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A local developer that recently listed one of the tallest and swankiest apartment towers in downtown Indianapolis for sale is now facing foreclosure on the property after allegedly failing to make payments on its loan.
Flaherty & Collins Properties faces a nearly $101 million lawsuit from California-based lender Prime Finance after allegedly defaulting on payments for 360 Market Square, the gleaming 27-story tower at the northeast corner of Alabama and East Market streets.
360 Market Square has 292 upscale apartments, a pair of ground-floor retail tenants in Whole Foods Market and Tinker Coffee Co. and a 525-space parking garage.
Flaherty & Collins Properties recently sought to either recapitalize or sell the tower. IBJ reported in March that the firm hired the Indianapolis office of Dallas brokerage CBRE to identify and negotiate with candidates. At the time, the parties declined to disclose to IBJ an asking price for a stake in the tower or how much of a stake the Indianapolis-based developer and property manager was hoping to sell.
Details on the status of that process were not immediately available Tuesday.
Since it was completed in 2018 at a cost of $120 million, the tower has become one of the city’s priciest residential properties, with an average rent of $2,365 per month, or $2.58 per square foot. The average unit size in the property is 915 square feet, according to CBRE.
According to the lawsuit, Flaherty & Collins missed its May and June payments tied to a $99.3 million loan it secured in July 2021. The loan has a principal balance of $97.9 million, which Prime said it is calling as due in its entirety after the developer missed its payments.
A spokesperson for Flaherty & Collins acknowledged the lawsuit in a statement provided to IBJ, indicating the firm had already been trying to work with Prime Finance to find a resolution.
“We were very surprised to learn of the court filing,” Nina Settappa, marketing manager for Flaherty & Collins, said in an email. “We have been working collaboratively with the lender to navigate the situation. This included offering a significant pay down of the outstanding loan, in addition to the millions we have already funded over the last several years to keep the non-recourse loan current.”
Settappa said management of downtown real estate “remains very challenging,” citing increased operating costs and flat revenue, adding that the 360 Market property accounts for about 3% of the company’s national portfolio. Settappa did not respond to questions on the status of Flaherty & Collins’ effort to either recapitalize or sell the property.
Prime is asking the court to foreclose on the property and put it into a sheriff sale. The sale proceeds would go toward paying back the debt and foreclosure costs.
The lawsuit also asks for a judgement awarding Prime additional monies, including $2.16 million in interest on the overdue portion of the loan; more than $544,000 in default fees; an exit fee from the loan of nearly $149,000; late charges totaling more than $132,000; and $310 in miscellaneous charges.
It’s also asking to be allowed to take over the collection of rent in place of Flaherty & Collins.
No additional proceedings have been scheduled in the foreclosure suit, according to court records.
The city contributed $5.6 million in land for the project, along with $17 million in tax-increment financing for infrastructure work. It also had significant input on the project’s design and components.
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What does this say about the viability of the proposed tower at the Old City Hall site?
Thats a hotel / mix/reuse, completely different from 360 MS
Probably little-to-nothing. I think it says a lot more about F&C than the viability of downtown development. Construction costs have increased but the Market360 Tower is almost fully occupied.
I still can’t stand that they cheaped out on the crown of that building! Renders showed a shiny facade, and it came out matte finish!
I’m sorry that feature keeps you up at night.
Shiny black would have made it look even more like a big giant deodorant stick!
Gosh, never saw this coming *sarcasm*, because SO many people can afford $2400 for an apartment per month. Also, if this accounts for only 3% of the developer’s balance sheet and they can’t make payments on it, they are headed down the tubes FAST. And, if “The city contributed $5.6 million in land for the project, along with $17 million in tax-increment financing for infrastructure work.”, did we ever get that back? Fat chance. Nearly every downtown “mixed use” boondoggle has empty space, and the developers keep building them and the city keeps giving them money to do it. STUPID!
Downtown apartments are 95%+ occupied, and this building is no different. There’s definitely a market for these apartments. It really says more about F&C’s management than it does about anything else.
Non recourse loan so no reason to use balance sheet if it will remain a stinker. They screwed it up but the lender is going to take the biggest hit.
This is an attractive piece of property and with the right investment company taking over, this could be an easy fix. To be honest, situations like this is going on in every major city. A realighnment in the real-estate market is definitely needed, at least in downtown Indy. I would also say that the city should only continue giving out incenitives to only companies that have a successful track record at building projects like this. I know Indy isn’t as attractive as a Nashville or Austin but with the right bold investments Indy could attract more residents who are willing to live, work and play downtown Indy but the infrastructure has to be built to attract the intended clients.
There isn’t really anything to fix. Occupancy is very high at 360 Market. The company is just mismanaged.
96% occupancy rate at Market 360.
F&C messed this one up.
I wonder if TWG would be interested in taking it on at the right price. They seem to be doing just fine. Maybe the owner of F&C should give up his penthouse city view pad at 360?