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Clark Tower foreclosure related to lenders' desire to foil refinancing, In-Rel says

Owner defaults on $60 million loan, lenders claim

By Updated: February 27, 2019 10:25 PM CT | Published: February 27, 2019 7:28 AM CT

The foreclosure of Clark Tower stems from an ongoing legal dispute over loan refinancing between the owner and its lenders, and a New York court will decide the building’s future.

That was the response Wednesday afternoon to The Daily Memphian from the CEO of In-Rel Properties, which manages the 34-story office tower in East Memphis and is affiliated with the building owner, Clark Tower LLC.

“I don’t understand why this has happened,” In-Rel Properties chief executive Kirk Cypel told The Daily Memphian. “Clark Tower has been making monthly payments under the loan. We expect those payments to continue, so it appears the lender is fully protected.”

Unless the New York Supreme Court intervenes, the office building that sticks out high above the short suburban buildings of East Memphis is to be sold to the highest bidder March 22 at noon on the southwest steps of the D’Army Bailey Courthouse, Adams at Second.

Clark Tower LLC defaulted on a $60.75 million loan to JPMorgan Chase Bank, according to a legal notice published Wednesday, Feb. 27.

Included in the foreclosure of the 34-story, 668,505-square-foot skyscraper at 5100 Poplar is the outparcel building that houses tenant Carrabba’s Italian Grill, 5110 Poplar, as well as the seven-story parking structure attached to the rear of Clark Tower.

But a lawsuit Clark Tower LLC filed in August against its lenders – including Wells Fargo Bank as trustee for loan holder JPMorgan Chase Commercial Mortgage Securities – claims the group of lenders is not following a refinance agreement that includes the forgiveness of more than $20 million of the loan.

The lenders don’t want to forgive $20 million of the debt, and have “hijacked” an agreed-to restructuring of the loan, the building owner claims.

The root of the problem goes back several years and involves the challenges of operating an older building, which caused Clark Tower LLC to be unable to service the loan. The owner and lenders negotiated a loan restructuring in which Clark Tower LLC agreed to invest $5.7 million in improving the building, the August lawsuit contends.


“I don’t understand why this has happened. Clark Tower has been making monthly payments under the loan. We expect those payments to continue, so it appears the lender is fully protected.”

Kirk Cypel, CEO, In-Rel Properties


In recent years, Clark Tower LLC has invested about $9 million in the building and marketing campaigns to attract more tenants.

“For over 1 1/2 years now, Clark Tower LLC has been working to refinance the current loan,” Cypel told The Daily Memphian. “… Since then, Clark Tower has received refinancing proposals from more than one lender. In Clark Tower’s opinion, it has the ability to pay off the loan in full.

“It appears the lender is proceeding with the foreclosure,” he said. “The lender has alleged the loan had matured. Clark Tower does not believe the loan has matured because Clark Tower has the right to refinance.”

Despite the foreclosure, activity at Clark Tower appeared to be business as usual for white-collar employees of the tower's 185 tenants on Wednesday morning.

They rode the high-speed elevators to their respective floors, a man bit into a breakfast sandwich in an outdoor patio and another got his shoes shined near the ground-floor entrance to Concorde Career College. 

The foreclosure comes about two years after In-Rel completed the $9 million renovation and rebranding to increase the occupancy rate, which stood at about 65 percent in 2016, In-Rel founding principal Dennis Udwin said at the time.

Cypel declined to reveal what the occupancy rate is today.

In 2016, Udwin described his Florida-based In-Rel as “doubling down” on Clark Tower by investing in the renovation.

In-Rel bought the building in 2003 for $40.1 million and carried out a substantial renovation a year later and a modest improvement project in 2007.

The most recent work, completed in 2017, included improving both the mechanical parts and décor of the dozen high-speed elevator cabs; renovating the lobby, restroom and other common areas; creating a 60-seat conference room; giving the entrances a face-lift; making improvements to the secured parking garage; and providing a $2 million makeover of the heating and cooling system.

Developer William B. Clark Sr. erected the tower in the early 1970s where about 30 houses once stood. He built it next door to the 22-floor office building now called i-bank Tower, which In-Rel bought in late 2015 for $19.25 million.

The twin towers intensified the exodus of white-collar employers from Downtown to East Memphis. Trouble was, many of those employers eventually kept moving east along the Poplar Corridor beyond Interstate 240.   

Still, Clark Tower has remained a Memphis icon, not just for its height, but for the giant, rooftop U.S. flag that offers both patriotism and wind direction, and for the row of arches designed just under the roof line.

It has been a tough week for landmark Memphis skyscrapers. On Friday, Raymond James & Associates informed its Downtown workers of plans to move out of the 21-story Raymond James Tower at 50 N. Front to the Ridgeway Center office park in East Memphis.  

The setbacks come at a time when city leaders' mantra for future Memphis growth is to "build up, not out."



Topics

Commercial Real Estate Clark Tower foreclosures
Tom Bailey

Tom Bailey

Tom Bailey covers business news for The Daily Memphian. A Tupelo, Mississippi, native, he graduated from Mississippi State University. He's worked in journalism for 40 years and has lived in Midtown for 36 years.


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