[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?]
[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.]
Below is the transcript of Steve Weiss’ welcome address at the opening of the Downtown Voices Coalition’s Visioning Conference on January 15, 2010 at the Matador Mexican Restaurant.
Good evening and welcome to the pre-event for tomorrow’s Downtown Voices Coalition Visioning Conference.
You know, Downtown Voices was formed in a place just like this. As a matter of fact, if the Matador bar wanted to, they could create a new drink called the DVC. All you need is a shot of good tequila and a signature on an article of incorporation!
What some may not realize is that Downtown Voices Coalition was the culmination of a chain of events that began with a move to bring a pro football stadium to downtown. As the art folks and small business owners got wind of the plan, they felt their work to make a new and interesting arts district was going to suffer with a giant stadium plunked in its center. Though the protests didn’t stop the demolition and razing of the Evans Churchill neighborhood by speculators and the City, it did manage to shine a light on the project, and successfully persuade the city officials to put the idea aside.
For the first time, artists and small business folks started talking to each other. Then, the Jerde Project, a big box mall development, was floated as another direction for downtown. Ideas were being discussed for another ASU campus, and suddenly the University began as a player in the fate of the downtown community. The fledgling organization known as D-PAC, the Downtown Phoenix Arts Coalition, felt now was the time to get the other voices heard, ones that didn’t have political power or an outstretched hand looking for tax incentives and variances.
The result was an event singular in the City’s history: A one-day facilitated discussion at the Icehouse of over 80 downtown stakeholders, to determine what WE as a group wanted for the future of downtown Phoenix. The resulting report created from the discussion was titled “Downtown Voices: Creating a Sustainable Downtown.” It was not only presented to the City of Phoenix, but also found its way into many of the aspects of the newly created Downtown Strategic Plan.
On that day, when we all met and talked, new relationships were formed.
Artists, business owners, developers and, yes, even city officials began to realize that the ultimate goal of the downtown stakeholders were actually very similar.
However, as the dust began to settle from the good work done, development projects in once untouched and unwanted areas began to rise. We as stakeholders learned how zoning by variance and self-imposed hardships could dramatically change the development rulebook.
A key group of stakeholders, coming from different backgrounds yet tied together with similar concerns, realized it would be beneficial to speak with one voice, the voice of what became the Downtown Voices Coalition. We met with a lawyer at the old Ramada Inn downtown bar, and with a toast, began our first mission and organization.
Negotiating a better project for The Summit at Copper Square became our first test, and as we created our organization’s bylaws and elected officers, we found direction from that initial Downtown Voices document.
It was a boom time, and it seemed many times we were playing Whack-A-Mole, that great carnival game where hitting one pop-up mole only made another rise. We found ourselves as a group both welcomed and disparaged. The tactics of “Agitate, Negotiate and, when all else fails, Litigate” brought us through a series of events with many successes and some sad losses.
A Tibetan Buddhist Lama, whom when asked at a conference the definition Buddhism, replied “Divine Common Sense.”
It is regular old common sense that drives our group, and something else just as tangible. Dr. Howard Cutler has worked with His Holiness the Dalai Lama to write three books, The Art of Happiness, The Art of Happiness at Work, and The Art of Happiness in a Troubled World. In each book, the over-arching view expressed that people as a common goal ultimately desire happiness above all else.
As I’ve worked with this group of fellow DVC members, I’ve come to realize that each member seeks the same thing: Happiness in their lives and in their community. There isn’t one member of DVC who wouldn’t want happiness above all other things. The desire is a better place to live, a better place to create sustainable businesses, and a genuine dedication to staying here and making it a great city for all of us.
An example of how different this sentiment can be expressed was in one particular issue, when a proposed out of scale development’s lawyer declared in front of City Council that he’d “never dealt with people who didn’t want to raise their property values.”
The truth is, we represent people who aren’t moving toward the next buck or the next city, to which it’s more important to raise living values than financial values.
Since 2004, new blood with new ideas have entered the downtown picture. Individuals are drawn to the small-town feel of the 5th Largest City in the Nation, great small businesses have enhanced neighborhoods, partners have been found in thoughtful development, and the ASU Downtown campus is showing signs of like-minded goals for that sustainable, cool, and enhanced downtown where we all will happily live, work, and recreate.
In these circumstances of a down-turned economy, it seems appropriate to take a breath, reflect a bit on the past, but, most important, look forward.
- What is the City that we hope for?
- What have we achieved and what can we improve?
- How can we get more voices to speak as Downtown Voices so that together we can create that happiness we all desire?
These are tomorrow’s questions, and the facilitated discussion we begin at 10 am at the A.E. England building at OUR Downtown Civic Space will help to provide some answers.
Tonight we reflect, remember old battles, good friends, vocal and silent partners. Tomorrow we begin anew and renewed, with new ideas and voices, to create a better Phoenix.
I toast the future. To the city of Phoenix!
[Source: Mike Sunnucks and Jan Buchholz, Phoenix Business Journal] — Some Valley city council members are frustrated with the lack of updates they are getting from real estate developers regarding projects tabled by the market crash and recession. A slew of construction projects have fallen short of expectations, and council members across the Valley are giving developers and their lawyers mixed reviews on keeping their respective cities updated.
“No, no, no, no, no,” Tempe City Councilman Ben Arredondo said when asked whether he’s been kept up to date on the status of stalled projects — including the Tempe Centerpoint condo high-rise, which is in Chapter 7 bankruptcy and sits unfinished on Mill Avenue. Arredondo said he’s not getting frequent or detailed enough updates on Centerpoint or other projects. He said developers — especially those in distressed situations, such as Centerpoint — aren’t giving Valley cities straight answers on their projects. “I don’t think they are ever going to give us the bottom line,” Arredondo said.
Developers and their various lawyers aren’t specifically obligated to keep cities updated on their projects, but some city council members are worried about the status of delayed or abandoned developments and how they might hurt short- and long-term economic development.
Centerpoint developer Ken Losch did not respond to requests for comment. Centerpoint is not the Valley’s only distressed real estate development. The Hotel Monroe redevelopment in downtown Phoenix sits empty and boarded up. Downtown condos such as 44 Monroe and the Summit at Copper Square are mostly empty, and a significant number of suburban subdivisions and commercial developments are unfinished or delayed because of lack of demand and financing.
“I think that everyone is cautious and holding close to the vest. This goes beyond the developers, as end-users are placing projects on hold,” said Surprise City Councilman John Williams. “That said, I believe much of the information shared is often one-sided and biased and may not reflect the exact state of our economic recovery.”
Valley cities signed off on scores of retail, condo, single-home and commercial projects during the real estate boom. Now, many of those projects are on the back burner. “Many of (the planned projects) look foolish in hindsight, but most looked really good at the time,” said Phoenix City Councilman Tom Simplot…
After extensive efforts to obtain updates on several of the largest mixed-use developments in the Valley, few elected officials wanted to discuss the uncertain, even dire, financial situations facing some of them. The Phoenix Business Journal asked for comments about those projects — including CityScape, CityNorth, and Main Street Glendale — from the cities of Phoenix, Glendale, Tempe, Scottsdale and Chandler. The only responses from public officials are those noted above. [Note: Read the full article at City council members annoyed by lack of communication from developers.]
[Source: Sarah Fenske, Phoenix New Times] — There’s a development on the edge of downtown Phoenix that captivated me even before I moved into the neighborhood: the Chateaux on Central. My interest wasn’t a matter of good design — everyone from Will Bruder on down is on the record mocking the place, and rightly so. (With its fanciful turrets, shiny copper roofs, and that ghastly faux-French “eaux,” the project’s overall effect is Disney Does Brownstones in the Desert.) No, the Chateaux on Central were somehow personally evocative. They made me homesick. [Note: Read the full article at Phoenix Interrupted: Downtown’s full of gleaming progress surrounded by vacant lots – now what?]
[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]
[Source: Jan Buchholz, Phoenix Business Journal] — The Summit at Copper Square condominium project across from Chase Field in downtown Phoenix is scheduled for an Oct. 14 foreclosure sale. A notice of trustee sale on the 23-story luxury project was filed July 10 at the Maricopa County Recorder’s office by the public trustee, Fidelity National Title Insurance Co., according to information from Ion Data, a Mesa research firm.
The project was built by W Developments LLC. The Chicago-based firm’s principal, David Wallach, was planning to build another high-rise downtown and was partnering with pro sports investor Dale Jensen and others to develop the Jackson Street Entertainment District when the housing markets collapsed. The Phoenix Business Journal was unable to reach Wallach for comment about the pending foreclosure sale and his plans in Phoenix.
David Newcombe, a broker with Russ Lyon Sotheby’s International Realty who specializes in urban luxury condo sales, said news of the foreclosure was unexpected. “You know, I’m really surprised at that,” Newcombe said. [Note: Read the full article at Summit at Copper Square in downtown Phoenix hit with foreclosure notice]
[Source: Jahna Berry, Arizona Republic] — When the first condo owners moved into The Summit at Copper Square, Phoenix leaders hailed the luxury high-rise because it would bring residents who live, work and shop in the heart of the city. But two years later, the 22-story complex near Chase Field has millions of dollars in unpaid bills, from late utility payments to construction costs. The developer, W Developments LLC, said the project’s bank debt could lead to future problems, but downplayed other expenses. Meanwhile, residents, who paid anywhere from $300,000 to more than $1 million, are worried about their investments.
The Summit is the latest sign that the once-overheated housing market has put a strain on some upscale projects. At Landmark Towers on Central Avenue, owners say they are paying for costly tower repairs, but have lost perks such as valet parking. A few miles away, Orpheum Lofts owners filed a lawsuit over a permanent parking dispute.
David Wallach, principal of W Developments, characterizes The Summit’s legal and financial problems as “challenges” that can be overcome. And the firm still plans to help build a downtown entertainment district and to develop property near the Orpheum Theatre, he said. “The fact that we have challenges and continue to meet those challenges is . . . a true statement,” Wallach said. “That doesn’t mean that we are having financial problems,” he added, calling The Summit “successful.”
While several owners in the 165-unit building praised Wallach for giving them frank updates about the building, some worry about the future. Condo owner David Moskowitz hopes he still is able to sell his two-bedroom unit for $350,000 through a short sale. “I was so jazzed about this building,” said Moskowitz, who bought his unit last year for $650,000 as an investment property. Moskowitz said he would lose thousands of dollars. But real-estate agent Vince Zerilli said he was “very happy” with the penthouse he bought in 2008. [Note: To read the full article, click here.]
We’re in a spoofing mood, so bear with us as we offer up the short video above made a few years back. The “3rd Annual Downtown Phoenix Loft & Home Tour” is coming up Saturday, November 1. Well, it’s really just a tour of rather expensive lofts…not that there’s anything wrong with that. No neighborhoods with actual house-like homes (like Capitol Mall, Coronado, F.Q. Story, Garfield, Roosevelt, or Willo) are included. And that’s an opportunity lost on telling the fuller story of living in and around downtown Phoenix.
The loft tour runs from 10 a.m. to 4 p.m. and free shuttles will circulate the tour route through the day for easy transportation. Tour admission is $8 in advance or $10 the day of the tour. Everybody must check in at 5th Street between Roosevelt and Garfield to get your wristband and tour book. Destinations on the tour include: 44 Monroe, 215 E. McKinley, Century Plaza, Chester Place, Portland 2, Portland 38, and The Summit at Copper Square. For more information (including the possibility for free tickets), click here.
[Source: Jan Buchholz, Phoenix Business Journal] — Hundreds of mechanic’s liens are being filed each month in the Valley by contractors and subcontractors that haven’t been paid for their work. Industry experts say the liens, some in the millions of dollars, are a strong indicator of stress in the real estate community. “Liens are a great way of seeing what’s coming ahead. A glut of liens is a bad sign,” said Zach Bowers, a researcher for Ion Data Express, a Valley real estate data firm.
In fact, the numbers are startling compared with previous years. In 2005, 1,752 mechanic’s liens were filed with the Maricopa County Recorder’s office. Through Aug. 6 of this year, 5,303 liens were filed. If that rate continues, the number of mechanic’s liens filed will more than double the 4,152 liens filed in 2007. “We have filed a ton of liens,” said Janet Summers, owner of Van Rylin Associates Inc. in Tucson, which researches and files mechanic’s liens on behalf of clients all over Arizona.
Summers believes the mortgage and banking industries are to blame. In many cases, she said, developers did not receive the full amount of money promised them. In other cases, banks and other lenders suddenly have called loans or refused to extend credit lines to worthy parties because of market fears, she said. [Note: To read the full article, click here.]
Top 10 Mechanic’s Liens Filed in 2008 (Downtown/Midtown Phoenix Only)
#1. Summit Builders Construction Co. ($5.68 million)
Lien filed against: Hotel Monroe, Central & Monroe LLC, Grace Communities
Type of project: Luxury boutique hotel, historic preservation
#4. The Weitz Co. ($3.21 million)
Lien filed against: The Summit at Copper Square LLC
Type of project: High rise condominiums
#5. Gold Creek Inc. ($3.05 million)
Lien filed against: Mortgages Ltd. in connection with Chateaux on Central
Type of project: Luxury condominiums