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Phoenix homebuyers may qualify for financial help in purchasing foreclosure

[Source: City of Phoenix] — Potential homebuyers may qualify for $15,000 in down payment and closing cost assistance to help buy a foreclosed single-family home, townhouse, or condominium in the city of Phoenix.  The city of Phoenix Neighborhood Stabilization Program (NSP) Homeownership Assistance Program is presenting two information sessions to outline eligibility criteria.  The first session will be from 6 to 7:30 p.m. Wednesday, April 14, at Devonshire Senior Center, 2802 E. Devonshire Ave. and the other from 6 to 7:30 p.m. Wednesday, April 28, at the Washington Activity Center, 2240 W. Citrus Way.

The loan is only repaid to the city when the homebuyer sells the home, refinances, or moves.  The home must pass a Housing Quality Standards or FHA standards inspection and funds cannot be used for rehabilitation activities.  Families must be Federal Housing Administration creditworthy and complete the required eight-hour Homeownership Education and two-hour one-on-one Credit Assessment counseling.  The property must be maintained as the principal residence and the total household income must be below 120 percent of area median income, which is based on family size.  Participants must contribute a minimum of $1,000 of their personal funds for down payment and closing costs.

More sessions will be offered throughout the city during the next few months.  Funding for this program will end by late summer.  For more information about the program, a list of future sessions and other homeownership opportunities, call 602-262-6602 or click here.

Wisconsin firm buys troubled midtown Phoenix project

[Source: Milwaukee Business Journal] — Main Street Ingredients, a La Crosse company that manufactures and distributes food-processing ingredients, has been selected to buy the “opulent” Chateaux on Central brownstone project in Phoenix for $7 million.  The unfinished residential development at the northwest corner of Central Avenue and Palm Lane has been financially troubled since construction started in 2005.  All forward movement stopped when the lender, Mortgages Ltd., took it back in 2008 shortly before that company was forced into Chapter 11 bankruptcy protection.

Mark Winkleman, chief operating officer of ML Manager LLC, said MSI West Investments LLC submitted the winning bid for the Chateaux.  Closing on the property is scheduled for Friday.  ML Manager is the court-approved entity administering the Mortgages Ltd. loan portfolio in the wake of the lender’s bankruptcy.  The Chateaux is one of the first Mortgages Ltd. properties to be sold off.

Dave Clark, CEO of Main Street Ingredients of La Crosse, confirmed that his company is behind the winning bid.  Main Street recently created MSI West, a limited-liability company registered with the Arizona Corporation Commission.  The company has purchased real estate in other states and started looking around the Phoenix area last year.  “We like what we see in downtown Phoenix,” Clark said.  “We feel this will be a good investment, but we’re not here to turn a dollar.”

The project was designed as 21 five-story residences with private elevators and rooftop terraces.  The announced prices ranged from $2.8 million to $4.5 million per unit, but none were sold.  Desert Hills Bank provided the first construction loan, but the relationship soured when the bank filed a lien on the property.  The late Scott Coles, then CEO of Mortgages Ltd., stepped in to salvage the project, but Coles committed suicide on June 2, 2008, thrusting the entire Mortgages Ltd. loan and property portfolio into limbo.  Within a month of Coles’ death, several borrowers forced Mortgages Ltd. into Chapter 11 bankruptcy.

Bank of America moves to foreclose on Viad Tower in midtown Phoenix

[Source: Ken Alltucker, Arizona Republic] — A lender is seeking to foreclose on the Viad Corporate Center, a high-rise office tower on Central Avenue in Phoenix, the latest example of the region’s commercial real-estate woes.  Bank of America has asked a Maricopa County Superior Court judge to appoint a receiver for the signature tower at 1850 N. Central Ave.  The lender said the building’s owner has not kept current since December on a $65 million loan.   A spokesman for Costa Mesa-based real-estate investment firm McCarthy Cook & Co., the building’s owner, declined to comment on the lender’s action.

The ownership group, MCC/I&G Viad Office Tower Owner LLC, acquired the 478,000-square-foot tower near the height of the Valley’s real-estate boom in 2006 for about $105 million.  At the time, the office tower was nearly full.  Yet occupancy has dipped to less than 80 percent with significant leases expiring next year.

BofA said in court documents that, since December, the building’s owner has not paid interest, tax and insurance escrows, late charges and other fees.   Viad’s owners owed more than $3.9 million in back payments and fees as of January.   With BofA seeking an accelerated repayment per the loan’s terms, the debt has escalated to over $81.2 million in principal, fees and other costs, the lender said in court documents.  BofA wants the court to appoint San Diego-based Trigild Inc. as the building’s receiver.  Trigild specializes in distressed-property management, receivership and loan recovery.   [Note: Read the full article at Bank of America moves to foreclose on Viad Tower in midtown Phoenix.]

1931 bank building in downtown Phoenix headed for foreclosure

[Source: Jahna Berry, Arizona Republic] — A downtown Phoenix 1931 bank building that was entangled in Mortgages Ltd.’s collapse appears headed for foreclosure.  The 12-story Professional Building at 15 E. Monroe Street is scheduled to be auctioned on April 20, according to a notice of trustee sale filed at the Maricopa County Recorder’s Office.  The notice is the first step in the foreclosure process.  Thirteen investors are owed $76.5 million, according to the notice.  The largest share is owed to a court-appointed entity that is managing the remainder of lender Mortgages Ltd.’s assets.

Phoenix-based Mortgages Ltd., helmed by the late Scott Coles, was once considered Arizona’s largest private commercial lender.  The firm ran into trouble when the real estate market crashed, the firm couldn’t raise new capital from investors and couldn’t meet some of its loan obligations.  When Mortgages Ltd. went bankrupt, developer Grace Communities was transforming the former home of Valley National Bank into an upscale 150-room boutique hotel called Hotel Monroe.  Construction stopped and the partially-renovated building sits empty near Central Avenue and Monroe Street.

44 Monroe luxury condos in downtown Phoenix on road to foreclosure

[Source: Jahna Berry, Arizona Republic] — Most of the units in 44 Monroe, the swank, 196-unit luxury high-rise could be headed for foreclosure.  The bank has filed a notice of trustee’s sale, the first step toward taking over 182 unsold condos.  The units are scheduled to be sold to the highest bidder on April 14, according to county documents.  A notice of trustee’s sale doesn’t always end in foreclosure but it’s a signal that the project has serious financial problems.

The 44 Monroe owes Corus Construction Venture, LLC $86.8 million, according to county documents.  Officials at Grace Communities, the project’s Scottsdale developer, declined to comment on today.  The project near 1st Ave. and Monroe St. was completed in 2008.

44 Monroe’s lender collapsed and was taken over last year by the FDIC, which owns a 60 percent stake in Corus Construction Venture, LLC.  The rest is of the firm is owned by private equity consortium led by Starwood Capital Group.

This is the second upscale high rise in the heart of downtown Phoenix to face financial trouble in recent months.  The Summit at Copper Square, a 165-unit condo complex, sought Chapter 11 protection October.  The developer headed to bankruptcy court to stop its lender from foreclosing on 74 unsold units.  The Summit’s bank, Scottsdale’s Stearns Bank, filed a notice of trustee sale last summer.

Before the recession and the housing bust crippled the economy, Phoenix leaders hoped that affluent condo dwellers who lived in projects like 44 Monroe and the Summit would help revive downtown Phoenix.  [Note: Read the full article at 44 Monroe luxury condos in downtown Phoenix on road to foreclosure.]

Recession rising like Phoenix with area delinquencies surging

[Source: Brian Louis, Bloomberg] — Drive up to the Peaks Corporate Park in north Scottsdale, Arizona, and the only person you’ll encounter at the luxury office complex is a security guard.  The development was planned to offer executive suites with views of the McDowell mountains, neighbors such as General Electric Co. and a location just minutes away from Jack Nicklaus’s Desert Mountain golf courses.  Plans to lure tenants haven’t materialized and today the complex in this city next to Phoenix is empty, the entrance blocked by a traffic barricade.

Delinquencies in the Phoenix area on loans backed by office, industrial, retail and apartment properties have risen more than five-fold since March, according to data compiled by Bloomberg.  The Phoenix region has the second-worst U.S. delinquency rate, behind Detroit’s 10 percent.  In Phoenix, the economic recovery looks a lot like a recession.  “A commercial recovery in markets that are heavily dependent on construction will be slow, which means the overall recovery will lag the nation as a whole,” said Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School in Philadelphia.  “These are more volatile markets and getting back to normal could take years.”

Phoenix and other southern and western cities such as Atlanta, Houston, and Dallas grew because they offered an affordable lifestyle to middle-class Americans, said Edward Glaeser, an economics professor at Harvard University in Cambridge, Massachusetts. That growth has slowed.  The Phoenix area’s population is forecast to increase 1.6 percent in 2009 from 2008 and 1.8 percent in 2010, according to a forecast by Scottsdale, Arizona-based real estate and economic consulting firm Elliott D. Pollack & Co.  That’s the slowest growth since at least 1990.  Employment may fall 6 percent in 2009 and another 1 percent in 2010, according to the firm.

The real estate crisis has brought economic growth to an end.  Arizona had the highest unemployment rate since 1983 in July at 9.2 percent, according to the U.S. Bureau of Labor Statistics.  The rate fell to 9.1 percent in August.  Single- family building permits in metropolitan Phoenix may fall to 5,973 this year, down 81 percent from 2007, according to a consensus forecast of real estate and consulting firms and universities compiled by Arizona State University’s W.P. Carey School of Business.  “The economy in Phoenix is in tatters right now,” said Matthew Anderson, a partner at Foresight Analytics LLC in Oakland, California.  “It’s now really hit the skids.”  [Note: Read the full article at Recession rising like Phoenix with area delinquencies surging.]

Moody’s lowers ratings outlook on City of Phoenix to negative

Phoenix City Hall

[Source: Wall Street Journal] — Moody’s Ratings Service lowered its ratings outlook on the city of Phoenix, Arizona, to negative, citing ongoing revenue declines and expected tax-base losses in the city, which will weaken its credit profile.  Arizona’s largest city, and the fifth most populous in the U.S., is in the midst of a severe recession that began with the housing crisis and now includes most other sectors of the economy.

Unemployment has been less of a burden in the city, reaching 8.7% in July, compared with 9.5% for the state and 9.7% for the nation.  But a weak job market combined with the potential for more foreclosures means many consumers in the area will severely limit their discretionary purchases well into 2010, Moody’s said.

The ratings agency said that, despite the city’s efforts to maintain fiscal stability during the recession, the outlook cut reflects Moody’s expectation that finances will remain under pressure for the foreseeable future, given those broader economic concerns and uncertainty about the region’s next economic expansion.  Moody’s has Phoenix at Aa1, which is one notch under Aaa.  The outlook change affects about $2.4 billion of debt.

Earlier this month, Moody’s lowered its ratings outlook on Arizona’s Aa3 issuer rating, which is three notches under Aaa, to negative.  The ratings agency cited similar concerns about revenue underperformance.  Despite those concerns, once the housing market levels off, Moody’s said Tuesday, Phoenix will resume its above-average long-term growth due to its high-skill office jobs and high-tech manufacturing sector.  The city continues to develop a number of revitalization efforts, including a convention-center expansion, light-rail construction, and development of a downtown campus for Arizona State University.  Moody’s said those efforts and ongoing population increases should help the city recover at a faster rate.  [Note: Read the full article at Moody’s lowers ratings outlook on City of Phoenix to negative.]

Phoenix’s Opportunity Corridor knocked by recession

Opportunity Corridor

[Source: Mike Sunnucks, Phoenix Business Journal]Four years ago, Phoenix Mayor Phil Gordon announced he wanted to rehabilitate run-down areas along the 12-mile stretch from the Arizona Capitol through downtown Phoenix to Arizona State University in Tempe.  Dubbed the Opportunity Corridor, it was to be filled with new office, residential, biomedical, and industrial developments.  Today, inopportune times have stalled those plans.

Van Buren and Washington streets east of downtown still are dilapidated and, in some cases, are worse off because of the recession and real estate crash.   “It’s just in the tank,” said Mark Dioguardi, a real estate expert and attorney with the Scottsdale law office of Dioguardi Flynn LLP.

Like much of the Phoenix commercial real estate market, Dioguardi said the Opportunity Corridor is plagued by foreclosures, unsold vacant lots, shuttered businesses, and almost zero transactions, financing, and construction.  [Note: Read the full article at Phoenix’s Opportunity Corridor knocked by recession.]

Metro Phoenix commercial foreclosures rocket

[Source: J. Craig Anderson, Arizona Republic] — More than 2,000 commercial properties in Maricopa County have received 90-day foreclosure notices since Jan. 1, representing $6.3 billion in real-estate loans on which the borrowers have failed to make payments.  That number is staggering when placed in contrast with the average commercial foreclosure rate over the past decade, which has been practically zero.

The problem, sparked by property-value declines and a paucity of refinancing options, has produced a steady flow of distressed commercial properties onto the market, with a heavy emphasis on small and midsize office and retail centers.  Industrial and warehouse properties also have suffered tremendously, due in large part to disappearing jobs.  More than 1 million square feet of previously occupied industrial and warehouse space was vacated in the second quarter.

Commercial-real-estate broker Bret Isbel has been tracking actual foreclosure sales in Maricopa County, which can take several months to occur following the issuance of a foreclosure or trustee’s sale notice.  The number of notices issued has been holding steady at between 300 and 400 a month since January, but actual foreclosures vary more widely, because it can take months — potentially even years — for a property in default to be repossessed by the lender or sold to a third party.  In Arizona, a lender can foreclose in either of two ways: It can take the borrower to court via foreclosure, or it can bypass the court system and call for a trustee’s sale, which is quicker and less expensive but requires the lender to waive certain legal rights.

Isbel said there’s no indication that the pace of commercial foreclosures is about to taper off.  If anything, it’s still building momentum.  “We’re at the tip of the iceberg, there’s no doubt,” said Isbel, of Scottsdale-based GPE Commercial Advisors. “It’s just a question of how big it is underneath.”

The inescapable problem for many commercial developers is that they’ve had to maintain the same construction loan payments while lowering rents because of dwindling demand for leased commercial space.  While the federal government has created programs to help homeowners in danger of foreclosure negotiate lower mortgage payments, no such program exists for commercial-property owners, and none is expected.

By and large, commercial-mortgage lenders are not modifying commercial-real-estate loans, even as commercial-lease rates have plummeted as much as 75 percent in some areas.  Isbel said county records show more than 50 commercial foreclosure sales in June, the most recent full month available, with a total mortgage value of about $54 million.  Geographically, they’re all over the map, including the East Valley, West Valley, Scottsdale, and downtown Phoenix.  [Note: Read the full article at Metro Phoenix commercial foreclosures rocket.]

Downtown Phoenix high-rise’s woes may hurt other area condos

[Source: Jahna Berry, Arizona Republic] — Financial woes at a luxury downtown high-rise could hurt property values at similar central and downtown Phoenix condominium complexes.  Last week, the lender for the Summit at Copper Square took the first step toward foreclosing on 74 unsold units in the multicolored tower near Chase Field.

Scottsdale’s Stearns Bank Arizona issued a notice of trustee sale, which says the units will be sold to the highest bidder on Oct. 14.  While a notice of trustee sale doesn’t always end in foreclosure, it’s a signal that the developer is having financial problems.  If the bank does foreclose on the units, those unsold condos in the 165-unit building will be sold at a discount, said Diane Drain, a Phoenix attorney.  She likened foreclosures to a “black mold” that lowers property values within the building.  And, “if you have several condo developments around it, and they are all in hot water, the black mold seeps out more and more and more,” she said.

The Summit at Copper Square opened near Chase Field in 2007.  The condominium complex at Jackson and Fourth streets hit hard times after the Valley real-estate market tanked.  The developer has struggled to make debt payments because it has been able to sell only 91 units.  The Federal Deposit Insurance Corporation shut down the developer’s bank.  And he credit crisis has made it difficult for W Developments LLC to restructure its debt with its new lender, Stearns Bank Arizona.  The notice of trustee sale says the loan principal is for $44 million.

Developer David Wallach said that loans for the project totaled about $64 million.  The developer paid $40 million and as of last year, they owed about $28 million, including interest.  Wallach said that his firm is working to avoid foreclosure.  “Smart developers look at all options,” he said.

The Summit’s immediate financial problems will probably not impact the fortunes of downtown Phoenix or Wallach’s plans to help build a proposed Jackson Street Entertainment District, a cluster of restaurants, nightclubs and music venues, he said.  [Note: Read the full article at Downtown Phoenix high-rise’s woes may hurt other area condos]