A Polk County District Court judge plans to appoint a receiver to oversee the remainder of the construction of a downtown Des Moines parking garage while the outcome is decided in a foreclosure petition involving the property.   

However, before District Court Judge William Kelly issues the order, he asked the parties during a hearing today to come to an agreement about specific points that the ruling will address. The hearing was held via Zoom, a video conferencing service. 

The foreclosure petition, filed by Bankers Trust Co. on Sept. 14, alleges 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 parking garage, under construction at Fifth Avenue and Walnut Street, is part of a $200 million multipiece development planned by the Mandelbaum brothers. In addition to the 751-stall parking garage, the development called the Fifth was 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. That didn’t occur and in June, the city issued notices of default on the parking garage, tower and commercial building. Last week, the project’s developers filed a counterclaim against the city claiming it reneged on the development agreement.

Bankers Trust, in a court filing, has asked the court to appoint Christensen Development as the receiver to manage the ongoing construction of the parking garage. The Mandelbaums, in a court filing, said they didn’t object to the appointment. 

However, in a response to the court filing asking for a receiver to be appointed, the Mandelbaums want to ensure that:
•Christensen Development’s responsibilities don’t undermine the developers’ claims against the city;
•That the bank and receiver aren’t provided access to the designs for the tower or commercial building; and
•That Bankers Trust be required to provide the developers with weekly reports about the construction of the garage.

G. Mark Rice, the attorney for Bankers Trust, told Kelly concerns existed in the amount of detailed information the Mandelbaums were requesting in the construction updates.  

“This reminds me of the childhood book ‘If You Give a Mouse a Cookie’ they are going to ask for more and more,” Rice said. “The first question is ‘to what end?’”

Rice also said that it appeared the developers’ request was “like a backhanded way of discovery that the court would ordinarily conduct.”

Rice said Bankers Trust was willing to disclose to the court when it was advancing money to the receiver and to provide a weekly update on the project through the end of construction. 

Todd Lantz, the attorney for the defendants, told the court the Mandelbaums also wanted access to information about the project kept by general contractor the Weitz Co. on a computer software program. 

Kelly told both parties to submit wording for a proposed order by Friday and that he would issue a ruling sometime next week.

“This will be a high-profile case,” Kelly said. “We want to make sure this gets done right and properly and lawfully.”

In a related matter, a hearing was scheduled for Oct. 13 to hear arguments related to the Mandelbaums’ counterclaim against the city. 

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