Community Bank & Trust has foreclosed on Austin Avenue Flats, a downtown apartment and retail center that a Houston-based group built to anchor development near Waco’s City Hall.
Located on 1.5 acres at Franklin Avenue and South Fourth Street, the two-story condominium project is home to living units, a Jimmy John’s sandwich shop, a branch of American Bank and a new restaurant yet to open called Coach’s Smoke, where the owners are creating a rustic exterior with wooden touches and metal awnings.
An entity called 330 Downtown Waco LLC, acting on behalf of Community Bank, recently acquired the property for the bank at an auction on the steps of the McLennan County Courthouse with a bid of $3.6 million.
The borrower, Waco Town Square Partners, defaulted on a loan by Community Bank to build the complex. The bank declined to state the amount of the original loan or how much was left on the note.
Austin Avenue Flats ran into financial difficulty when developer Michael Wray racked up millions of dollars of cost overruns. He had been chosen by the Houston-based Wallace Bajjali development group to oversee the project, and David Wallace stepped in to invest in the venture and kicked out Wray.
Community Bank & Trust placed a lien on the property, and it was on that lien that it now has taken legal steps.
“The actions or lack of actions by the borrower forced us to have to foreclose,” said David Lacy, president of Community Bank.
He said the bank will honor all leases and intends to sell the property but will take its time to ensure it finds a quality buyer.
“We hope to lend some stability to the project during the interim period,” he said. “It’s first-rate with a good location.”
Waco attorney Jeff Cox, who acted as an agent for the bank, said it also has paid off nearly $1 million in city, county and school taxes on which the borrower had become delinquent.
The foreclosure involving Austin Avenue Flats represents another setback for the high-profile partnership of David Wallace and Costa Bajjali, who recently have feuded and resigned their positions in the entity, leaving it leaderless and unresponsive to inquiries for comment.
Wallace, a former Sugar Land mayor, represented the firm in Waco when the city chose him as master developer to build on city-owned properties downtown in 2006. The city last year officially terminated the firm’s last remaining future development rights after Wallace Bajjali failed to develop the remaining blocks in front of City Hall.
Partnerships created by Wallace Bajjali developed Heritage Quarters, a student housing project, and Austin Avenue Flats on city property. Those entities still own RiverSquare Center, home of Spice Village and the Ninfa’s restaurant, but no longer control Austin Avenue Flats because of the foreclosure.
Elsewhere, the cities of Amarillo and Joplin, Missouri, fired Wallace Bajjali as master developer for their downtowns. Joplin officials, who hired the firm to guide an $800 million redevelopment of its tornado-ravaged downtown, have accused the firm of “gross negligence, fraud and willful misconduct.”
In Amarillo, Wallace Bajjali was supposed to be master developer of a $92 million redevelopment that included a convention hotel, ballpark and 750-space garage. Amarillo paid the firm $924,000 to vet the project, according to the Amarillo Globe News. The city recently declared the firm in default of its contract and severed all ties.
Jennifer Wilson, owner of Spice Village, considers it good news that Community Bank now controls Austin Avenue Flats.
“It’s a good thing for them to step in because they have a reputation to uphold and a vested interest in what happens to it,” she said. “It’s crucial that they take care of it, keep it looking good. I wish this building (River- Square Center) was funded by a local bank. But a bank in New York financed its acquisition by Wallace Bajjali, and what does it know about Waco?”
David Hicks, president and CEO of American Bank, echoed those sentiments, saying, “I would think it’s very good that it now is in local hands. It has been sitting inactive without directional leadership for quite some time. It’s a great location, and I’m glad to see it moving along.”
Hicks said the American Bank branch on the first floor is doing well, “and we’re thrilled with what it’s done for our name on all fronts.”
But he said he has heard that some living space on the second floor has remained empty “because there was no one to talk to, no one to answer a phone.”
He said it is unfortunate that banks have to repossess property from time to time, but expressed confidence that Community’s president Lacy “will do something good with it.”