A downtown Los Angeles high-rise being built by beleaguered commercial real estate developer Meruelo Maddux Properties Inc. has filed for Chapter 11 bankruptcy protection.

Meruelo Maddux-845 S. Flower Street LLC, which controls the development at 705 W. Ninth St., filed for Chapter 11 protection on Sept. 3, according to a U.S. Bankruptcy Court filing. The project is a 36-story luxury rental building that was expected to be completed by the end of the year.

Meruelo Maddux-845 S. Flower Street LLC is controlled by Meruelo Maddux Properties, which filed Chapter 11 in March and remains in reorganization. The company was hit hard by the collapse of commercial real estate market and was unable to make payments on $266 million in debt. The project was excluded from Meruelo Maddux's orginal bankruptcy filing.

The development, which straddles South Park and the Financial District, was planned as Meruelo Maddux's first ground-up residential tower. Meruelo Maddux, downtown L.A.'s biggest land owner, had plans before the bankruptcy to turn much of its properties into residential developments.

The project first ran into troubles in January 2008, when the company lost construction financing. Eight months later it secured a high-interest, $84 million replacement loan from an affiliate of Century City real estate investment manager Canyon Capital Realty Advisors LLC.

Richard Meruelo, chief executive of Meruelo Maddux, was optimistic about the project's prospects in an interview with the Business Journal this summer. He said leasing would begin on the 214-unit building in January. The Sept. 3 bankruptcy filing caught lender Canyon Capital off guard.

"We are very surprised at the timing. We are disappointed that it occurred," said Bobby Turner, managing partner of Canyon Capital Realty Advisors. He declined to comment further because of legal concerns.

Canyon Capital is in a position to take possession of the property if Meruelo Maddux cannot reorganize the LLC.

According to the bankruptcy filing, the limited liability company's 20 largest unsecured creditors, mostly contractors that have worked on the project, are owed more than $7.5 million.

Another Meruelo Maddux entity that was excluded from the March filing, Meruelo Chinatown LLC, also filed for bankruptcy on Sept. 3.

Meruelo Maddux was immediately unavailable for comment.

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