Another Investor Group to Battle Mortgages Limited Securities

September 25, 2008 – 8:37 pm

While the nightmare on Wall Street unfortunately continues, there is a now a small twist added to the Mortgages Limited Securities (MLS) Bankruptcy case. This small twist could have a ripple effect and end up turning this case into a very lengthy process, ultimately hurting the naked Centerpoint Towers.

U.S. Bankruptcy Judge Randolph Haines, who requested to have an emergency hearing several months ago and has been handling the case ever since granted a motion on Wednesday that gives the opportunity to a small group of 50 investors to form a committee to represent their specific Value-to-Loan fund with Mortgages Limited Securities. County records show there were nearly 3,000 investors who provided around $1 billion for real estate development loans. Coles convinced these people to invest in a variety of loans, including the Value-to-Loan fund, which was formed this year to lend money to separate “opportunity fund.” Details on the inner workings of Mortgages Limited Securities are currently being investigated by the Securities and Exchange Commission.

The court set a date of October 7th, which is the deadline for filing a claim that outlines how much money they believe MLS owes them. Another date was set by the court, October 22, which is when Mortgages Limited Securities will submit a draft of its reorganization plan.

Mitch | High Rise Condos, Tempe, Trouble | Comments (0)

Judge Plans to Let Centerpoint Receive $2.8 Million Now

September 3, 2008 – 9:17 am

As the scorching summer comes to end, the Centerpoint High Rise Condos are still unoccupied. That might change in the coming weeks if this new deal is approved by U.S. Bankruptcy Judge Randolph Haines.

While Mortgages Limited Securities (MLS) is hanging on by a thread, they have come to an agreement, or so it seems. This is the newest of many claimed to be “done deals”, but only the next day in court will tell. The first deal included an outside investor, Stratera Portfolio Advisors that would funnel an immediate $4.8 million through MLS to Avenue Communities, developer of Centerpoint Condominiums. Apparently this deal wasn’t good enough for MLS, who then sought another hard-money investor, Mountain Funding, LLC. They came in and somewhat complicated things when they demanded superiority deeds of trust, leaving the original several thousand investors with empty-pockets. The Judge was supposed to decide on that before the end of last week.

Yesterday, the Judge said he would approve an even newer deal, which only allows Centerpoint to receive an immediate $2.8 million from the first investor, Stratera. The other $2 million that was originally promised will be resolved in court on October 16 and the additional $75 million that is needed to finish the complex will also come at a later, yet unknown date.

Hang on future Centerpoint dwellers, your units will be ready soon…

Mitch | High Rise Condos, Tempe | Comments (0)

Mortgages Ltd. finds new funding for Centerpoint

August 27, 2008 – 6:15 am

We learned today from the most recent Bankruptcy Court case regarding Mortgages Limited Securities (MLS), that the private lender has slightly switched gears in terms of their new lender for Centerpoint. As of Friday, MLS announced a company called Stratera Portfolio Advisors will lend an immediate $4.9 million to help finish some highly time-sensitive issues with the Centerpoint towers. Today, MLS announced they have found a new hard-money lender, Mountain Funding, LLC. The primary reason for this move is because Mountain Funding is giving MLS better terms, including a lower interest rate.

With this new and potential better move for MLS, the Bankruptcy Judge postponed the hearing until Wednesday morning. Stay Tuned…

Mitch | High Rise Condos, Tempe, What's New | Comments (0)

Centerpoint and Mortgages Ltd. Come to Agreement

August 25, 2008 – 12:51 pm

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.

Mitch | High Rise Condos, What's New | Comments (0)

How Can Centerpoint High Rise Condominiums Survive?

August 19, 2008 – 2:03 pm

There have been numerous newspaper articles reporting on the financial woes for Avenue Communities and its downtown Tempe high rise condo developement, Centerpoint.

What I have not understood is how can a project that has sold 20-25% of its condominiums over the last three years survive current market conditions AND the bankruptcy of its construction lender?

But I’m starting to understand. Here’s my take on it:

The construction lender referenced above, Mortgages Limited, funded approximately $100 million of a $175 million loan. So they funded approximately $75 million less than the loan commitment stipulated. Then the company filed bankruptcy.

Avenue Communites is out looking for lenders to supply the $75 million so that it can complete construction of the building.

One can easily understand that a lender might be hesitant to loan $75 million on a $200 million project in today’s market. However, what if the $75 million takes priority over the $100 million already spent? In other words the new lender would loan $75 million for assets valued at $200 million. That seems pretty safe even today doesn’t it?

Apparently this is possible because the bankruptcy court can force the first lender (the $100 million lender) to subordinate to the next lender (meaning going from first position to second position) thus changing them from a first mortgage to a second mortgage if you will.

I guess the reason this is allowed is because it is better for the $100 million lender to be in a position if doing so is the only way to save the project. This way the lender as a chance to get something instead of all of nothing.

What I haven’t understood is that if the project was originally projected to cost $200 million and profits were based on 2005 prices or higher and prices have gone down since 2005 then how can the project survive?

A case can easily be made that new construction high rise condo prices have gone down a minimum of 30% and maybe as much as 50% over the last three years. IF this is true then total sales could end up as low as $130 million (taking into account a 30% profit for the developer). So how does that work? Total sales of $130 million for a project that cost $200 million to build?

I’m guessing that the new lender, the one coming in with $75 million gets paid principal plus interest or $85 million, the original lender which ended up in second position gets paid $.30 for every dollar loaned or $30 million and then the developer gets the rest (about $15 million). But guess what? the project would be successful at these prices and survive!!! Granted the developer would not make as much profit as they had expected and the original lender would lose a ton of money but again, something is better than nothing. And of course, if I’m wrong about the value of high rise condos today and they actually sell for more then the developer and the second lender end up with more in their pockets.

And, Tempe and the Valley would see the completion of a fantastic urban community. One that would add significantly to the popularity and ultimate success of downtown Tempe.

NOTE: PLEASE KNOW THAT I AM TOTALLY PULLING THESE NUMBERS OUT OF THE AIR. I HAVE ZERO INSIDE INFORMATION. I AM PROBABLY WAY OFF ON THE VALUE OF THE FINISHED CONDOMINIUMS, THE DEVELOPER’S PROFIT, THE LENDER’S INTEREST AND THE AMOUNT THAT THE SECOND LENDER WOULD LOSE BUT AT LEAST THIS MAKES SOME SENSE. I WELCOME ANYONE TO PLEASE CONTRIBUTE TO THIS ARTICLE (LEAVE A COMMENT OR E-MAIL YOUR INPUT TO ME AND I’LL POST IT FOR YOU) ESPECIALLY IF YOU HAVE ANY EXPERIENCE OR KNOWLEDGE IN SUCH MATTERS.

We would love to see Centerpoint succeed and any dialogue that helps us better understand how that might be possible would be much appreciated.

Will Daly | Foreclosure-short sales-REO's, High Rise Condos, Tempe, Trouble, Uncategorized | Comments (0)

The State of Centerpoint High Rise

August 3, 2008 – 11:25 pm

Several articles have run recently regarding the financial challenges facing Centerpoint High Rise community in Tempe.

The gist of the articles suggest that all is fine with the development per Ken Losch, one of the principals of Avenue Communities, the developer of Centerpoint. In general, these kinds of articles don’t really offer any kind of substantive information but are really more filler and background info.

However, we did glean something of value; at least we think we did. Rumors have been circulating that sales at Centerpoint are approximately 30%. The question was whether that was 30% of the first tower alone or 30% of the two high rise towers combined. We had suspected that it was 30% of the first tower only
and we now believe we have confirmation thanks to the East Valley Tribune article http://www.eastvalleytribune.com/story/120971.

In that article Losch is quoted as saying that they have sales of approximately $24 million. The article also confirmed that tower one has 171 units while the second tower has 204. Well, $24 million in sales would equal approximately 30% of 171 units. This is based on a very rough guestimate that works out as follows:

Take an average sales price of $500,000 (a total guess) and divide that into $24,000,000 to get 48 units. Divide 48 by 171 to get 28.07%. If we are wrong and the average sales price is higher then that would mean even fewer than 30% have sold. If the actual cost per unit is lower then the percentage of units sold would go up. We feel pretty safe using a number of $500,000.

If our numbers are right (and again please understand that we are guessing) and only 30% of the first tower has sold and zero condominiums have sold in the second tower then Avenue Communities has a looooong road ahead of them.

Now, please know that we are huge fans of Centerpoint and Ken Losch and we are totally rooting for the success of Centerpoint. We believe it is bringing a truly urban experience to the most urban city in the Valley, Tempe. However, we are certainly concerned.

Will Daly | High Rise Condos, Tempe, Trouble | Comments (0)

Tempe business owner goes on hunger strike – Tribune

June 16, 2007 – 11:17 pm

Tempe entrepreneur Amandeep Sandhu said she’s run out of options.

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Will Daly | Uncategorized | Comments Off

Condo Developers See Upscale Downtown Tempe – East Valley Tribune

September 24, 2006 – 12:00 am

Every developer has critics. For David Dewar of Avenue Communities, the first critic of his plan for Centerpoint Condominiums was the most unlikely of sources – his wife.

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High-Rises To Replace Flour Mill as Tempe Icon – East Valley Tribune

September 24, 2006 – 12:00 am

Since Tempe‘s founding, its iconic downtown landmark has been an industrial building that milled grain into flour.

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Tempe condo project set to begin 13-hour concrete pour – Business Journal

May 15, 2006 – 7:17 pm

One of the largest concrete pours in Tempe’s history is planned over 13 hours this week at the Centerpoint Condominiums, the four-phase downtown residential development by Avenue Communities.

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Will Daly | Uncategorized | Comments Off
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