Centerpoint Condo Towers have been untouched for over six months now and were pretty much forced to file for bankruptcy, a growing trend among developers. Technically, the development company itself didn’t file for bankruptcy in this case, as they created a separate LLC for the project. After battling in court with the troubled lender Mortgages Limited Securities, developers of Centerpoint filed for bankruptcy two weeks ago in a move to separate itself from the lender.
Centerpoint is one of the many projects affected by the fall of Mortgages Limited Securities over the summer. Centerpoint, which had a total cost of construction at $200 million, only received approximately $125 million of the $200 million loan from Mortgages Ltd. The remaining funds had disappeared in the late spring and several developers filed lawsuits against the risky mortgage company. Shortly later, the CEO of Mortgage Ltd., Scott Coles committed suicide and the company began to reorganize themselves and prepare for months of legal battles. While the troubled lender was able to reach a deal with another developer, Ken Losch of Avenue Communities (Centerpoint developer) tried to come to a deal as well, and they initially did come to a temporary deal, an immediate influx of $3 million back in September. However, months later and many more unsuccessful legal battles lead Losch to file for bankruptcy, a way to separate the project from Mortgages Ltd. Losch believes he can gain the necessary $75 million to finish the project through a new lender, but Mortgages Ltd. would still need to subordinate its current first-lien on the the property. This might be another major obstacle, as this would put the new lender first in line to be paid back if the project is successful.
Days after Losch filed for bankruptcy, Mortgages Ltd. fought back by accusing Avenue Communities of misusing the $3 million influx from September. The lender claimed the money was used to pay legal fees and bank overdrafts, instead of sealing up the building with windows and air-conditioning units. As a result, all accounts tied to the development and construction of Centerpoint Condominiums have been frozen, in addition to the individual accounts of the principals of Avenue Communities.
It is too early to tell if Centerpoint is in serious trouble. We all would love to see the building finished and occupied, and if there really is a new lender, then maybe it will be in the near future. Court battles will most likely continue through the new year before any funding comes to the company.
