Developer to file suit over Tempe towers

The developer of the twin Centerpoint Condominium towers in downtown Tempe said it will file a lawsuit against its lender today because the firm has defaulted on the terms of its loan agreement, which is preventing the two high-rise buildings from being completed.

Hearing set to approve $2M for Centerpoint

The suit will be filed against Mortgages Ltd. and its investors, said the developer, Tempe-based Avenue Communities.

Mortgages Ltd. filed for reorganization under Chapter 11 of the Federal Bankruptcy Code on June 23, shortly after the suicide death of its chief executive, Scott Coles, who became caught up in the Valley’s severe development slump.

Ken Losch, principal of Avenue Communities, said he has been patient is trying to work out an agreement with Mortgages Ltd. that will provide sufficient funds to complete the high-profile project. But he said his patience has run out.

"We see no direction with Mortgages Ltd’s business plan, we have made no progress on our settlement agreement and our hearings (in U.S. Bankruptcy Court) continue to be delayed time and time again," he said. "Most important, there has been no progress towards completion of our project, which is in everyone’s best interests."

Efforts to reach officials of Mortgages Ltd. late Thursday evening were unsuccessful.

According to Avenue Communities, Phoenix-based Mortgages Ltd. had contractually agreed to provide a $150 million loan to complete the project but did not fund all of the loan.

Mortgages Ltd. raised the money from investors who were promised they would receive their money back from income provided by sales of the condo units. But with the project remains incomplete, Avenue Communities has not been able to sell any units.

Mortgages Ltd. defaulted on its funding obligations beginning in late 2007 by failing to fund loan draws in full and ultimately ceasing funding completely, the suit says.

The two parties negotiated a new loan that would have cured the shortfall, but since May there has been no funding on Centerpoint except for a portion of $2.8 million in financing granted on Sept. 2 by the bankruptcy court, the developer said.

Losch said the default has cost Avenue Communities tens of millions of dollars in damages.

"For the sake of a spectacular project in an extraordinary location and community, we are left with no choice," Losch said. "We need to be compensated for the incredible damages we have suffered. . . "

Losch said Avenue Communities has procured $22 million in pre-sale commitments from buyers of the condo units, and 250 people are on a waiting list to view model units once the towers are completed. A total of 375 homes are in the two towers, which rise 22 and 30 stories.