An Ashland bank has filed suit against a portion of the The 500s on Main complex in downtown Lexington, demanding that it be sold at auction to pay back unpaid loans.
In a suit filed in Fayette Circuit Court, Citizens National Bank states that it is owed about $1.33 million by Schneider Designs, which was lent the money for the development of the property.
It's the latest in a series of setbacks for the property, which drew attention to the west end of downtown when it opened with condos in 2007 and attracted The Penguin Dueling Piano Bar in 2008.
Since that time, the development has been unable to fill its remaining retail spaces along Main Street. The development also hasn't been able to sell or lease all condos in its new phase that fronts West Short Street, which is the subject of the lawsuit. Other portions of the development, which sits across from Lexington Center, remain unfinished.
Never miss a local story.
The suit states that the bank lent Schneider Designs principal of $1.3 million in December 2006, and the company was to have repaid the loan in one payment of all outstanding principal by Nov. 30, 2009, and pay regular monthly payments of all accrued unpaid interest.
To secure the loan, The 500s on Main LLC mortgaged the property at 510 West Short Street. The lawsuit also states that J. Edward "Butch" Schneider and Kerry Schneider of Schneider Designs offered commercial guarantees to the bank that guaranteed payment of the loan.
"The loan is in default at this point, and we needed to foreclose on the collateral and sue the guarantors," said Jill Hall Rose, attorney for Citizens National Bank.
The suit affects only the portion of the complex at 510 West Short Street, she said.
Butch Schneider, who according to state records is organizer of The 500s on Main LLC and president of Schneider Designs, declined to comment in any detail about the suit.
He would say only that the company is working on the development at 510 West Short Street and is looking to sell and lease the condos on the property.
He said he also is working on luring retail tenants to the portion of the development that fronts Main Street.
The development has received much acclaim, including a 2008 Urban Innovation Award.
But in the past year or so, The 500s on Main has become mired in lawsuits.
The latest suit states that Schneider Designs was involuntarily placed in bankruptcy protection in April 2009 by its creditors. Several of those creditors, including the Lexington Herald-Leader Co. and Appliance Distributors Inc., have filed lawsuits against it in Fayette County.