Last year, this Clive development held great promise for Greg Judas. Photo by Duane Tinkey
Last year, this Clive development held great promise for Greg Judas. Photo by Duane Tinkey

Greg Judas, whose K.C. Holdings Inc. and its spinoff companies have been key players in Greater Des Moines development since the mid-1990s, is returning property to lenders and facing several bank-initiated lawsuits in Polk and Dallas counties.

At least one of the properties was a hallmark of Windsor Heights' efforts to rejuvenate its town center along University Avenue, and another has been returned to a bank that has been unable to shake a deed it obtained from another troubled developer.

Judas' problems appear to be connected to an overall decline in commercial real estate since the spring of 2008 that was marked by easily available credit for land and other properties that have lost their income-producing potential.

A report last week from New York-based Real Capital Analytics Inc. said U.S. commercial real estate valued at more than $108 billion was in default, foreclosure or bankruptcy, double the value of troubled properties at the start of the year.

Real Capital Analytics blamed the rise in distressed properties on a lack of credit and said the problem touches all regions of the country and every investor class. Commercial real estate was the most troublesome sector, the firm said.

A separate report from real estate research firm Reis Inc., also released last week, said that vacancy rates at U.S. strip malls reached 10 percent, a 17-year high, in the second quarter.

Commercial properties make up the majority of the real estate that Judas has turned over to banks and account for most of the lawsuits that have been filed.

In a variety of legal filings, lenders cite loans of nearly $25 million for properties in Clive, Johnston, Windsor Heights, West Des Moines and Des Moines.

Bankers Trust Co. has obtained two strip centers in a voluntary foreclosure agreement with Judas.

The strip centers were part of Judas' efforts to rehabilitate a former Dahl's Foods store and build the strip centers at the northwest corner of 100th Street and University Avenue in Clive.

Knapp Properties Inc. has been named receiver of the strip centers, located at 1300 N.W. 100th St. and 9901 University Ave., in a separate lawsuit in which Bankers Trust seeks $3.3 million on unpaid promissory notes.

Knapp Properties will manage the real estate and attempt to find tenants for empty storefronts, said Gerry Neugent, president and chief operating officer.

"The retail segment is tough when the economy is down," he said.

Neugent would not speculate on what financial woes caused Judas to begin turning over property to banks.

"He did a lot of nice developments over the last 10 years," Neugent said.

However, the easy lending that persisted into 2008 has caused problems for a number of Greater Des Moines developers, most notably the Regency companies, which collapsed in the spring of 2008, and John Kline, who declared bankruptcy earlier this year.

In both cases, projects were not developed and sold fast enough to cover interest payments and an eventual decline in the availability of credit.

"We're a mature company and have a low level of debt and have been very conservative in our borrowing," Neugent said. "With the kind of debt that was available, it helped push a lot of people over the edge."

It is not clear whether Judas has been pushed over the edge. Judas and his business associates could not be reached for comment by press time.



Lenders step back

What is clear is that Greater Des Moines lenders are backing away from the edge.

On July 6, Two Rivers Bank & Trust filed a foreclosure lawsuit seeking possession of the Rocklyn Court office park in Urbandale.

Judas' KC Holdings Inc. obtained a $2.2 million mortgage in September 2008 from the bank to purchase the property, which the bank had obtained the previous month after a Regency-related company defaulted on a $2.1 million mortgage.

Windsor Heights Town Center, a combination retail and residential condominium project that is a key to the suburb's University Avenue face lift, is in the hands of VisionBank of Iowa, which filed a lawsuit March 13 against Judas and his KC Holdings III LLC in connection with $4.5 million in principal, interest and fees the bank says it is owed on a $5.6 million mortgage.

Judas voluntarily turned the deed to the property at 6600 University Ave. over to the bank. Polk County District Judge Richard Blane has named NAI Ruhl & Ruhl Commercial Co. as receiver for the property.

Ruhl & Ruhl President Kurt Mumm said his company will market the property as a premier retail location.

"There are people out there who continue to look to upgrade their positions in the market, and this is a new, attractive, very visible building," he said.

The residential units on the second floor need to be finished, but the commercial space on the first floor is ready to lease.

Mumm also noted that Judas' problems are not unique.

"I think this is going on all over the place, and it's a combination of a number of different things," he said.

Like Neugent, Mumm said the ability to borrow large sums of money for projects without having much equity in the deal was good thing, so long as markets were strong, unemployment was low and land values continued to climb.

"That gets turned around and things get pretty difficult," he said.

Valley Bank has been awarded $512,000 in judgments in two lawsuits it filed earlier this year in Polk County District Court related to properties in Des Moines and Clive.

Regions Bank has filed a lawsuit in Polk County District Court seeking slightly more than $500,000 in unpaid debts from Judas and his wife.

In addition, Bankers Trust has another lawsuit pending, also in Polk County District Court, in connection with more than $2 million in principal it says Judas and a limited liability company owe in connection with a property at 700 Second Ave. in Des Moines and a commercial condominium unit in the rehabbed former Dahl's store at N.W. 100th Street and University Avenue in Clive.

Knapp Properties has been appointed receiver of the Second Avenue property. The Clive property is the home of Nobbies party store. It is not under receivership.

Bank of the West and Liberty Bank have filed lawsuits in Dallas County in connection with two Judas projects.



More land to banks

Judas has agreed to turn over additional properties to lenders in connection with loans totaling $10.9 million. In some cases, the loans were forgiven in exchange for the properties. In others, the banks have maintained the right to seek court action, in part to make sure that titles to the properties are marketable and to obtain personal guarantees that secured the loans.

Liberty Bank obtained development land April 17 in Dallas County in connection with a $925,000 mortgage.

The bank also received seven commercial condominium units April 17 in Johnston.

First American Bank obtained land May 19 in West Lakes Office Park in West Des Moines in connection with three mortgages totaling more than $3.7 million that were filed between February and August of last year.

In addition, First American has received properties in Clive and Johnston related to loans totaling $3.1 million that it said were in default.

Earlham Savings Bank received two lots May 19 in Johnston in connection with a $2.5 million mortgage.

Guthrie State Bank received two lots in a Johnston townhome development in connection with a $650,000 mortgage.

Judas is a principal player in the redevelopment of the Liberty Building in downtown Des Moines.

Public records do not indicate the project is in distress.