Posted Aug 1, 2008, 11:25 PM
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Join Date: May 2006
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Here you go...
Quote:
Avenue Communities LLC gives Mortgages Ltd. ultimatum: Settle or face lawsuit
Phoenix Business Journal - by Jan Buchholz Phoenix Business Journal
The developers of the massive Centerpoint mixed-use project in downtown Tempe said this week they can't -- and won't -- wait any longer for additional financing while its primary lender on the $200 million project works its way through Chapter 11 bankruptcy.
Ken Losch, principal of Avenue Communities LLC, confirmed about $24 million in liens have been filed on the project by unpaid subcontractors. Losch said he has numerous lenders who want to help finish Centerpoint, contingent on Avenue Communities working out a settlement with Mortgages Ltd. That likely will require the beleaguered Phoenix commercial real estate lender to subordinate its two existing loans totaling nearly $132 million.
"Look, we've got an asset with a retail value of over $300 million," Losch said. "We don't have a lender problem. We have an authority problem. (Mortgages Ltd.) needs to make this happen now, or it's going to face large losses (because of) apathy and indecision."
Avenue Communities wants Mortgages Ltd. to file a motion with the U.S. Bankruptcy Court to allow the developer to secure outside financing immediately to finish its project.
"We've been very patient, and our patience is now finished. We want to be bifurcated from that process," said Losch. "We have a hard schedule that we want Mortgages Ltd. to meet so we can go down our own separate road. If it's not adhered to, we will file a lawsuit."
In essence, Centerpoint wants to be separated from the gridlock of intersecting and sometimes conflicting interests that have emerged in the complicated Mortgages Ltd. bankruptcy case.
Avenue's ability to secure an additional $75 million now to finish the high-rise residential and retail project is crucial, company officials said.
Work has come to a standstill on the two towers, retail space and public plaza. The project is largely finished, but still needs extensive interior and landscaping work.
Attorney Carolyn Johnsen of Jennings Strouss & Salmon PLC, the bankruptcy counsel hired by Mortgages Ltd., confirmed that the lender's new president, Richard Feldheim, has been in discussions this week with Centerpoint to resolve issues surrounding the loans and construction delays.
"Both parties left with tasks to do. I'm not at liberty to discuss that, but they are exploring possibilities," Johnsen said.
She was a bit less optimistic about meeting Centerpoint's deadlines, which Losch said he is not ready to disclose.
"Whether we can meet that timeline ... that might not be doable," she said.
Three other Valley developers have claimed -- either in separate lawsuits or through motions with U.S. Bankruptcy Court -- that their projects were never funded to the degree promised by Mortgages Ltd. Avenue Communities is the fourth to make that assertion.
Although problems with disgruntled borrowers began in late spring, Mortgages Ltd.'s financial difficulties were exacerbated by the suicide of the company's chairman and sole shareholder, Scott M. Coles. He was found dead June 2 at his Camelback Mountain home.
Since then, developer Grace Communities forced Mortgages Ltd. into Chapter 11 with support from another developer and Mortgages Ltd. customer, Rightpath Limited Development Co.
KML Development, which has two projects that were supposed to be funded by Mortgages Ltd., recently filed a motion asking U.S. Bankruptcy Judge Randolph Haines to appoint a Chapter 11 trustee to the case. KML's attorney argued in court documents that the current Mortgages Ltd. management and counsel cannot adequately represent all interests in the case, which includes more than 4,500 investors, various borrowers, creditors, heirs of the estate and the lender's employees. That hearing has been scheduled for Aug. 21.
An Aug. 6 hearing still is on, according to Johnsen, primarily to discuss resuming payments to investors who had become accustomed to receiving monthly checks from Mortgages Ltd., but were shut out of interest payments when the Chapter 11 bankruptcy case was filed in late June.
Don Gaffney, an attorney with Phoenix law firm Snell & Wilmer LLP who represents Grace Communities, was unaware of Centerpoint's attempts to separate itself from other Mortgage Ltd. borrowers, but he is not opposed to it.
"There are a lot of different ways this (bankruptcy) could be approached," he said. "It could be separated borrower by borrower and project by project. That could make a lot of sense."
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