Bank aims to foreclose on Town Center
The downtown office building has housed a number of businesses
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CEDAR RAPIDS — Two downtown office buildings may be headed for foreclosure.
Deutsche Bank has filed suit against the owners of two properties on Third Avenue SE, including the five-story-tall Town Center complex.
The bank has claimed the owners, Second Succession LLC and Second Progression LLC, are in default of a $25 million loan for a number of reasons. They include claims the owners failed to make payments on the loan, not notifying the bank when tenant lease agreements were changed, and that the owners failed to pay vendors, such as those performing maintenance.
Second Succession and Second Progression are both based in Kentucky and a subsidiary of the same holding company. Second Succession owns the Town Center properties, while Second Progression owns the 600 Third Ave. SE property.
The properties under question include the office space and parking garage that make up Town Center, 221 Third Ave. SE, and an office building at 600 Third Ave. SE.
A judge has appointed a receiver, NAI Optimum in West Des Moines, to take over management of the property. Deutsche Bank also has sought a foreclosure and sale of the properties.
In total, Deutsche Bank claims the owners owe more than $26 million as of July 1, including a principal payment on the loan, interest and late fees.
Attorneys and representatives for both the bank and Second Succession did not respond to requests for comment this week.
Town Center has been home to a number of businesses in Cedar Rapids and sits almost at the center of downtown. It’s also seen its share of turnover.
Rockwell Collins was the largest Town Center tenant when the $25 million loan was made in 2013, occupying 82,000 square feet, according to court documents and past Gazette stories. The avionics company decided midway through 2016 that it would leave the space and move about 300 employees to its main campus on Collins Road NE.
Digital marketing company Hibu moved in soon after, with plans to have 650 employees work in Town Center. The move came with a celebration from the city and months of renovations.
Other tenants, including Bankers Trust, moved out of Town Center to occupy new space in the CRST Center.
Tenant changes are among the bank’s complaints against Second Succession, according to court documents. Second Succession did not receive approval from the bank, it claims, when the owners altered and then terminated Rockwell Collins’s lease or when it spent $2 million to renovate space for Hibu.
Second Succession “voided the largest lease at the Mortgaged Property without the consent of the Noteholder, causing a significant decrease to Rents generated and to be generated from” the property, the bank claims in its filing.
No wrongdoing is claimed against tenants.
A ruling on the foreclosure motion had not yet been filed by Friday morning, nor had an response from the owners.
Kurt Mumm, president and CEO of NAI Optimum, said the receivership should not affect tenants currently in the buildings. He also said NAI Optimum has previous experience with Town Center after flooding in 2008.
“It’s still a premiere property in downtown Cedar Rapids and it will be for a long time,” Mumm said.
The Town Center properties had a combined value of about $14.3 million, while the 600 Third Ave. SE building was valued at more than $4.8 million, according to the Cedar Rapids Assessor’s office.
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