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Is empty property next to downtown parking garage part of foreclosure, developers ask in court battle

The Des Moines City Council this week voted to purchase the garage and adjacent lots; developers say the lots weren’t part of mortgage they obtained


A Polk County District Court judge is being asked to clarify the ownership of two undeveloped lots adjacent to downtown Des Moines parking garage property that was foreclosed on, according to court papers filed Thursday afternoon.

Earlier this week, the Des Moines City Council approved an agreement to buy the 11-story parking garage at Fifth Avenue and Walnut Street as well as two adjacent vacant lots.

The property is at the center of a legal battle that began last June when Des Moines filed a notice of default alleging developers Justin Mandelbaum and Sean Mandelbaum failed to meet construction deadlines for their $200 million, multipiece project called the Fifth.

The development was to include the 751-space parking garage, a 40-story tower with luxury apartments and hotel, and a five-story commercial building with a movie theater and restaurant.

The developers acquired the property from the city in 2017. Parcels for each development piece are held by separate limited liability companies.

In September, Bankers Trust Co., which provided a construction loan for the garage, filed a foreclosure petition alleging that 5th and Walnut Parking Garage LLC, Justin Mandelbaum and Sean Mandelbaum were in default on the loan. The Mandelbaums are brothers.

In October the court appointed a receiver to manage the completion of the construction of the garage, and in January it approved a request to sell the structure to the city of Des Moines.

Information provided to the City Council before its special meeting on Wednesday stated that Bankers Trust was offering Des Moines “the opportunity to purchase the garage and the adjacent lots” from the receiver.

“These steps protect the city from having some unidentified owner or project obtain control over the garage and the separate development lots and move in a direction that might not be in the city or its taxpayers’ best interests,” the council document read.

The council, on a 6-0 vote, approved the purchase agreement. City Councilman Josh Mandelbaum abstained from voting. He is a cousin of Justin and Sean Mandelbaum.

In court papers filed Thursday, Justin and Sean Mandelbaum asked the court to clarify whether the undeveloped lots are included in the property the council voted to purchase.

“The developers ask this court to clarify that the receiver is not authorized to sell or otherwise convey the two vacant real estate parcels adjacent to the parking garage that is under construction,” wrote attorney Todd Lantz in the court papers.

Bankers Trust only holds a mortgage on the parking garage and its commercial spaces, Lantz wrote in the court filing. The two other parcels are owned by different entities, he wrote.

“Importantly, the mortgage does not cover the two adjacent parcels owned by 5th and Walnut Tower LLC and 5th and Court LLC, which were not named as defendants in this foreclosure action,” Lantz wrote.

Lantz wrote in the court filing that “city staff and the city council are under the alarming misimpression that the city will be paying upwards of $47 million for all of the parcels, rather than the parcels that are actually subject to the bank’s mortgage.”

A spokesperson for Des Moines said city officials have not yet seen the new court filing and would “respond to it in court going forward after review.”

The court filing is the latest series of legal actions between the Mandelbaums and the city. A week after Bankers Trust filed its foreclosure petition, the Mandelbaums filed a counterclaim against the city seeking $101 million in damages. Last week the city filed its own counterclaim and asked a judge to determine damages.

Related articles:
Des Moines offers to buy parking garage property in foreclosure
Developers of the Fifth seek $101 million in counterclaim against city
Bankers Trust files foreclosure petition on parking garage

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