Bankrupt lender asks for $125M in aid for metro Phoenix projects

[Source: Andrew Johnson, Arizona Republic, June 29, 2008] — Financing from Phoenix Suns majority owner Robert Sarver’s real-estate company could help bankrupt Mortgages Ltd. continue to fund some big-ticket developments and keep running its business.  Phoenix-based Mortgages Ltd. filed an emergency motion Friday to obtain $125 million from Southwest Value Partners.  Without the money, Mortgages Ltd. says it will not have enough cash to operate.  The company immediately sought $500,000 from the lender for “payroll and other short-term obligations.”  Grace Communities, a developer that borrowed money from Mortgages Ltd., said Friday that it opposes the agreement.

Rendering of Hotel Monroe project in downtown Phoenix.Southwest Value Partners is a real-estate investment company of which Sarver is a co-founder and executive director.  Its loan to Mortgages Ltd., which finances commercial real-estate projects, would be broken into two parts, including $5 million to pay down debt and pay for business expenses and $120 million to fund six development projects.  They include the Centerpoint condo high-rise in Tempe and Hotel Monroe in downtown Phoenix.

Problems at Mortgages Ltd. have intensified since its Chairman and Chief Executive Officer Scott Coles died June 2 in an apparent suicide.  The lender filed for Chapter 11 bankruptcy Monday after Scottsdale developer Grace Communities tried to force it to liquidate under Chapter 7.  Grace is developing Hotel Monroe, a boutique hotel project that has shut down due to a lack of money to pay contractors.  The developer claims Mortgages Ltd. is behind on funding a $75.6 million construction loan it borrowed for the project.  In its emergency motion, Mortgages Ltd. listed proposed amounts it might give to developers.  They are:

Phoenix

  • $35 million for Hotel Monroe.
  • $5 million for Chateaux on Central, a Victorian-style development that Mortgages Ltd. took ownership of in May under a lawsuit settlement with the project’s developer, Central PHX Partners.
  • $3 million to Zacher Homes, which Clemency said is for infill developments in Phoenix.

Outside Phoenix

  • $75 million for Centerpoint in Tempe, which includes two towers, the first of which is close to completion.
  • $5 million for an entity identified as National Retail.  John Clemency, an attorney for Mortgages Ltd., said that loan was for Tutor Time child-care center.
  • $1.1 million for Grace’s Ten Wine Lofts condo development at Scottsdale and Osborn roads in Scottsdale.

The deal was not finalized as of Friday afternoon and is still subject to the approval of the bankruptcy court.  A court hearing is set for 2:30 p.m. Tuesday.  [Note: To read the full article, click here.]

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