Pedcor’s proposal finalized, but questions remain

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By Adam Aasen

The Carmel Redevelopment Commission finalized its sale of the long-vacant Shapiro’s building after the money was wire-transferred from Pedcor, its new owner.

But questions still remain from elected officials and the public about this confusing financial transaction.

CRC Director Corrie Meyer said: “This is a complicated deal made years ago so I expect that there will continue to be questions. We are happy to answer any of them.”

DID CARMEL SELL THE PROPERTY FOR LESS THAN IT WAS WORTH?

Technically no, but the CRC did sell the property for less than they bought it for. CRC paid $2.5 million to purchase the mortgage on the Shapiro’s building.  The current value of the property, based on two appraisals received, is $2.1 million. So the appraised value decreased. Mayor Jim Brainard said the CRC bought the building because they wanted to try to keep Shapiro’s in the area and this allowed them to offer restaurant owner Brian Shapiro a monthly mortgage payment of $1,000 to the CRC.

There are many reasons why the Shapiro’s building decreased in appraised value since the 2010 purchase. Some reasons for this could be that there was slowed development for the City Center, or because of a perception that if that restaurant couldn’t succeed, then maybe another one would fail as well. When the deli closed, it was reported that Shapiro’s owed the CRC around $79,000 at the time.

“I would imagine that it lost value because it was a vacant building,” Meyer said.

WHY DID PEDCOR WIN THE BID?

The CRC received two nearly identical bids for the property. One was from a bank who offered all cash and the other was from Pedcor, which offered half cash and half debt relief. Some City Councilors thought it would have been better to have all cash, because in theory the city could take that money and pay back debt. But Meyer said they liked Pedcor’s use better.

“The CRC Commissioners preferred the restaurant/retail potential given the opportunity to continue bringing diverse users into the urban core,” she said. “This is what the market is wanting.”

But City Councilor Eric Seidensticker still wonders: “What’s wrong with a bank?”

He said banks bring in lots of high-paid employees to the area and could be seen as more stable than the food service industry. He questioned whether it is the government’s role to decide such matters.

Some think that Pedcor won the bid because the city understands that this land could play into the developer’s strategy for the City Center area.

“We opened it up to the market, so the city didn’t dictate it,” City Councilor Sue Finkam said. “The CRC received two bids and they decided one was a better fit for the overall vision of the City Center area. Pedcor is a key strategic partner. They understand what we are trying to accomplish and they have been very successful at leasing these properties.”

WHAT DEBT ARE WE TALKING ABOUT?

Meyer said one of Pedcor’s entities, Village Financial, holds two subordinated Secondary Installment Contracts, which are loans that have to be paid after all other debt is paid. The first Secondary Installment Contract has an approximate balance of $4 million with a second one at $1 million. The Pedcor deal allows the CRC to clear the entire second contract and a little of the first contract.

Deals involving Village Financial have caused some debate among the City Council. Back in February, a heated council meeting involved discussion about interest accruing on a loan that some people were not aware had payments due. The confusion was mostly resolved, but some city councilors such as Seidensticker and Rick Sharp say it might be wise to use all of the revenue to pay down debt instead of just half. This is because the Village Financial debt is back-loaded with variable-rate interest, according to city consultants.

WHY NOT TRY TO GET A HIGHER BID?

Sharp suggested that it would have been wise to reject both bids and then open up negotiations to see if the CRC could receive a higher offer from either party.

Meyer said they considered that but decided against it.

“We vetted all of the different scenarios that could happen,” she said. “Our broker informed us that this is the best that we could get and if we didn’t accept one of these offers, we were going to have to lower the process to generate interest.”

WHO HAS THE MORTGAGE ON THE PROPERTY?

There is no mortgage. When the refunding bonds were issued in 2012, CRC purchased the United Fidelity Bank mortgage loan interests on the Shapiro’s building. Meyer said the CRC effectively became Shapiro’s lender. When CRC acquired fee title to the property in June 2013, CRC recorded a release of its own mortgage loan interests.  Therefore, there is no mortgage on the property. All of the parking spaces are included in this deal.

Some councilors wondered if “refunding bonds” were used to buy the mortgage that it would mean that taxpayer-backed debt exists on the building.

WERE THERE ANY LIENS ON THE PROPERTY?

No. E-mails obtained by the Current speculated that there were tax liens against the building but Meyer asserted on separate occasions that all taxes have been paid and there are no liens.


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