Centerpoint Towers in Tempe Not Sold Yet; Prospects for Deal Diminish
|Image: Jamie Peachey|
|The sale of Tempe's Centerpoint Towers was supposed to close no later than October 15. That didn't happen, and prospects for the deal are dimming.|
Workers should be buzzing all over the 22- and 30-story towers, which have sat unfinished and vacant (except for the occasional trespassers) since 2008.
Zaremba Group, the Ohio-based company that wants to buy the towers, expected construction to start immediately after the expected October 15 close-of-sale. The company planned to be renting apartments in the towers by August.
But, as New Times reported on October 22, the hoped-for deal has hit some serious snags.
The situation didn't improve last week, says Keith Hendricks, one of the main lawyers working on the sale for the owner, ML Manager.
"I don't know if it's going to be successful," Hendricks says of the sale. "It's possible. I don't know if it's probable."
Trouble is, the failure to sell the project to Zaremba might not be a temporary problem, says both Hendricks and Chad Schexnayder, a lawyer with whom we chatted last week.
A fresh round of litigation is likely to ensue if this deal falls through. And that would be an obstacle for any potential sale -- maybe even for the next few years.
We don't even want to think about what kind of shape those buildings will be in by then.
The main hurdle: Hundreds of workers from about 15 companies -- people like the carpenters, plumbers, electricians, cabinet installers, etc. -- who got stiffed when the project went bankrupt.
Collectively, they're owed about $21 million. And they weren't thrilled to hear ML Manager, the owner, wanted to sell the five-acre, two-tower project to Zaremba Group for a mere $30 million.
True, the investors behind the project stand to lose the most. When Mortgages Ltd. was funding the project before its collapse in 2008, it (and its investors) sunk in about $135 million.
The investors behind the crumbled lending firm, now reorganized as ML Manager, have the first priority position to get paid in the sale. As the numbers show, they'll receive a fraction of their investment back.
But those below them sure don't want to end up with nothing.
Negotiations are ongoing between the many parties in the deal, each represented by one or several lawyers. The obstacles, like everything else associated with the implosion of Mortgages Ltd., are complex.
Hendricks explains that the Fidelity Insurance subsidiary Lawyers Title, which provided the title insurance services for the project, agreed originally to insure the new buyer against the claim by the the sub-contractors, a.k.a. the mechanic's lien-holders.
Not that the title insurance company wants to pay the $21 claim -- in fact, they've been fighting it in court for more than a year, Hendricks says. In September, a court ruling against Lawyers in the case made the insurance company realize it could lose. A month later, the company said it wouldn't insure the new buyer against the lien-holders' claim, Hendricks says.
Zaremba doesn't have insurance to protect itself against the claim, either, he says.
Representatives for Lawyers couldn't be reached this morning.
As our last article mentioned, the lien-holders won't be satisfied with a settlement on the $21 million claim that's too low. And they're reportedly willing to see this sale to Zaremba evaporate if they're not going to benefit from it.
The worst-case scenario: If the Zaremba deal dies on the planning board, the angry parties involved might launch even more lawsuits -- which could make any sale in the next couple of years rather difficult to accomplish.
The more time that goes by with the buildings vacant, the less attractive they'll be to buyers. We can't help but wonder if a double implosion will be the towers' ultimate fate.
There's still a ghost of a chance the players will sort things out, Hendricks says. But the clock is ticking.
Zaremba believes it needs to start construction by the middle of this month, at the latest, in order to meet its timeline, Hendricks says. The company planned to finish one tower, plus the ground-level retail space, by March, and begin renting apartment units in time for Arizona State University's 2011 fall semester.
We left a message for Kent Chantung of Zarema Group, but haven't heard back yet.
We'll update the Centerpoint saga as soon as we hear something.
UPDATE: The deal fell through -- officially.