Madison Equities relinquishes three downtown St. Paul buildings to lenders

Madison Equities relinquished three buildings to lenders this month, but downtown St. Paul’s largest property owner is far from untangling itself from its debt-ridden real estate portfolio.

Earlier this month, in lieu of the foreclosure process, a Madison Equities subsidiary sold the Degree Apartments to lender Minnwest Bank for $9.5 million, according to public real estate filings. The bank previously argued in court that Madison Equities owed $12 million plus interest for a construction loan in default.

A different lender, Merchants Bank, purchased the Empire Building and adjacent Endicott Arcade at a sheriff’s sale Thursday, using $1.3 million of credit owed on the properties’ mortgage.

A third, First Interstate Bank, filed a complaint last month seeking $24 million owed on the mortgage of the 32-story U.S. Bank Center. The lender is also asking the court to appoint a receiver to protect the value of the building while it goes through the foreclosure process.

Kelly Hadac, an attorney for Madison Equities, declined to comment on the litigation.

The company’s founder and longtime principal, Jim Crockarell, died early this year, leaving more than a dozen St. Paul properties to his wife, Rosemary Kortgard. Crockarell grew his empire through decades, purchasing some of downtown’s most recognizable office towers.

The COVID-19 pandemic and rise of remote work dealt a blow to office buildings across the country, particularly older ones in need of upgrades. Madison Equities subsequently lost several corporate and government tenants who downsized or moved.

With debt payments looming, Kortgard listed the company’s entire downtown office portfolio in April, in the unlikely hope of finding a buyer who would take the lot off her hands for a bargain price. No such figure emerged, and some lenders are moving to cut their losses.

Because Kortgard guaranteed each loan personally, claims against her are also starting to mount.

The Lowry Apartments, which has struggled with crime and maintenance issues, went back to lender Colliers Funding through a September foreclosure sale. City officials condemned the 11-story building at 345 Wabasha St. N. earlier this month following a water leak that forced tenants to temporarily relocate to hotels.

Per the request of Merchants Bank, Ramsey County district judges appointed receivers to manage the vacant Empire Building at 360 Robert St. N. as well as the Park Square Court Building in Lowertown. The latter, at 400 Sibley St. N., went into bankruptcy earlier this year.

Both properties are “at risk” because of the owner’s “inability to pay its utility bills” and “abandonment” of the properties, according to orders Ramsey County District judges signed last month.

An attorney for Merchants Bank did not respond to a request for comment. Nor did an attorney for Minnwest Bank, which now owns the 10-story Degree of Honor Building, former offices that Madison Equities converted into market-rate apartments at 325 Cedar St.

An attorney for First Interstate Bank declined to comment on litigation surrounding the U.S. Bank Center at 101 E. 5th St. The building’s namesake tenant moved out of 10 floors this fall.

Madison Equities also owns the First National Bank Building, the Alliance Bank Center, the 375 Jackson Building and two parking ramps in downtown St. Paul, as well as the building that houses the Handsome Hog restaurant and and an adjacent surface parking lot in the city’s Cathedral Hill neighborhood. The company has ownership stake in the Seventh Place Apartments, another downtown apartment building.

Across its portfolio, Madison Equities owes at least $2.8 million in property taxes and late penalties.

City leaders and downtown boosters have publicly lambasted Madison Equities, saying its abandoned and poorly maintained buildings have negatively affected downtown St. Paul. Representatives for the company repeatedly blame crime, drug use and homelessness in the urban core for its struggles.