A note-holder has filed to foreclose on the Bingham apartments, the largest project in downtown Cleveland's Warehouse District.
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The Bingham in 2001, before a $80 million renovation transformed the massive warehouse into 340 apartments and space for commercial tenants. An investor filed a foreclosure complaint against the building's owner on Thursday.
Updated at 5:17 p.m.
CLEVELAND, Ohio -- A note-holder has filed to foreclose on the Bingham apartments, the largest project in downtown Cleveland's Warehouse District.
Resource Real Estate, a national investor based in Philadelphia, filed a foreclosure complaint against the building's owner Thursday in federal court. The investor recently purchased a $45 million mortgage note on the building, a warehouse redevelopment that comprises 340 apartments and commercial space at 1278 W. Ninth St.
Court records give few clues as to what Resource might be planning for the Bingham. The company has asked the court to approve appointment of an outside receiver, Buckingham Management Group, who would run the property and collect rents during the foreclosure.
Todd Jaycox, a senior vice president with Resource, declined to comment today. The building's owner, Bingham Building Limited Partnership of Downers Grove, Ill., did not respond to a request for comment.
"It's not clear what [the foreclosure] means for the building's operations, from a day-to-day management standpoint," said Tom Yablonsky, executive director of the Historic Warehouse District Corp. "I would think they would just continue to operate it. We've had other downtown properties go through foreclosure, and their occupancy and operations improved after it happened."
Yablonsky said he had not seen the foreclosure filing, but he had heard long-running rumors that the building's owner was troubled. He speculated that the loan sale and foreclosure resulted from the owner's financial situation and considerable debt on the property, rather than the condition of the building. About 80 percent of the Bingham's apartments are occupied, and Constantino's Market, a local grocery store, is expanding on the ground floor.
"It's a solid, first-class rehabilitation," Yablonsky said. "It has a tremendous amount of amenities."
The building's owner is an affiliate of Burnside Construction Co., a now-defunct homebuilder from the Chicago area. Bingham Building Limited Partnership acquired the hulking warehouse in 2000 and turned it into a residential complex. The $80 million project was finished in 2004.
Burnside Construction filed a Chapter 7 bankruptcy petition -- to liquidate the company -- in May 2007. In early 2008, Bingham Building Limited Partnership defaulted on a $45.5 million mortgage that was insured by the U.S. Department of Housing and Urban Development, according to court filings. HUD took over the mortgage and, on March 24, put the note up for sale in an auction that involved about two dozen other multifamily and health-care loans.
Sale results were not posted on HUD's Web site today, but sources familiar with the auction said the Bingham loan fetched more than $24 million. In court records, Resource Real Estate referred to a recent appraisal that placed the Bingham's market value between $20.5 million and $29.2 million -- only 46 percent to 66 percent of the debt on the property. As of April 6, Bingham Building Limited Partnership owed $44.3 million in principal, plus several million dollars in interest, penalties and fees, according to court records.
The building's owner also owes money to the city of Cleveland, which kicked in a $2 million economic development loan for the rehab project. The city has a slim chance of recouping its investment, because Resource would be the first lender -- and in all likelihood the only one -- to collect proceeds from a foreclosure sale of the property.
Resource owns and manages a $1.7 billion real estate portfolio, with a heavy concentration of apartments. The investor also owns West Tech Lofts, an apartment redevelopment of the former West Tech High School on West 93rd Street in Cleveland. A Resource affiliate bought a HUD note on that property in 2007, filed foreclosure in 2008 and bought the building last year.