UPDATE: JULY 19, 2024: Flaherty & Collins Marketing Manager Nina Settappa said rising operating costs and flat or declining revenue have been challenges in downtown Indianapolis. Still, the company was surprised to learn about the filing at 360 Market Square, which represents less than 3% of its national portfolio.

"We have been working collaboratively with the lender to navigate the situation," she told Multifamily Dive in an email. "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."

Dive Brief:

• California lender Prime Finance is suing MSA North LLC, an entity established by Indianapolis-based Flaherty & Collins Properties, for nearly $101 million in a foreclosure filing after the apartment developer allegedly defaulted on payments on a 27-story high-rise in its hometown, according to the Indianapolis Business Journal.
• Prime is asking the court to foreclose on the property and sell it at auction, with the proceeds going to pay debt and foreclosure costs. In March, the Indianapolis Business Journal reported that Flaherty & Collins hired Dallas-based brokerage firm CBRE to recapitalize or sell the tower. 
• The 292-unit project, known as 360 Market Square, was completed in 2018 for $120 million. Flaherty & Collins has a principal balance of $97.9 million on a $99.3 million loan it took out in July 2021. It missed its May and June payments, which prompted Prime to call the loan due in its entirety, according to the Indianapolis Business Journal. 

Dive Insight:

Flaherty & Collins has developed over 10,000 units that it owns and has 7,000 units under management, and its “bread and butter” is public-private partnerships, former vice president of development and lead project developer Brian Prince told Multifamily Dive last year. Prince no longer works at the company.

“We’ll get our tax increment financing for the project, and the city may throw in land,” Prince said, who didn’t work on 360 Market Square. “But then usually with these very complicated, mixed-use, dense projects, there’s still an additional gap after that. So then you go into the state [incentives].”

At 360 Market Square, Indianapolis contributed $5.6 million in land for the project and $17 million in tax-increment financing for infrastructure work, according to the Journal. Flaherty & Collins Properties and its public relations firm didn’t respond to an email from Multifamily Dive asking for comment.

In addition to the apartments, 360 Market Square contains a 525-space parking garage and Whole Foods Market and Tinker Coffee Co. as ground-floor retail tenants.

The property’s market rents range from $1,545 to $4,350 for its studio to three-bedroom units, according to Apartments.com. Apartment sizes range from 570 to 1,546 square feet and its amenities include a pool, fitness center, concierge services, clubhouse and rooftop terrace.

Although Midwestern multifamily markets have generally held up better than those in the Sun Belt, oversupply still poses a slight risk in Indianapolis. Last year the metro absorbed 2,200 units, with another 5,000 new units arriving this year, according to a report from Kansas City, Missouri-based brokerage firm MMG Real Estate Advisors.

Rent growth should pick up this year, according to the report. However, suburbs like Putnam and Shelby counties will lead the way, while downtown Indianapolis, where 360 Market Square is located, “will show slower growth,” according to MMG.

Editor’s note: This story has been updated to include comments provided by Flaherty & Collins.

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