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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.]

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.]

Suns, D-backs partners to pay $20M, beat out Jackson St. developers for key spot

[Source: Jahna Berry, Arizona Republic] — Ownership of a parking garage has become a battle between influential downtown Phoenix players, and, in the end, representatives of the Phoenix Suns and Arizona Diamondbacks are likely to get to control the game.  Today, the Phoenix City Council is expected to give the green light to an agreement with the Suns Legacy Properties LLC and AZPB Limited Partnership, representing Suns and Diamondbacks ownership, to take over the 1,400-space city garage because sports fans use it during home games, Deputy City Manager David Cavazos said.

The developers behind a planned downtown entertainment district, who also wanted the garage, are retooling their game plan.  “The major users of the garage are the Diamondbacks and the Suns,” Cavazos said.  “Any time you have a third party, it’s more difficult to manage the garage according to what the custom and practice has been for many years for traffic control and pricing.”

The Jefferson Street Garage is bound by Jackson, Jefferson, Third and Fourth streets.  It’s walking distance from both Chase Field, home of the Diamondbacks, and US Airways Center, home of the Suns.  The deal, which calls for the city to sell the garage for a set price of $20 million, will satisfy the teams and will help the proposed district, Cavazos said.  Suns managing partner Robert Sarver couldn’t be reached for comment. [To read the full article, click here.]

City should preserve Sun Merc, Arizona Republic columnist says

In this October 24, 2007 column, Arizona Republic editorial writer, Richard deUriarte, encourages the City of Phoenix to preserve the 1929 Sun Mercantile Building just as it did with another city-owned property, the Phoenix Union High School buildings at 7th Street and Van Buren.

Phoenix Council may testify in W hotel trial; Court to decide if conflicts existed in talks with developer

[Source: Jahna Berry, Arizona Republic] — Phoenix City Council members and their top aides may have to tell a court whether they had improper talks with the developer of a proposed $200 million W Hotel project.  Last week, a Maricopa County Superior Court judge ordered a trial to sort through conflicting accounts about how the developer tried to sway city leaders to build the project.  That means council members and top aides may have to testify about the behind-the-scenes lobbying tactics in the controversial project.

Developer Suns Legacy Partners was poised last year to build a 39-story W Hotel near US Airways Center in downtown Phoenix.  A key part of the project was an 11-story office and condo tower that would have been built on top of a historic warehouse, preserving it from being torn down.  Even if Phoenix wins the court case, litigation and other problems have effectively killed the hotel project for now.  Legal wrangling has delayed the project, and the developer’s deal with W Hotel expired because ground was not broken by June 30.  In his four-page Sept. 18 ruling, Maricopa County Superior Court Judge Peter Swann wrote that a trial would have to sort out whether Mayor Phil Gordon, his council colleagues, and their aides had improper talks with Suns Legacy Partners, the development group that includes Suns owner Robert Sarver and former Suns owner Jerry Colangelo.

The litigation is just about procedures; it’s not about the City Council’s decision to build a condo tower on top of a historic building, the mayor and the city attorney say.  The city is weighing its legal options, City Attorney Gary Verburg says.  Gordon denies any wrongdoing.  “There was no influence behind the scenes or any type of nefarious-type discussions,” Gordon said.  “Everything was public.”

The preservationists are prepping for trial, although no date has been set.  They filed the lawsuit to protect the 1920s warehouse, the last vestige of Phoenix’s old Chinatown.  “Phoenix can do better with its historic structures.” said Barry Wong, a former state lawmaker who is a spokesman for the coalition of preservationists and Asian-American community groups.

The City Council was essentially sitting as a judge when it overruled the historic-preservation officials who didn’t think the condo tower should be built on top of the historic warehouse, the coalition argued in court.  When acting as judges, council members can’t have outside talks with the parties in the dispute, the preservationists argued.

The warehouse, the Sun Mercantile Building, is owned by the city.  Suns Legacy Partners has a long-term lease agreement.  Lawyers for both sides agree that preservationists and the hotel developer lobbied the City Council.  However, the preservationists argue that council members and their top aides — including the mayor’s senior assistant, Bill Scheel — may have been swayed by undisclosed talks with the Suns Legacy developer.

The contacts included a Dec. 6 letter from the developer’s lawyer.  The preservationists also point to a form letter that Scheel used to respond to several people who e-mailed Gordon about the project.  In addition to replying on behalf of Gordon, Scheel lauded the project as a “reasonable and positive re-use” of the 1920s warehouse.

Scheel, who has helped run Gordon’s election campaigns, downplayed the letter.  Gordon said his staff gives him advice, but ultimately he and the rest of the council made the final call.  In court, the city argued that council members were more aggressively lobbied by residents and groups that opposed the 11-story tower.  The city’s legal team also argued that the City Council avoided communicating with either side after it was clear that issue would be appealed to the full council.

Since council members are routinely lobbied on issues, it would have been impossible for them to know before the appeal that they should be careful about talking about the case, Verburg said.  In affidavits, council members said that they did not talk to the developer after Suns Legacy appealed the decision the historic preservation decision.  Swann, however, ruled that any contact with parties in the hotel fight could fall under scrutiny.

[Click here to download Maricopa County Superior Court Judge Peter Swann’s ruling of September 17, 2007.]

$200M W Hotel proposal is dealt a killing blow by ruling; Lawsuit arose in bid to save Sun Merc

[Source: Jahna Berry, Arizona Republic] — A proposed $200 million boutique hotel in downtown Phoenix was on life support, but a judge’s Tuesday ruling has effectively killed the existing deal, the developer said.  Phoenix Suns majority owner Robert Sarver was poised to build a 39-story W Hotel near US Airways Center.  The development would have included an 11-story office and condo tower built on top of a historic 1920s warehouse.

Maricopa County Superior Court Judge Peter Swann ruled that a jury should decide whether the Phoenix City Council had improper talks with Sarver before it decided the fate of the warehouse on the hotel site.  That litigation could drag on for a year or two years on appeal, said Robert Yen, an attorney who represents several groups that want to protect the Sun Mercantile Building, which is considered by many to be the last vestige of Phoenix’s once thriving Chinatown.  “It was a building built by a very prominent Chinese family,” Yen said of the Sun Mercantile.  Back in the 1920s, the property housed a wholesale grocery store owned by Shing Tang, a Chinese immigrant.  The Tang descendents, many of whom still live in Phoenix, include the late Thomas Tang, a former Phoenix City Councilman and federal judge.

The hotel project had another problem, Sarver said Tuesday.  The agreement with Starwood Hotels and Resorts Worldwide Inc.’s W Hotel brand expired because the project didn’t break ground by June 30, he said.  “It’s too bad, because that’s a part of Phoenix that needs development,” Sarver said.

[Click here to download Maricopa County Superior Court Judge Peter Swann’s ruling of September 17, 2007.]

Alternative design for hotel/condo project leaves Sun Merc intact

While visiting the online Skyscraper Forum, a Phoenix resident found renderings of architect Will Bruder’s proposed design for the W Hotel and condo project.  One view looks southeast along Jefferson Street between US Airways Center on the west and Suns parking garage on the east (where you can get an inkling of how the back of the building cantilever’s over the Sun Mercantile Building).  A second view shows how the physical integrity of the historic structure is protected to a greater extent.

Alternatives to "facadism" exist right here in Phoenix

According to the National Park Service, responsible for maintaining the National Register of Historic Places, no property listed on the Register would stay on the Register if descrecrated as originally proposed for Phoenix’s historic Sun Mercantile. 

That doesn’t mean creative architectural design or adaptive reuse of historic properties can’t occur.  Examples exist right here in Phoenix.  For example, the rehabilitation of the Phoenix Union High School Buildings at 7th Street and Van Buren blends the old with the new.  City of Phoenix Historic Preservation Office and Downtown Development Office staff, University of Arizona staff, and project architects have worked closely together to carefully meld historic and new.  The rendering above shows the historic building on the left and new construction glass entry, elevator, stairwell, and restrooms on the right.

Asian American coalition attempts to save Phoenix landmark and build a museum

The San Francisco-based Nichi Bei Times published an article in their February 23, 2006 edition about the Save SunMerc Coalition’s effort to preserve the Sun Mercantile Building and develop an Asian American Museum.  The author, Sam Chu Lin, contributes to various newspapers and reports for KTTV Fox 11 News in Los Angeles.  The same article has appeared in the March 3, 2006 issue of Asian Week and AsianWeek.com.

 
 
 
 
 
 
 
 
 

 

Row over Chinatown landmark stirs memories

Photo by Angela Cara Pancrazio, Arizona Republic[Source: Angela Cara Pancrazio, Arizona Republic] — If Mary Lum’s Mesa house ever caught fire, she would grab the only thing she cares about: a plastic storage box overflowing with photos and documents, her great-grandmother’s green card and a hand-colored photo of herself with her sister Suzie taken in Hong Kong before they came to America, a place the Chinese called Gold Mountain.  These are some of the traces of the earliest Chinese families that are scattered and stacked inside homes across the Valley.  A grandfather clock hanging on a wall, yellowed Chinese newspapers folded inside a cigar box, faded photos of family grocery stores crammed into dining room buffets.

Many Chinese-Americans, like Lum, are no longer willing to remain quiet about how their families, the first wave of Chinese immigrants, helped shape Arizona.  Last fall, hundreds rallied to save the last remnant of Phoenix’s Chinatown, known as the Sun Mercantile, when developers proposed building an 11-story condo and office tower atop the brick warehouse.  But they weren’t just trying to save the Chinatown landmark; they were trying to save their Chinese and Asian-American heritage here.  The old grocery warehouse is the perfect place, they say, to tell their story.  A place they plan to call the Arizona Asian-American Museum. And what story do they want to tell?  [Note: To read the full article, click here.]