X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

TEMPE, AZ-After being caught without financing for Centerpoint Condominiums, the developer and its former mortgage company have reached a $75-million settlement. The financing, which includes $4.8 million from Mortgages Ltd., is contingent upon bankruptcy court’s approval.

The court has set an emergency hearing for Monday. Avenue Communities LLC is one of several developers in the area left without financing when Mortgages Ltd. declared bankruptcy earlier this summer. The Phoenix-based lender was known for funding non-traditional projects.

According to published reports, Mortgages Ltd. has not made any new loans nor accepted new investors since the death of CEO Scott Coles in early June. A new management staff is now in place.

Ken Losch, principal and managing partner of Avenue Communities, says he expects the financing deal to close in four five weeks, allowing his team to resume construction on the 375-unit Centerpoint Condominiums at 110 E. Seventh St. In a press release about the settlement, Losch says the financing will fund completion of two condo towers and 23,150-sf public plaza. The new lender will be disclosed next week in a formal filing.

Losch says he opted to settle rather than litigate for several reasons. “They have a crystal clear default and there are damages that compromised our position,” he tells GlobeSt.com. “But if we went down the litigation road, we’d probably get 20 cents on the dollar versus getting the money back today.” He adds the litigation, though, wouldn’t have stalled Centerpoint Condominiums.

A quick settlement also means Mortgages Ltd.’s investors could see their money sooner. “No distributions can be sent to Mortgages Ltd. investors while litigation is going on,” Losch says. He adds he hopes other developers also will go for a settlement, rather than sue, especially since Mortgages Ltd. has put a solid management team in place.

But, Mortgages Ltd. investors could have their own axes to grind. Phoenix real estate attorney Stanley Bronstein says while developers might be willing to settle, individual investors might not be quite so forgiving. Bronstein doesn’t represent any clients involved with Mortgages Ltd., but he points out individual investors may have issues if their money went into deals that were foreclosed.

“The bankruptcy court is interested in getting as much money as they can with as little paperwork as possible,” Bronstein stresses. “They may not be as interested in the individual investor and there could be an inherent conflict there.”

In short, Mortgages Ltd. still has a long road ahead whether or not other developers could follow Avenues Communities and settle out of court. “There is just no way to resolve all of these issues quickly,” Bronstein says. “There are too many parties involved with this whole thing.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt. APARTMENTS SPRING 2021Event

Join 1000+ of the industry's top owners, investors, developers, brokers & financiers at THE MULTIFAMILY EVENT OF THE YEAR!

Get More Information
 

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.