[Source: Andrew Johnson, Arizona Republic] — Many Arizona developers relied on Mortgages Ltd. In a business where even minor delays can add millions of dollars to projects, real-estate developers turned to the Phoenix-based commercial-mortgage lender for hard cash fast. In most cases, the company and its investors financed short-term loans intended to bridge gaps between the equity a developer was investing in a project and what it intended to obtain later from other lenders.
Mortgages Ltd. often financed real-estate projects deemed too risky by more-conventional lenders. With the company now in Chapter 11 bankruptcy, many local industry analysts feel that the risky loans may have contributed to the company’s financial problems. In return for fast approval at higher risk, developers paid significant upfront fees and higher interest rates than traditional bank lenders typically charge. Developers accepted the higher costs because they might not qualify for loans elsewhere.
Phoenix-based APEX Development Group obtained three loans in recent years from Mortgages Ltd. for residential projects in south and central Phoenix. APEX principal Gary Leavitt said quick loan approval was a primary reason his company turned to the lender. Mortgages Ltd. isn’t the only hard-money lender in town, but it’s the largest with $925 million in outstanding loans. The firm’s loan portfolio includes such high-profile developments as the Centerpoint condo high-rise in downtown Tempe, Hotel Monroe in downtown Phoenix, and Main Street Glendale, a 500-acre sports and entertainment project near University of Phoenix Stadium. [Note: To read the full article, click here. To read a related article about individual investors caught up in the situation, click here; to read about Southwest Value Partners’ decision to withdraw an offer to provide financing to Mortgages Ltd., click here.]