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Bankruptcy seen as way to finish condos: Developer of Tempe's Centerpoint project files for Chapter 11(Tribune, The (Mesa, AZ) Via Acquire Media NewsEdge) Dec. 6--The developer of the Centerpoint Condominiums project in downtown Tempe filed for Chapter 11 bankruptcy reorganization Friday, saying paradoxically that it is the fastest way for the company to obtain a loan to complete the stalled towers. "This new direction allows us to use the bankruptcy court's authority to obtain new financing so we can immediately move forward with construction," said Ken Losch, principal in Avenue Communities LLC, the developer. The filing was made Friday morning in U.S. Bankruptcy Court in Phoenix by Tempe Land Co., an entity affiliated with Avenue Communities, which actually owns the unfinished twin towers, the tallest buildings in the East Valley. In a related action, Avenue Communities said it also filed a suit in the bankruptcy court seeking damages from Mortgages Ltd., the Phoenix-based commercial lender on the Centerpoint project. Officials for Mortgages Ltd. could not be reached Friday, but in documents filed in bankruptcy court this week Mortgages accused Tempe Land of misusing $1.8 million in an emergency loan the lender provided to Avenue Communities in September. The complaint said a portion of the money was used for "improper, unapproved expenditures including legal fees, reimbursement to themselves, the TLC party, for expenses incurred long before the request for the emergency relief was sought, and bank overdrafts." Mortgages Ltd. said it wants the money back. Tempe Land and Avenue Communities officials denied improper spending, saying they got approval from Mortgages Ltd. for each expenditure. Losch said Tempe Land has been unable to complete the project because Mortgages Ltd. defaulted on a $150 million loan agreement to fund the construction. Mortgages Ltd. filed for Chapter 11 reorganization on June 23 amid a collapse in the Valley's real estate market and after the suicide of chief executive Scott Coles. Since then, construction at Centerpoint has ground to a halt with the towers about 90 percent completed. Losch said he has lost patience trying to work out arrangements to finish the project through the Mortgages Ltd. bankruptcy proceedings. He said he hopes a new bankruptcy judge overseeing a Tempe Land reorganization will speed up the process and allow the complex to open by mid-2009. Losch said he has lined up $75 million in financing from a new lender, which he declined to identify, but the new lender wants to be first in line for repayment once the towers are completed and money flows in from the sale of condos. Mortgages Ltd. had agreed to take a subordinate position, but investors who gave money to Mortgages Ltd. to fund Centerpoint's construction have not, he said. Losch said a new bankruptcy judge might break the logjam by placing the new lender first in line. If Avenue Communities received $44 million in initial financing, the company could complete the 22-story Tower One, retail areas on the ground floor and the exterior of the 30-story Tower Two, Losch said. He said the majority of condo buyers and subcontractors support the company's decision to go into bankruptcy. Under the proposed plan, the new lender would be paid back first and then the balance of the loan would be used to finish Tower Two, he said. Subcontractors would receive payment for all future work. Their past work would be paid back in a future schedule along with all remaining creditors. Nancy Hormann, executive director of the Downtown Tempe Community, which manages the Mill Avenue district, believes the downtown area will benefit from the Chapter 11 filing. "This will help them (Avenue Communities) move forward," she said. "I see this as a positive thing, not a negative thing." When completed, Centerpoint will have "a tremendous impact" on the area, she said, increasing the number of people living within walking distance of Mill Avenue and Town Lake. "It extends the hours of people walking on the streets from 12 hours a day to 15 to 18 hours a day," she said. To see more of The Tribune, or to subscribe to the newspaper, go to http://www.eastvalleytribune.com. Copyright (c) 2008, The Tribune, Mesa, Ariz. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |