First you owned the Franklin Circle Shopping Center. Then you didn’t. Now you own it again.
Next week—who knows?
That’s the saga of a shopping center that’s a casualty of the 2010 bankruptcy of nonprofit developer Great Neighborhoods Development Corp a nonprofit developer.
The good people of Minneapolis became owners of the shopping center Monday for the second time this month. The center at 201 E. Franklin Av. is in foreclosure and multiple secured creditors are exercising their legal rights to claim the property.
First, Franklin Bank took possession as the first mortgage holder. Then the city, which holds second position, paid off the center’s debt to Franklin and took possession. Then, third position lender Franklin returned to ownership by paying off the city’s loans. On Monday, the city as fourth position lender cut a check for $2.8 million to buy out Franklin.
The city was willing to pay that much because its appraisal estimates the property’s value at $3.66 million. That means that if it ends up as the owner, it likely could dispose of the center and be money ahead.
So now it’s Franklin’s turn. It will need to up the ante by roughly another $1 million to buy out the city.
“We’re hopeful, but not certain” that Franklin will redeem its interest, said Erik Hansen, a city development project coordinator. The bank’s president couldn’t be reached late Friday.
If Franklin does buy back in, two other more junior creditors will have a shot at redeeming the property. But they’d likely need to figure the center has a higher upside than the city’s estimate for that to pay off.
The bankruptcy and resulting foreclosure is the hangover from a 30-year financial relationship between the city and Great Neighborhoods. That financing soured when the nonprofit tried to shift its development track record across town to Broadway Avenue. A proposed redevelopment there foundered in a weak economy and left Great Neighborhoods over-extended.
Some Indian activists blamed Great Neighborhoods, which was founded to encourage native enterprise in the Franklin area, for straying too far from its roots.