Blog Archives
Judge OKs Mortgages Ltd. deal for Tempe, but not downtown Phoenix, developer
[Source: Andrew Johnson, Arizona Republic] — A judge approved part of a settlement Tuesday between Mortgages Ltd. and a real-estate developer that had threatened to sue the bankrupt lending firm for shorting it $100 million in constructing financing. The ruling answered a few questions about Mortgages Ltd.’s authority to negotiate deals that could affect the position of its 2,700 investors, who were the Phoenix-based company’s primary funding source. In an oral ruling, Judge Randolph Haines granted Mortgages Ltd.’s proposal to revise terms for a loan that KML Development obtained to build a high-rise condo tower at the northwest corner of University Drive and Ash Avenue in downtown Tempe. KML’s loan was supposed to be for $130 million. Mortgages Ltd. has admitted to funding only $30.3 million of the amount. Under the settlement, the outstanding principal due on that loan is reduced to $14.9 million. That is because the difference was never funded to the borrower. The settlement also allows for a five-year window within which development can commence. Project plans discussed in court call for high-end student housing to be built at the site.
However, Haines rejected portions of the settlement that would have revised repayment terms for two other loans worth a combined $13.1 million that KML borrowed to buy land in downtown Phoenix. One of those loans, worth $7 million, was to buy land in downtown Phoenix at Roosevelt and Third streets. The other loan, for $6.1 million, was to acquire nearby land for a mixed-use project. Allowing such a settlement would have been unfair to investors in those two loans, which Mortgages Ltd. fully funded and are now due for repayment, Haines said.
Investors fronted Mortgages Ltd. about $925 million to make loans to mostly commercial real-estate developers prior to the firm’s involuntary bankruptcy filing in June. Their rights have been a focal point throughout the case. Attorneys for some investors opposed the settlement. They argued that the agreements investors signed when giving money to Mortgages Ltd. do not give them the right to change terms of a loan without investors’ consent. Haines, however, said that even if investors withheld their consent for Mortgages Ltd. to alter deals, as some of have tried to do, that does not mean they were withholding Mortgages Ltd.’s right to continuing making decisions regarding loan terms for the other investors the company acted as an agent for.
Mortgages Ltd. is currently trying to negotiate settlements with other borrowers. Among them are the developer of the stalled Centerpoint condo towers in downtown Tempe and the developer of the stalled Hotel Monroe project in downtown Phoenix.
Attorneys question Mortgages Ltd. settlement with downtown Phoenix developer
[Source: Andrew Johnson, Arizona Republic] — Attorneys for investors in construction lender Mortgages Ltd. expressed skepticism during a bankruptcy hearing Tuesday about a settlement the company wants to enter with a development firm that borrowed money for condominium projects. Mortgages Ltd. attorneys say settling with KML Development is in the best interest of the nearly 500 investors who put up about $43 million for numerous loans to the borrower.
KML planned to build mixed-use condo towers in downtown Phoenix and Tempe. The company borrowed loans from Phoenix-based Mortgages Ltd. under the names University and Ash LLC, Roosevelt Gateway LLC, and Roosevelt Gateway II LLC for development costs. [Note: To read the full article, click here.]
Mortgages Ltd. agreements may restart stalled projects, including Hotel Monroe in downtown Phoenix
[Source: Andrew Johnson, Arizona Republic] — Attorneys for Mortgages Ltd. plan to unveil settlement agreements this week with several developers who contend that the bankrupt real-estate lender underfunded construction loans. The settlements could allow some of the developers to move forward on a boutique hotel [in downtown Phoenix], high-end condos, and other high-profile projects that have stalled because of the lender’s bankruptcy. The agreements, subject to U.S. Bankruptcy Court approval, will affect the standing of more than a thousand investors who supplied Mortgages Ltd. with millions of dollars to make construction and development loans.
Investors’ rights are a sticky issue in the 3-month-old bankruptcy. Mortgages Ltd. had more than $900 million in about 70 loans to developers and land speculators when one of its borrowers pushed it into bankruptcy in late June. Most of the money came from about 2,700 investors, who put money in various investment vehicles the company managed. Some invested directly in specific loans. Others bought memberships in limited-liability companies that owned interests in multiple loans. [Note: To read the full article, click here.]
Mortgages Ltd. real estate investors seek new court representation
Hotel Monroe, downtown Phoenix
[Source: Andrew Johnson, Arizona Republic] — A group of about 50 investors who pumped nearly $8 million into a fund that bankrupt construction lender Mortgages Ltd. managed could have a new committee representing it in court. Judge Randolph Haines granted a motion at a hearing Wednesday at the U.S. Bankruptcy Court in Phoenix clarifying that an existing investor committee does not represent Mortgages Ltd.’s Value-to-Loan fund investors.
That leaves the door open for the U.S. Trustee’s Office to appoint a separate committee to represent those investors. Jonathan Hess, an attorney for the U.S. Trustee in Phoenix, said the office plans to decide on such a request shortly. Valley bankruptcy attorney Dale Schian said he has been asked by a handful of investors in the Value-to-Loan fund to get a committee formed to represent those investors. [Note: To read the full article, click here.]
Known Downtown/Midtown Phoenix Projects associated with Mortgages Ltd.
Downtown Phoenix’s CityScape developer lands key funding
[Source: Andrew Johnson, Arizona Republic] — The developer of downtown Phoenix’s CityScape project will draw on $200 million in funds for current and future projects under a new partnership with a Texas investment-management firm. Red Development LLC will use the money to help pay construction and development expenses, the company announced Friday.
The money comes from a fund managed by CDK Realty Advisors in Dallas. The firm typically buys stakes in real-estate projects to generate a return for institutional investors. The company has invested in prior Red projects. The partnership gives Red access to capital at a time when banks and private lenders are hesitant to finance large-scale construction projects. [Note: To read the full article, click here.]
Mortgages Ltd. empire is built, then crumbles
[Source: Catherine Reagor and Andrew Johnson, Arizona Republic] — Mortgages Ltd. has gone in less than two years from being Arizona’s largest private commercial real-estate lender to a company plunged into bankruptcy following the suicide of its CEO, Scott Coles. Along with questions raised by the suicide, Mortgages Ltd.’s dramatic fall raises the business question of why a firm holding $900 million in high-interest commercial loans suddenly had to borrow money to stay afloat. Some borrowers and investors have wondered whether illegal investment practices, a Ponzi scheme, or bad record keeping could have played a role.
The Arizona Republic has tracked the arc of Mortgages Ltd.’s financial plummet through months of interviews, court testimony, and thousands of documents. The company’s undoing was the result of heavy investment in a falling market, investors pulling out, and a shortfall of cash. The collapse has cut off payments to thousands of panicked investors and stalled several of the Valley’s biggest commercial projects.
The problems started quietly. In early 2006, as metropolitan Phoenix’s housing market showed early signs of slowing, Coles continued to pour hundreds of millions of dollars into residential developments, which included Chandler’s first high-rise and a tower on Phoenix’s Central Avenue that would have rivaled the state’s tallest skyscraper (rendering at right). A year later, the Valley’s housing market was clearly in a downturn: A glut of new homes with no buyers. Falling home prices. Struggling home builders.
Coles did not slow down. He put almost $50 million into Chateaux on Central’s brownstone mansions in central Phoenix and committed to more than $150 million for the high-end high-rises at Centerpoint in Tempe’s Mill Avenue district. “I can’t figure out how Mortgages Ltd. decided to fund the condo projects it did when it did,” said Eric Brown, founder of the Artisan Lofts in Phoenix and an analyst with national real-estate consultants Robert Charles Lesser & Co. “The timing was bad for most new housing developments.” [Note: To read the full article, click here.]
Mortgages Ltd. plans legal action against borrowers; downtown Phoenix Hotel Monroe targeted
[Source: Andrew Johnson, Arizona Republic] — Bankrupt real-estate lender Mortgages Ltd. plans to begin foreclosing on properties being developed by two of its largest borrowers. John Clemency, an attorney representing Mortgages Ltd., said in U.S. Bankruptcy Court on Monday that the company plans to take action against Grace Communities and Rightpath Ltd. Development Group LLC. Mortgages Ltd. claims the borrowers are in default on loan payments.
Grace has five loans from Mortgages Ltd., including ones for the construction of Hotel Monroe in downtown Phoenix and X Wine Lofts near downtown Scottsdale. Rightpath has three loans from Mortgages Ltd. for the development of Main Street Glendale, a mixed-use sports and entertainment project on 500 acres near University of Phoenix Stadium. Both companies deny being in default and are suing Mortgages Ltd. in Maricopa County Superior Court. They allege in separate lawsuits that the lender did not fully fund their loans. [Note: To read the full article, click here.]
Phoenix developers challenge bankruptcy by Mortgages Ltd.
[Source: Andrew Johnson, Arizona Republic] — Developers worried about Mortgages Ltd.’s dwindling assets asked the U.S. Bankruptcy Court on Monday to convert the real-estate lender’s Chapter 11 bankruptcy case to a Chapter 7. The change would significantly affect the Phoenix-based company, other borrowers and the company’s nearly 3,000 investors. Specifically, Chapter 7 proceedings would halt the Phoenix-based firm’s efforts to obtain interim financing for stalled projects while in bankruptcy.
Mortgages Ltd. has been meeting with other lenders, seeking money to pay for business expenses and continue funding unfinished developments such as Hotel Monroe in downtown Phoenix, [Chateaux on Central in midtown Phoenix,] and the Centerpoint condo towers in downtown Tempe.
The motion filed Monday came from Rightpath Limited Development Group LLC, one of several borrowers that claim Mortgages Ltd. did not fully fund its loans. Scottsdale-based Rightpath is developing a spring-training and entertainment facility in Glendale. Its motion asksthe court to convert the Mortgages Ltd. bankruptcy case from Chapter 11 to Chapter 7. [Note: To read the full article, click here.]
Phoenix developers came to rely on Mortgages Ltd.
[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.]
Downtown Phoenix parking rate jumps 50%
[Source: Andrew Johnson, Arizona Republic] — The median monthly parking rate in Phoenix’s central business district jumped 50% to $52.50 from a year ago, according to a survey by commercial real-estate broker Colliers International. Yet, Phoenix had the third-cheapest median rate in the country behind Bakersfield, Calif. ($40 per month) and Reno ($45 per month).
The five most expensive parking districts were New York City’s Midtown area ($585), downtown New York City ($462), Boston ($460), San Francisco ($350), and Chicago ($310). Colliers’ annual North America Parking Rate Survey predicts that as rates increase locally, use of public transit will rise.
Where to park in downtown Phoenix (Downtown Phoenix Partnership)
