Meidinger Tower in downtown Louisville defaults on loan, enters receivership

One of the largest downtown office towers in Louisville is in financial trouble and is now under court-appointed control.

The owner of the Meidinger Tower at 462 S. Fourth St. defaulted on its loan in November 2023 and owes its lender about $30.3 million, according to a lawsuit filed in early June in Jefferson Circuit Court.

National banking association Wilmington Trust National Association, as the trustee of a BBCMS mortgage trust, filed the suit.

It pointed to a loss of tenants at the 26-story, 331,000-square-foot office tower as a reason behind the default.

“Borrower has lost tenants and in turn has lost revenue that would be generated from such tenants’ leases,” lender attorneys wrote in court filings. “Additionally, Borrower has not made various repairs and has deferred maintenance needed to maintain the condition of the Meidinger Tower, which exposes Plaintiff to the diminution of the value of its collateral.”

The tower’s owner hasn't made its full $142,200 monthly loan payment since November, according to the suit. A loan agreement for $28 million was executed in July 2019, with a loan maturity date of July 2029, court records show.

Florida-based real estate investment and management firm In-Rel Properties, which owns the downtown tower, did not respond to a request for comment.

A Lexington-based attorney for the lender also did not reply to requests for comment. The building’s Louisville-based property manager and leasing agent, NAI Fortis Group, declined to comment or provide occupancy information.

Computershare Inc. was the tower's largest tenant as of 2019, occupying about one-third of the building's rentable space, according to records filed as part of the foreclosure suit. The company relocated last year two blocks south to the Kindred Square building at 680 S. Fourth St.

Downtowns across the nation are dealing with an excess of vacant office space as companies downsize their square footage needs in the hybrid work age that followed the COVID-19 pandemic.

As part of its lawsuit, the lender sought a third-party “receiver” to take over the building’s affairs.

Jefferson Circuit Court Judge Annie O’Connell entered an order July 1 granting that request and appointing Jonathon Margolis, senior vice president of asset management for commercial real estate agency Farbman Group, as receiver.

The court’s order allows the receiver to take control of the building and oversee its operations. The receiver is empowered to sign new tenants, with lender approval, as well as market and sell the building.

Margolis did not respond to a request for comment. It was not immediately clear what changes, if any, building tenants can expect.

Receiverships are often preferable to foreclosure actions, as they help limit liability and losses while working to save a distressed asset, said Doug McCoy, director of the Center on Real Estate Studies at the Indiana University Kelley School of Business.

“They're a middle person, and they're trying to preserve the asset for both the interest of the borrower and the lender,” McCoy said. “That's one of the beauties of the receivership.”

The Meidinger Tower was completed in 1982 — along with its sister tower, the former Brown & Williamson Tower, at 401 S. Fourth St. — as part of the Galleria shopping development that has since been replaced by Fourth Street Live.

The tower has an assessed value of nearly $28.6 million, according to Jefferson County Property Valuation Administration records.

It last sold in 2017 for $32 million to its current owners.

The building faced hard financial times as recently as 2013, when the tower sold in a foreclosure auction for $16.6 million. At the time, the downtown tower was nearly half vacant and had recently lost a major tenant, Mercer, the Courier Journal previously reported.

As of the end of the first quarter of 2024, downtown office vacancy was at about 21%, according to Cushman & Wakefield Commercial Kentucky.

Among Class A offices, considered to be the most desired, premier spaces with the most amenities, that rate was higher at 27%, which is up from around 15% in early 2019.

“This is a long-term opportunity,” McCoy said of the Meidinger Tower's financial woes. “It's a short-term problem. There's liquidity in the market. There are professionals in the market. This is gonna get figured out.”

Reach growth and development reporter Matthew Glowicki at mglowicki@courier-journal.com or 502-582-4000.

This article originally appeared on Louisville Courier Journal: Meidinger Tower in downtown Louisville defaults on loan, enters receivership