First Tennessee Bank takes over medical building

Once thought jewel of DeSoto Commons

A medical office building once touted as a hot location in Horn Lake's troubled DeSoto Commons development has been taken by First Tennessee Bank in a foreclosure.

Chris Brown, a First Tennessee spokesman, confirmed Friday that the bank had taken control of the property in the spring in a foreclosure sale.

"We're probably going to finish it out and lease it, then try to sell it," Brown said of the unoccupied building on the west side of Interstate Boulevard, north of Horn Lake Creek.

The foreclosure is the latest problem for DeSoto Commons, a large mixed-use development south of Goodman Road along the west side of Interstate 55 that has failed so far to perform up to the bright potential originally hoped.

The failure of owners to pay annual property taxes on time on the largely undeveloped site has presented short-term cash flow problems for the City of Horn Lake each of the past three years.

The city has been forced to dip into the budget to cover bond payments that financed infrastructure improvements to the site, requiring loans to cover city expenses until the property taxes came in.

Brown, the First Tennessee spokesman, said the medical building has only one suite completed.

"Other suites could be made ready in 30 to 45 days, pretty much designed to suit whoever wanted to be there," he said.

The building has about 30,000 square feet of space.

When the building was under construction, DeSoto Commons officials said it was so hot as a doctor's office site that the partnership would have to build a second medical office building to accommodate the demand.

It has never had a tenant.

"I believe it could accommodate from 10 to 12 doctors," Brown said. "It's class A office space and at this point, it's flexible."

He said First Tennessee is working on a proposal with Brown Properties of Southaven to lease the property, which is near Baptist Memorial Hospital-DeSoto.

Attempts to contact Jim Brown, president and owner of Brown Properties, were unsuccessful Friday.

First Tennessee purchased the building for $2.9 million March 24 in a foreclosure sale from trustee David Adams of Senatobia.

The bank had loaned the DeSoto County Medical Office LLC $3,937,500 on Oct. 30, 2003, to build the building -- designed from the ground up as an office building for doctors and other medical professionals.

The partnership that constructed the building included Dr. Whitney Slade and Dr. Stevan Himmelstein, who are also prominent partners in the overall DeSoto Commons development. They refinanced the building June 8, 2005.

The refinancing plan called for 36 monthly payments of $6,228 that would have covered the interest only, then a balloon payment for the remainder of the $3.9 million loan debt.

Instead, the bank took what is termed a "technical default" following the death of Richard Cooper, the managing partner.

Cooper, an employee of the Dial Cos. in Omaha, died Nov. 3, 2005.

Himmelstein was out of town Friday and could not be contacted.

Slade confirmed that the bank had foreclosed on the medical office building, but had no comment on the foreclosure.

He remains confident that DeSoto Commons -- a 440-acre multi-use development on land bounded by Goodman Road, U.S. 51, Nail Road and Interstate 55 -- will be successful.

"It's taken us years to get to the point we had anticipated we would be at much earlier," he said. "But it's a big development and big things take time."

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.