Business

Foreclosure leads to public auction of downtown Cedar Rapids office building to help settle $26 million debt

Wellmark, Clifton Larson Allen, Morgan Stanley among the tenants

A building at the corner of Third Avenue Southeast and Sixth Street Southeast is seen on Wednesday, June 19, 2019.   (Rebecca F. Miller/The Gazette)
A building at the corner of Third Avenue Southeast and Sixth Street Southeast is seen on Wednesday, June 19, 2019. (Rebecca F. Miller/The Gazette)
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CEDAR RAPIDS — A downtown office building occupied by Wellmark Blue Cross and Blue Shield, Clifton Larson Allen and Morgan Stanley is in foreclosure and will be put up for public auction next month to help settle a $26 million debt.

Two Kentucky-based companies are responsible for the debt and hold the deeds on that property and the Town Centre building a few blocks away.

A public notice for a sheriff’s levy and sale for the three-story Wellmark building at 600 Third Ave. SE, which has an assessed value of $4.8 million, shows the auction is scheduled for 10 a.m. July 30 at the Linn County Sheriff’s Office, 310 Second Ave. SW.

Nothing in the notice indicates Wellmark, Clifton Larson Allen or Morgan Stanley would be required to leave the building, although representatives for those companies have not returned messages seeking comment.

Deutsche Bank Trust Co. Americas filed a lawsuit in 2017 to begin foreclosure proceedings on the two buildings, claiming Second Succession LLC, which holds the deed for Town Centre, 215 Third Ave. SE, and Second Progression LLC, which holds the deed for the Wellmark building, had defaulted on the loans. Deutsche Bank is the trustee for those loans.

An attorney for Deutsche Bank did not respond to questions.

Roscoe-Danial Holdings owns 75 percent of Second Progression. SLE Investments, owned by prominent Cedar Rapids developer Steve Emerson, owns 25 percent, according to court records.

As for Second Succession, Roscoe-Danial Holdings owns 70 percent, while Emerson’s company owns 30 percent, according to court records. Town Centre has an assessed value of $7 million.

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The registered agent for Second Progression and Second Succession did not respond to a call seeking comment.

Cushman and Wakefield Iowa Commercial Advisors of West Des Moines has been appointed as receiver to take over management of both properties. A representative for the company declined to comment.

Borrowers and guarantors

Second Progression and Second Succession were issued a $25 million loan in 2013 around the time they purchased the two buildings from Emerson — in 2009 in the case of Town Centre and 2011 for the building at 600 Third Ave. SE. The Wellmark building was built in 2012, and the property previously was the location for Peoples Church Unitarian Universalist.

The companies were named as “borrowers” and Jacob Danial and Lisa Roscoe personally were named as “guarantors” of the loans.

At the time of the sale, SLE Investments became a minority owner of the buildings with the expectation of being bought out over time, Emerson said on Wednesday.

Emerson nor his company are named in the loan documents, according to court documents, and Emerson said he is not liable for the debt.

Aspect Inc., Modern Piping Inc. and Nesper Sign Advertising Inc. also were named as defendants in the foreclosure of 600 Third Ave. SE. But court records show those companies were named because they held liens on the property.

The court order gave Deutsche Bank first position to recoup money owed before others.

Emerson, who owns Aspect, and Donna Garland, co-owner of Nesper, said their companies had liens because they were owed money for services provided at Town Centre, and say they are not financially liable for the debt. Modern Piping did not return a message seeking comment.

Garland said Nesper was owed only a few thousand dollars and previously had waived its lien rather than pursue what was owed through litigation. But it is named in court filings for procedural reasons, she said.

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Emerson said he was owed $2 million for building out space for the recruitment of marketing company Hibu to Town Centre. He is countersuing Deutsche Bank for what he is owed because Deutsche Bank is collecting rent from Hibu, which is benefiting from Emerson’s work, he said.

Emerson said he does not expect this litigation to detract from his efforts to secure financing and move forward with his proposed $73 million high rise on city-owned land adjacent to the Paramount Theatre.

• Comments: (319) 398-8310; brian.morelli@thegazette.com

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