IMG Center foreclosure proceedings stir with magistrate’s ruling

Embers are starting to flare in the long-pending foreclosure proceeding in the Cuyahoga County Court of Common Pleas on the 15-floor IMG Center, 1360 East Ninth St.

Cuyahoga County Magistrate Jim L. Jackson ruled Friday, March 25, that the building’s owner, 1360 East Ninth CLE LLC, which does business as IMG Center, had defaulted on a $16 million mortgage issued on the property. He also ruled that the lender, a collateralized mortgage-backed securities special servicer called RSS UBSCM2018C9-OH IMG LLC, was entitled to have the property sold or obtain the keys itself.

However, the magistrate’s decision is not the final word in the case. Judge Daniel Gaul may overrule the decision. The case also would not be finished until a judgment is entered by the judge.

The magistrate’s decision also is subject to appeal by several parties with interests in the property. And building owner Jim Breen, who heads 1360 East Ninth, could satisfy the mortgage by ponying up a total of $20.6 million to cover remaining principal on the 2018 loan, interest, fees and costs of the proceeding.

In ruling for the lender’s special servicer, the magistrate declined to accept multiple reasons that 1360 East Ninth cited for not making loan payments, most importantly the failure of the lender to disburse some borrowed funds and a multitude of procedural challenges.

Magistrate Jackson also authorized the potential sale of the property through a sheriff’s sale or online auction conducted by a private party authorized by the state of Ohio.

Another move indicating the resolution of the case is still evolving is that the court authorized a conference call among the attorneys for case management on May 5.

The court action surfaced in the public record after three brokers from Cushman & Wakefield’s Cincinnati office began circulating a video online calling for offers on the building.

Paul Downey, the court-appointed receiver for the case, said in a phone interview that the brokers felt they got satisfactory responses to the initial marketing effort for the property. He declined to say how much of the building is vacant. CoStar, the online realty data service, said it is more than 10% vacant.

The case was filed in July 2019. A New York-based prospective buyer had interest in purchasing the structure for $18 million last November, but the purchase did not proceed.

Breen, a high-profile office leasing agent and owner of IMG and other buildings in Northeast Ohio, acquired the structure for $10 million in 2002. He later sold a low-rise attached parking garage that was a longtime feature of the property.

Breen declined comment in a phone interview.

IMG Center dates from 1965 and contains 281,000 square feet of rentable office or retail space, CoStar reports.