The Bankruptcy Court in Phoenix has been very busy the last couple months trying to come to a conclusion on the Mortgages Limited Securities case. Some parties ended up with smiles of relief, while the majority of investors are taking a major loss. A quick history lesson and recap of the current situation:
MLS (short for Mortgages Limited Securities) was originally a small private lender not funding more than $20 million projects. Scott Coles took over the company in the 1980′s and slowly changed their company services. In the more recent years, Coles brought in thousands of outside investors all over town who contributed nearly $1 billion toward to company for funding major real estate developments accross the valley from Centerpoint Condominiums ($200 million for vertical construction) in Tempe to Main Street ($120 million for 500-acre land acquisition) in Glendale.
Recent Timeline:
March 28, 2008: Central PHX Partners, developer of the Chateaux on Central files a lawsuit against Mortgages Limited Securities for breach of contract, among others.
May 21, 2008: Rightpath Limited Development, developer of Main Street Glendale files a lawsuit against Mortgage Limited Securities for fraud and excessive fees, RLD asks for $25 million in damages
May 23, 2008: Avenue Communities, developer of Centerpoint Condominiums announces they need $50 million dollars to finish the towers because MLS was unable to fulfill the full loan.
June 2, 2008: Scott M. Coles, Chairman and CEO of Mortgages Limited Securities is found dead in his Phoenix home. Later learned to be a suicide.
June 20, 2008: Grace Communities, developer of Hotel Monroe Renovation in downtown Phoenix and X Wine Lofts in Scottsdale file a Chapter 7 bankruptcy petition against MLS. (MLS was funding both projects)
June 23, 2008: Mortgages Limited Securities files for Chapter 11 Bankruptcy after U.S. Bankruptcy Judge Randolph Haines orders for emergency hearing on the situation. MLS said they have about 70 outstanding loans worth around $925 million.
July 24, 2008: KML Development, developer of Roosevelt Gateway in Phoenix and Mosaic in Tempe files a motion to request a Chapter 11 trustee to the case, in addition to allegations of unfulfilled loans in excess of $100 million.
August 1, 2008: Avenue Communities gives MLS an ultimatum, settle the case through subordinating its two loans for the project or face another lawsuit.
August 7, 2008: U.S. Securities and Exchange Commission and the Securities Division of the Arizona Corporation Commission opened investigations on the dealings of MLS and a company called Radical Bunny that lent it nearly $200 million.
August 11, 2008: MLS said in Bankruptcy court they will soon begin to foreclose on properties being developed by Grace Communities and Rightpath Limited Development.
August 20, 2008: Centerpoint developer Avenue Communities reaches tentative deal to keep MLS as lender as long as MLS pays $4.6 million up front to protect the two towers while the remaining $75 million is to be funneled from outside investors through MLS to Avenue Communities at a later date.
August 21, 2008: Bankruptcy Judge Haines granted MLS a $5 million interim financing proposal from Stratera Portfolio Advisors. In a separate case regarding the thousands of outside investors for MLS, the judge ruled in favor of a new payment agreement.
Conditions for both agreements granted on August 21, 2008:
• Mortgages Ltd. will immediately begin paying interest to investors in loans that borrowers are currently paying. These payments could begin within a month.
• Investors will receive only interest, not principal amounts that borrowers have repaid.
• Mortgages Ltd. will help find financing for Avenue Communities’s Centerpoint condominium towers in Tempe and Rightpath Ltd. Development Group’s Main Street Glendale. Centerpoint could be within 90 days of completion on the first tower, while the second tower is 80% complete. Centerpoint will receive an initial $4.6 million and $75 million later. Rightpath Limited Development intends to drop the lawsuit if MLS fulfills the agreement on new loan terms and $85 million more in financing.
• Mortgages Ltd. said it also has agreed to enter mediation to resolve conflicts with Grace Communities, the developer of Hotel Monroe in downtown Phoenix.
• The lender also has a settlement in the works with KML Development, which borrowed a loan for a high-rise condo project at University Drive and Ash Avenue in Tempe. That project has not started.
Centerpoint developer Avenue Communities has a hearing on Monday to determine if they will receive $2.8 million in emergency funding. Plans for the developer to receive the rest of the promised $4.6 million are unknown.
Rightpath Limited Development does not have a hearing yet regarding its timeline to receive new financing.
This whole situation is not over, and is going to continue to make headlines, in which we will provide consistent updates…stay tuned.
