Main Street project faces foreclosure

Land that was envisioned to become like a second Westgate City Center and help pay for Glendale's spring-training stadium is in foreclosure after its financially stricken developer failed to make tax payments.

Rightpath Limited Development Group and Maryland Way Partners, whose principals now do business as HB Equities, have failed to pay property taxes for two years, totaling $90,000, constituting a default, according to Mark Winkleman, chief operating officer for the lender, ML Manager.

Rightpath developers Danny Hendon and Bob Banovac, who previously denied defaulting on the property taxes, acknowledged through a spokeswoman that the $90,000 was unpaid.

The land will go to a trustee's sale Feb. 8.

The 150 acres is west of Loop 101 between Glendale Avenue and Camelback Road.

Rightpath was supposed to build a sprawling office, shopping and resort complex called Main Street on the land and other parcels.

The Olympic training organization USA Basketball was supposed to move there, with facilities built by Rightpath, but the organization canceled those plans after the developers missed construction deadlines.

The entire complex is years behind schedule. Rightpath has not broken ground.

Glendale was counting on Main Street to generate sales taxes when it decided to build Camelback Ranch Glendale ballpark. That tax revenue was supposed to help pay off the city's $200 million investment in the spring-training stadium.

Without the commercial complex and with money from the Arizona Sports and Tourism Authority falling tens of millions below expectations, Glendale faces the daunting task of repaying its debt.

The city has been using borrowed money to pay for the ballpark debt, but that is expected to be depleted around 2014. A nearly $16 million debt payment is due that year. City officials have not unveiled backup plans.

Glendale spokeswoman Julie Frisoni said the economic downturn has affected developments across the Valley.

"We just have to wait for market forces to change to allow for viable and economically sustainable development," she said.

Rightpath's land and the $120 million in loans tied to it from now-defunct lender Mortgages Ltd. have been mired in nearly three years of legal wrangling.

Rightpath sued Mortgages Ltd. in 2008, alleging the lender failed to provide full funding. Mortgages Ltd. accused Rightpath of defaulting on payments.

Weeks later, Mortgages Ltd. CEO Scott Coles committed suicide, the lender filed for bankruptcy and Rightpath's land was scheduled for foreclosure auction.

But Rightpath settled with the lender.

Mortgages Ltd. reduced the balance of the loans to $108.5 million, lowered the interest rate and deferred payment of the full amount until 2011.

The only payments Rightpath was responsible for in the interim were property taxes.

But Rightpath hasn't paid them.

Winkleman said ML Manager, a company formed by Mortgages Ltd. investors to dispose of or generate revenue from the former firm's assets, does not foreclose on properties just to get rid of them.

"That's not a way to maximize returns," he said. Already, the investors are owed more than the value of land taken back at auction, he said.

Projects that ML Manager has sold, foreclosed on or put on the market recently include lofts in Scottsdale, condos in Tempe and a hotel in Chandler.

"I don't think there's any likelihood that they (Rightpath) will step up and cure this default," Winkleman said.

He said the company will not sue Rightpath's principals personally because their personal guarantees on the loans were removed as part of the settlement.

Rightpath spokeswoman Georgia Taylor said the developers are open to negotiation with ML Manager to reduce the loan to reflect current land values. Both sides say they are waiting to hear from the other.

Rightpath intends to pursue the Main Street development, Taylor said, whether on the current property or at a different location priced according to the market.

Rightpath defaulted earlier this year on another project in Glendale, developing jet hangars and a service center at the city airport.

Glendale and that lender, First National Bank of Olathe, are now trying to jointly sell those leases.

by Rebekah L. Sanders The Arizona Republic Dec. 9, 2010 12:00 AM






Main Street project faces foreclosure