Foreclosure Looms Over Flaherty & Collins’ Skyscraper in Indianapolis

Prime Finance is filing a $101 million lawsuit, claiming the real estate developer defaulted on payments for the 27-story building. Flaherty & Collins’ marketing director, Nina Settappa, mentioned that rising operating expenses and stagnant or declining revenues have been obstacles in downtown Indianapolis. Despite this, the company was surprised by the foreclosure filing at 360 Market Square, which represents less than 3% of its national properties.

“We have been working with the lender to manage the situation,” she explained to Multifamily Dive via email. “This included proposing a substantial reduction of the outstanding loan, in addition to the millions we’ve already invested in recent years to keep the non-recourse loan in place.”

This is all about California lender Prime Finance taking legal action against MSA North LLC, a company formed by Indianapolis-based Flaherty & Collins Properties, for nearly $101 million in a foreclosure case after the developer allegedly defaulted on payments for a 27-story skyscraper in its hometown, according to the Indianapolis Business Journal.

Prime Finance is asking the court to foreclose on the property and auction it off, with the proceeds going towards covering the debt and foreclosure expenses. In March, the Indianapolis Business Journal reported that Flaherty & Collins hired Dallas-based brokerage CBRE to recapitalize or sell the tower. The 292-unit development, known as 360 Market Square, was completed in 2018 for $120 million, and Flaherty & Collins has a remaining capital balance of $97.9 million on a $99.3 million loan obtained in July 2021. It failed to make its May and June payments, leading Prime Finance to demand full repayment.

Flaherty & Collins has developed over 10,000 units it owns and manages 7,000 units, with its primary focus being public-private partnerships, as the former vice president of project development, Brian Prince, told Multifamily Dive last year. Brian Prince is no longer with the company.

For 360 Market Square, Indianapolis provided $5.6 million in land and $17 million in tax increment financing for infrastructure, according to a major local media outlet. Flaherty & Collins Properties and its PR firm did not respond to an email from Multifamily Dive regarding the matter.

In addition to the apartments, 360 Market Square includes a 525-space parking garage and ground-floor retail such as Whole Foods Market and Tinker Coffee Co. Market rents for the property range from $1,545 to $4,350 for studio to three-bedroom units, and apartment sizes range from 570 to 1,546 square feet, with amenities including a pool, gym, concierge services, clubhouse, and rooftop terrace.

While multifamily markets in the Midwest have generally performed well, oversupply still poses a minor risk in Indianapolis. Last year, the metro area absorbed 2,200 units, with another 5,000 new units expected this year, according to a report from Kansas City-based brokerage MMG Real Estate Advisors.

Rent growth is expected to increase this year; however, suburbs like Putnam and Shelby counties will lead the growth, while downtown Indianapolis, where 360 Market Square is located, “will show slower growth,” according to a prominent local media report.

Available foreclosures:
Indianapolis: 15 foreclosures
Putnam County: 3 foreclosures
Shelby County: 2 foreclosures

By Elias DaSilva | September 17, 2024.