Real Estate Education. “The receiver will be asked to try to preserve the value of the asset – the parking garage – for Bankers Trust. “To some extent, the [receiver] is acting as an asset manager rather than a property manager.”
The parking garage is part of a $200 million multipiece development planned by the Mandelbaums, who are brothers. In addition to the 751-stall parking garage, the development was expected to include a 40-story tower with luxury apartments and a hotel, and a five-story commercial building with a multiscreen movie theater and restaurant.
Construction of one of the two other buildings was to have begun by late 2019, according to a development agreement the Mandelbaums had with the city of Des Moines. Negotiations between the developers and city failed to produce a new agreement that would have extended the deadlines one or more years.
In June, the city issued notices of default on the parking garage, tower and commercial building. Two weeks ago, Bankers Trust filed the foreclosure petition; last week, the developers filed a counterclaim against the city claiming Des Moines reneged on its development agreement.
In its petition, Bankers Trust asked the court to appoint Christensen Development as the receiver of the property on which the parking garage is being constructed. Such a request is common in foreclosure proceedings, Cox said.
“The receiver will be charged with whatever Bankers Trust wants them to do – oversee the continuation of construction or just make sure everything stays as is,” Cox said. Bankers Trust wants to be able to keep the property in good condition so it can sell it and receive the money back that it loaned to the developers, he said.
In court documents, Bankers Trust wrote that among Christensen Development’s duties as receiver would be managing the completion of the parking garage construction project; entering into any necessary lease or purchase agreements needed to close the property’s sale; obtaining or renewing insurance policies; preparing and filing permit and license reports; and hiring whoever may be needed to help with management of the property.
Jake Christensen, who owns Christensen Development, declined to comment.Christensen, who started Christensen Development in 2003, has been involved with numerous projects in the Des Moines area including the building at 215 E. Third St. whose tenants now include Iowa Taproom and Molly’s Cupcakes and redevelopment of buildings at 317 E. Court Ave. whose tenants include Peace Tree Brewing Co. and Climb Iowa. Christensen is a consultant on the planned conversion of the Financial Center at 207 Seventh St. into a 190-room hotel with offices on the tower’s upper floors.
Christensen was the Business Record’s 2018 Commercial Real Estate Professional of the Year.
If he is appointed the property’s receiver, he would be working with the Weitz Co., who is the project’s general contractor.
The Mandelbaums, through 5th and Walnut Parking LLC, entered into a contract with Weitz on Aug. 1, 2018, court records show. The limited liability corporation agreed to pay Weitz $29.53 million for construction of the parking garage. The balance owed on the contract as of Aug. 25, including the cost of change orders and 5% retainage, was $6.2 million, court records show.
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