Regions Bank has repossessed the $3 million Renaissance Square mixed-use development from the 28th Legislative District Community Development Corp.
The group filed for relief under bankruptcy protection in August 2010, having sold none of the commercial space in the Martin Luther King Boulevard building and unable to pay back much of the project cost, including a $1.2 million loan from Regions.
Real estate agents have blamed the emptiness of the building on the organization's insistence on selling the condos instead of leasing them at a time when the credit crisis was in full swing.
Group representatives said the bank declined to extend the loan to allow them to find renters.
But even to just break even on the 21,000-square-foot project's $3 million cost, the developer would have had to sell for $143 per square foot at a time when buyers were turning their nose up at rates as low as $115 per square foot, according to agent Ann Najjar.
No bidders spoke up Tuesday to top Region's $769,884 stalking horse bid at the auction, held on the Hamilton County Courthouse steps. While there are four tenants occupying the building's residential condos, the other spaces are vacant.
The bank expects to have the property back up for sale within a couple weeks, and hopefully available to lease sometime after a buyer takes control of the property, according to Tim Collins for Regions Bank.
Though the group is still operating under supervision of U.S. Bankruptcy Court, city government has approved $275,000 in new funds for the development group to build three new units of housing for home ownership, after contributing $650,000 for similar projects over the previous two years.
However, the city has not given any money for Renaissance Square, preferring instead to designate funds specifically for home ownership.
"It's unfortunate that this building fell into foreclosure, but the 28th Legislative CDC has done a lot of good projects around town and has a pretty good track record of providing homes for people," said Richard Beeland, a spokesman for Chattanooga Mayor Ron Littlefield.