Funding Moves Mortgages Ltd. From Chapter 11

PHOENIX-Universal Equity Group LLC has led an investment group to close on a $20 million loan of Mortgages Ltd.’s bankruptcy reorganization plan. Mortgages Ltd., which had about 2,700 investors when it filed for bankruptcy protection last summer, has a remaining loan portfolio worth approximately $925 million.

“What our financing does is provide enough operating capital so they can go out and recover the most they can from assets,” remarks Rob Verhaaren, managing director for Universal Equity Group. “The objective is not to go out and start making loans. It’s to negotiate with borrowers, perhaps restructure loans with borrowers and liquidate assets.”

A little more than a year ago, shortly after the death of its founder Scott Coles, Mortgages Ltd. went into bankruptcy, leaving behind confused and angry investors and developers. Some of the high-profile projects Mortgages Ltd. had financed included the now-bankrupt Centerpoint Condominiums in Tempe and the Hotel Monroe in downtown Phoenix.

A recent article in the Arizona Republic noted that the company is in control of five investors who will oversee the resolution of close to 70 real estate loans. The management committee, going under the name ML Management, consists of economist and real-estate analyst Elliott Pollack; National Bank of Arizona Executive Vice President Scott Summers; Bruce Buckley, a retired title insurance expert; independent real-estate developer Bill Hawkins and bankruptcy trustee Grant Lyon, a certified public accountant.

Verhaaren tells GlobeSt.com that lending the money to Mortgages Ltd. has its advantages, not the least of which is that Universal Equity Group can benefit from origination fees and interest rate that is part and parcel of the financing. Furthermore, Universal Equity Group has the option to buy some of the assets that Mortgages Ltd. might offer up for sale. “If they go out and get other offers, we can submit competing offers,” he remarks. “To the extent that they have some good assets for possible purchase, we’re interested in that.”

Then there is the notoriety through affiliation. “We get a lot of visibility simply by virtue of being the financing source for the newly emerged entity,” Verhaaren acknowledges.