Two rulings support government’s attempt to redevelop Indian Springs mall site: Kansas City MO Star, 5/4/07

By Mark Wiebe

A bankruptcy judge delivered a near-fatal blow to Indian Springs shopping center today when he ruled that Wyandotte County’s Unified Government could continue its efforts to condemn the mall.

The mall’s owners had a decade to improve their property, Judge Robert D. Berger said in his ruling from the bench. Now, it is time to give the Unified Government a chance to pursue its vision for a 100-acre mixed-use development on the Kansas City, Kan., property.

“The city will probably do much better with this land,” Berger said. “And sadly, it couldn’t do any worse.”

The owners of Indian Springs, Kansas City Mall Associates, took their case to U.S. Bankruptcy Court in Kansas City, Kan., in March.

Such a move brings about an automatic stay, preventing creditors and other interested parties from acting against the debtor’s property. A judge, however, may find grounds to lift the stay.

After a two-day motion hearing, Berger concluded the stay did not apply to the Unified Government’s action, allowing condemnation proceedings to move forward in state court.

Earlier in the day, before Berger’s ruling, the Unified Government won another round when a Wyandotte County District Court judge ruled it has authority to conduct eminent domain proceedings against the shopping center.

Chief Judge Philip L. Sieve also named three certified appraisers to determine the value of the mall at 4601 State Avenue.

But even with the two rulings, the Unified Government still has another hurdle to cross in another Wyandotte County courtroom. That’s because the mall’s owners have also filed a suit challenging the Unified Government’s blight designation. The government made that conclusion in November in advance of approving tax increment financing for the proposed development.

Attorneys for the mall’s owners tried to persuade Berger, the bankruptcy judge, that he should enforce the automatic stay and allow the mall to redevelop the property as a business park.

They alleged the Unified Government had acted hastily and secretly, going so far as to talk with Wal-Mart about locating a store at the site without telling Kansas City Mall Associates.

“That doesn’t smack of fair play to me,” said attorney Carl R. Clark.

Unified Government attorneys countered that the mall’s owners had done little to make the mall a viable business and that their neglect was contributing to blight in the neighborhood. The bankruptcy filing, they argued, was a ruse to stall the condemnation.

“This debtor was not insolvent at the time of the bankruptcy filing,” said attorney Thomas M. Mullinix.

In his ruling, Berger said he had toured the mall and noted several problems, including a poorly maintained parking lot and water damage in the former Montgomery Ward store that he called a “disaster.”

He used the damage there as an example of the owner’s negligence. The building, he said, “simply wasn’t taken care of.”

That negligence, coupled with the mall’s negative reputation in the community, he said, would make it difficult for the mall’s owners to convert the mall to a business park.

Significant work would have to be done to attract the kind of tenants that could improve the mall’s cash flow and make the conversion to a business mall possible, he said. But Berger wasn’t convinced the mall’s owners were up to the task or that they had any secured debt to reorganize.

“The debtor’s had more than 10 years to take care of the building,” he said. “…Ten years later the debtor wants more time. I don’t think the debtor should have any more time.”

Kansas City MO Star: http://www.kansascity.com