The townhomes in The Lake District development, currently going through bankruptcy proceedings, are in the process of being sold to new ownership, said Michael Walker, Lakeland’s city manager.

Builders Capital, the lender for the 109-townhome section dubbed The Willows at the Lake, has taken back the property from The Lake District developer Yehuda Netanel. The lender foreclosed on the property Jan. 3. Negotiations are underway with Machine Investment Group of New York to potentially buy the section and finish the project, Walker told the city’s Industrial Development Board Thursday, Jan. 25.

The new ownership group met virtually with city officials Jan. 18 and seems eager to finish the project, Walker said.

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The townhomes, which were previously under the ownership of Netanel’s The Willows at the Lake Townhomes, LLC, would be the first residential homes at the $450 million, 160-acre project. The first two model townhomes were completed in 2022, but no more have been finished. Construction of seven units were up to the Sheetrock phase when work stopped last year due to bankruptcy.

The Lake District LLC filed a petition last March to reorganize under Chapter 11 of the federal Bankruptcy Code, avoiding the foreclosure. The next court date for the bankruptcy is scheduled for Feb. 5.

“(The townhomes) were tied up as part of the bankruptcy case filing from what I understand,” Walker said. “So now with new ownership, they’ll be able to complete the inspections to get the certificates of occupancy and allow them to be properly sold on the market.”

Multiple attempts to reach Netanel for comment regarding the potential sale were unsuccessful.

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The deal has not closed yet, Mayor Josh Roman said.

“The goal is to see The Lake District come fully into a vibrant existence, and this is a step in that direction,” said Roman, who also sits on the IDB.

Netanel unveiled The Lake District in April 2016 for the old Belz Factory Outlet Mall site south of the Canada Road-Interstate 40 interchange. The project was to include several types of residential housing, a variety of commercial entities, lakes and amenities and make Lakeland more urban.

But so far, only the first phase of the commercial space has materialized. The project ran into financial troubles on a couple of occasions, including with Netanel declaring bankruptcy in March last year.

The success of the Phase 1 commercial has been the one silver lining with the project. Businesses like Starbucks, Villa Castrioti, Lakeland Wine and Liquors, Portales Mexican Restaurant, Frost Bake Shop, Hollywood Feed, The Soap Factory and others have opened. Chick-fil-A could open in the next several months.

“The goal is to see The Lake District come fully into a vibrant existence, and this is a step in that direction.”

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The developer explained the steps in the bankruptcy last month.

Commissioner Wesley Wright and the rest of the suburb’s Board of Commissioners heard from city officials last month about several critical infrastructure items left unfinished at the project.

“This will help move The Lake District along tremendously,” Wright said of the potential sale of the townhomes.

IDB member and former commissioner Richard Gonzales remains critical of Netanel.

“The (townhome) models have been sitting there for a couple of years now, and I thought he would try to get some people in those models,” he said. “I’m not surprised. He’s looking for money. We really just need to send him packing and get someone else in here that knows how to develop.”