SANTA ROSA -- The developer group behind a new southwest Santa Rosa industrial property has filed for U.S. Bankruptcy Court reorganization after more than a year of unsuccessful efforts to refinance a nearly $16 million construction loan.

Industry West Commerce Center LLC filed a voluntary petition for Chapter 11 reorganization in Santa Rosa on Jan. 14. In court documents, the developer listed $18.8 million in liabilities and $24.3 million in assets.

The filing became necessary because the economic slowdown starting in late 2008 not only stalled initial leasing of the project but also challenged efforts to refinance a $15.9 million construction loan from lead secured creditor Central Pacific Bank of Honolulu by the July 2009 due date, according to Vince Rizzo of Santa Rosa-based Rizzo & Associates.

"We're not in trouble; we're still making deals," he said.

Assets include the property, appraised late last summer at $23.7 million, and nearly $618,000 in cash, according to court documents.

The three-building, 193,000-square-foot complex at 237 Todd Road currently is 72 percent occupied, not including 24,000 square feet of warehouse space leased to troubled wine distributor Billington Imports at least into March. A deal to occupy the space could be completed in 45 days, Mr. Rizzo said.

The project was completed in 2007 with 42,000 square feet already leased at that point, he said. A flurry of leasing in the first nine months of 2008 brought another 80,000 square feet of tenants. But the economic recession and banking crisis left the developers with few prospects for filling the remainder or providing take-out financing to replace the construction loan.

The bank and the developers disagree on how they've attempted to resolve the past-due loan, according to early February court filings. The developers claim the bank refused to provide an additional $1 million for tenant-improvement work as part of the loan agreement and doesn't want to accept the predefault level of payment, or a few percentage points of interest. The bank said it wants the loan agreement's five percentage-point default penalty, or a total rate of 8.5 percent, claiming it's comparable to 12 percent interest paid to the holder of the second deed and 5 percent to the third noteholder.

Bankruptcy Court Judge Alan Jaroslovsky, in a hearing today about the developer's use of cash, deferred discussion of such an "adequate protection" payment of the debt. A case-status hearing is scheduled for Feb. 26 at 9 a.m. in Santa Rosa.

That disagreement over payment led to Central Pacific Bank to start judicial foreclosure proceedings in Sonoma County Superior Court late last year, an action that prompted the developers to seek Bankruptcy Court protection, according to court documents. The developer filed a counterclaim of breach of the loan agreement, claiming that the bank didn't release an additional for $1 million for tenant improvements. The case is pending.

The two other secured claims listed in the reorganization filing are an $800,000 "hard money second" deed from a group of investors led by Clinton Brown of Windsor and a $2 million third deed from Mark and Irma McClure of Roseville. Seven unsecured claims top $93,000, including $59,500 from project general contractor Catalyst Construction of Roseville and $18,600 from PG&E.

Industry West Commerce Center LLC members are Rizzo & Associates of Santa Rosa, with a 64.3 percent stake; Mark and Irma McClure of Roseville, 20 percent; SRI Investments LLC of Petaluma, 9 percent; and Fran Rizzo of Santa Rosa, 6.7 percent, according to court documents.

Central Pacific Bank is under a Dec. 8 cease-and-desist order from the Federal Deposit Insurance Corp. to reduce the size of its commercial real estate loan portfolio and any loan extensions by mid-March.