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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.

Downtown Phoenix 2.0?

[Source: Jon Talton, Rogue Columnist] — It’s surprising that some appear so sanguine about the likely foreclosure of most units at the 44 Monroe condo tower.  This, along with a similar fate for the Summit at Copper Square and 44’s developer Grace Communities failing to rehab the historic Valley National Bank building because of the Mortgages Ltd. fiasco, represents a devastating setback for luring private investment into downtown Phoenix.  Maybe people are too shell shocked to take it all in.  Maybe they’re willing to settle for things being better than they were 20 years ago, which is undeniably true.  Neither option is wise for those who wish the central city well.

Make no mistake: the Phoenix depression is metro-wide.  I saw rotting framing and miles of distressed subdivisions out in the exurbs.  Tempe foolishly threw away its opportunity to build a mid-rise boutique downtown of national quality — now it has an empty condo high-rise and Mill Avenue is swooning again.  But my conviction remains that there is no healthy major city without a strong urban downtown, and center city problems left unchecked have a habit of spreading.  (And don’t be taken in by the propaganda: Phoenix did have a vibrant downtown — it was killed by civic malpractice).

In Phoenix, the past few years have seen some notable triumphs: the beginnings of a downtown ASU campus, light rail, a convention center worthy of such a tourist-dependent city, a new convention hotel, and a blossoming of independently owned restaurants.  The biosciences campus has been planted (although it has been allowed to stall and, I fear, its future is uncertain).  Yet major private investment has not followed; 44 Monroe and the Summit represented the strongest chance for that within the existing local business model of “real estate first.”  The many towers proposed for the entire Central Corridor are now blighted empty lots.  CityScape?  I’ll believe it when I see it.  What I see is a homely suburban design, not the soaring “game changer” sold to the public on the front page of the newspaper.

The great recession, the great reset: Where will they leave downtown Phoenix and the Central Corridor?  It’s tough all over, now that a commercial real-estate crisis will follow the explosion of the residential and mortgage bubble.  Nationally, suburbs and exurbs are being hit harder than downtowns.  Suburban poverty is spreading.  The massive destruction of wealth and overhang of leverage make restarting the sprawl machine of old impossible.  Smart places, such as Denver, are trying to retrofit the suburbs for a higher energy future. Some suburbs themselves are working to provide walkable, mixed-use and even urbanish neighborhoods.

The headwinds in Phoenix are different.  Most people have blinkered suburban values — they can’t imagine a different life.  City Hall’s decisions to clear-cut hundreds of buildings and drive out businesses that catered to the working poor have left Phoenix without the bones that other cities have used to revive their cores.  The old headquarters companies were bought or dismembered and their successors often keep only token presences in downtown (imagine, for example, if Wells Fargo had built its operations center downtown instead of in Chandler).  And the limited economy leaves few non-real estate businesses anyway.  I could go on, but what can be done now, in the reset?  [Note: To read Jon’s recommendations, click on Downtown Phoenix 2.0?]

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.]

Downtown Phoenix 44 Monroe condos “slow to sell”

Rendering of 44 Monroe, downtown Phoenix

[Source: Arizona Republic] — As the [global] economic downturn grinds on, downtown Phoenix boosters have been anxiously watching sales at several new condo projects, including 44 Monroe at the intersection of Monroe St. and 1st Ave. City leaders want to revive downtown Phoenix, and getting more people to live there is a crucial part of that plan.

Although 44 Monroe wrapped up construction this year, units have been slow to sell… According to Ryan Zeleznak, Grace Communities principal, of the 196 units in the 34-story building, 96 (49%) are in escrow and about a dozen (6%) have sold (including one for $1.55 million last week).

Mortgages Ltd. settles with 7 developers in Phoenix, elsewhere

[Source: Arizona Republic from U.S. Bankruptcy Court records] — Bankrupt construction lender Mortgages Ltd. has reached settlements with seven developers that account for more than one-half the company’s $925 million loan portfolio.  Under the agreements, Mortgages Ltd. will subordinate investor interest, find additional capital for certain borrowers, and reduce interest rates for others.  The borrowers agree to drop pending lawsuits against the company.

  • SOJAC I LLC — Proposed Jackson Street Entertainment District in downtown Phoenix.
  • MK Custom Residential Construction LLC — Various condo projects in central Phoenix.
  • Grace Communities — Hotel Monroe in downtown Phoenix, X Wine Lofts in Scottsdale, and others.
  • University & Ash LLC, Roosevelt Gateway LLC, Roosevelt Gateway II LLC — Various proposed condo developments in Phoenix and Tempe.
  • Rightpath Ltd. Development Group LLC — Main Street Glendale near University of Phoenix Stadium.
  • Avenue Communities LLC — Centerpoint Condominiums in Tempe
  • Bisontown LLC — Residential communities.

Mortgages Ltd. plans legal action against borrowers; downtown Phoenix Hotel Monroe targeted

Nick Oza, Arizona Republic[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.]

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.]

Lender for major downtown Phoenix projects files for bankruptcy

[Source: Andrew Johnson, Arizona Republic, June 23, 2008]Mortgages Ltd. filed for Chapter 11 bankruptcy Monday night, under pressure from a borrower that earlier had filed a petition seeking to liquidate the lender’s assets.  John Clemency, an attorney for Mortgages Ltd., said that the move seeking a reorganization of its debts could help bring stability to the embattled company, which has an estimated $925 million in loans outstanding and has faced questions since the June 2 death of its chairman and CEO, Scott M. Coles.

Mortgages Ltd. also is lining up outside financing from real-estate lender Southwest Value Partners to continue at least servicing existing borrowers, Clemency said.  The move by the Phoenix-based commercial real-estate lender comes three days after Scottsdale-based developer Grace Communities, one of its borrowers, filed a petition to force Mortgages Ltd. into Chapter 7 bankruptcy.  [Note: To read the full article, click here.]

Downtown Phoenix developer petitions court to force lender into bankruptcy

[Source: Andrew Johnson, Arizona Republic, June 20, 2008] — A developer behind several high-profile real estate projects and a construction contractor filed a petition late Friday to force lender Mortgages Ltd. into bankruptcy.  Grace Communities, which is developing the 44 Monroe condominium tower and Hotel Monroe in downtown Phoenix, filed motions in U.S. Bankruptcy Court for the District of Arizona asking a judge to put Mortgages Ltd. into Chapter 7. 

Separately, the firm also filed a lawsuit against Mortgages Ltd. seeking the $48 million in financing it claims it is owed for the Hotel Monroe project and to get a $100,000 bond from the lender’s regulator, the state Department of Financial Institutions.  If a judge accepts the bankruptcy petition, the Phoenix-based financier would be required to sell its assets.  Grace Communities also filed an emergency motion to appoint an independent trustee to take over Mortgages Ltd.’s operations.  [Note: To read the full article, click here.]

Other notable Mortgages Ltd. projects funded in and around downtown Phoenix: