Friday, February 26, 2010

Decline and foreclosure: The story of the CDC-KC's other shopping center

Posted By on Fri, Feb 26, 2010 at 7:00 AM

click to enlarge Instead of renovation, the Linwood Shopping Center went into receivership
  • Instead of renovation, the Linwood Shopping Center went into receivership

In 2007, when I first met with William Threatt Jr., he described the Linwood Shopping Center as a "resounding success." The former president of the Community Development Corporation of Kansas City pointed to new tenants and recent renovations as proof that the strip mall was on solid ground.

From the outside, though, the shopping center looked run-down. The largest retail space was dark behind cracked windows. The anchor tenant, a grocery store, had fled. The deeply potholed and uneven pavement in the parking lot posed a hazard to even the sturdiest SUVs. Still, Threatt claimed Linwood Shopping Center was top-notch. "Go into Ashley Stewart or Foot Action, and you don't know if you're at 31st and Prospect or Oak Park Mall," he suggested.

Even as we spoke in 2007, the development was faltering. Back taxes piled up. A loan from Bank of the West came due. In November 2009, the Linwood Shopping Center went into receivership.

According to documents produced by the CDC, the 80,000-square foot Linwood Shopping Center was developed in 1986. In order to meet the $5.5 million cost, the CDC received federal dollars from the Department of Health and Human Services and the Department of Housing and Urban Development. The CDC suggests the complex created 175 jobs.

But the center struggled financially. In 2003, Linwood and Prospect Investors -- a partnership between the CDC and James Ramsey -- took out a $1.7 million loan from Commercial Federal (now Bank of the West). By the time the note matured in November 2008, the CDC was more than $115,000 behind in property taxes on the shopping center. It didn't repay the loan. By October 2009, the penalties and interest had added another $100,000 to the growing debt. Late last year, the bank sued to take control of the property.

According to court documents, the shopping center was bringing in less than $260,000 per year in rent. The CDC owed more than $29,000 to security, trash and other services providers. To refurbish the long-vacant grocery store space would cost at least $3 million. The CDC didn't fight the bank's push for a receivership -- in November the shopping center was turned over to Brown Business Advisory Services.

Donald Lee, the current president of the CDC, acknowledges the development has struggled. "Anytime you lose a tenant that occupies a significant retail space it's going to have a negative impact on the commercial property," he says. "So, I mean, we can clearly point to that as a key element that has created some of the issues around the Linwood Shopping Center."

According to Lee, his organization shouldn't be measured by the foreclosure at Linwood. But, when asked what he would point to as signs of the CDC's success, Lee falters.

"It's absolutely not a fair representation of our track record," he says of the Linwood receivership. "We have been actively engaged in the metropolitan area since 1974. That we're in the year 2010 and still existing, that time frame speaks to the fact that we have the capacity to do development. So that's what I would say at this juncture."

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