Minn. developer buys Hotel Monroe in downtown Phoenix for $7.85 million

 

The historical building known as the Hotel Monroe has been sold to a Minnesota-based developer.

The vacant former bank headquarters in downtown Phoenix, built in 1931, recently was purchased for $7.85 million by the Minneapolis-based CSM Corp., according to Vizzda, a Tempe-based commercial-real-estate research firm.

The 12-story tower at Central Avenue and Monroe Street has been mired in bankruptcy and foreclosure proceedings. Developer Grace Communities bought the building in 2005 and planned to transform it into a 150-room boutique hotel. Grace took out a $27 million loan with now-bankrupt Mortgages Ltd. to renovate the building in 2007.

Read more...Minn. developer buys Hotel Monroe in downtown Phoenix for $7.85 million

Leader winds down Mortgages Ltd. asset sell-off

Mark Winkleman is the chief operating officer of ML Manager LLC, which took over the assets of Mortgages Ltd. after the Phoenix-based hard-money lender crashed with the real-estate market. His job for the past three years has been to sell the lender’s assets and try to recover the most money for the more than 1,500 investors. No easy feat.

Mortgages Ltd. had almost $1 billion in outstanding loans at the time of its bankruptcy in 2008. CEO Scott Coles committed suicide as the company went under.

Winkleman, an attorney and former Arizona state land commissioner, has sold most of Mortgages Ltd.’s assets. His latest deal is to sell the well-known Hotel Monroe project in downtown Phoenix. California company Grasshopper Development has signed a contract to pay $7.85 million for the property.

Read more...Leader winds down Mortgages Ltd. asset sell-off

ACC fines Radical Bunny, Horizon Partners nearly $195M

The order stems from when Radical Bunny and Horizon Partners mislead investors into thinking their funds would be used to buy interests in promissory notes secured by real estate deeds of trust. ...

http://www.bizjournals.com/phoenix/news/2013/03/12/acc-fines-radical-bunny-horzon.html

Ex-leaders of Radical Bunny face SEC grilling

Two of the four former principals of defunct Mortgages Ltd. financier Radical Bunny LLC, including former lead manager Tom Hirsch, testified in U.S. District Court on Wednesday, hoping to avoid a possible civil contempt order.

The U.S. Securities and Exchange Commission accuses the two of failing to make a serious effort to pay federal fines levied against them. The SEC has been recommending jail time for the former executives of Radical Bunny, who have failed to make significant strides toward paying off court-ordered penalties totaling $2.6 million plus interest.

Judge Susan R. Bolton's ruling was postponed until early November so the lawyers could debate whether the court has jurisdiction to use civil contempt as leverage to make the defendants pay a multimillion-dollar fraud judgment levied against them.

A series of briefs arguing for and against the jurisdictional matter are due to the court in October.

At Wednesday's hearing, SEC attorneys Spencer Bendell and David Brown said the other two former principals, husband and wife Howard and Berta "Bunny" Walder, have reached an installment agreement to pay their fines and no longer are subject to civil contempt charges.

They said former Radical Bunny executives Hirsch and former business partner Harish Shah had yet to pay more than a few hundred dollars toward paying off their fines.

The purpose of Wednesday's hearing was to determine how much money Hirsch and Shah could pay realistically each month toward their federal fines.

Defendants' attorney Michael "Mick" LaVelle said Hirsch possessed the means to pay no more than about $500 a month.

At that rate it would take Hirsch, a certified public accountant, more than 266 years to pay the fraud judgment against him.

LaVelle said Shah, also a CPA, had the ability to pay about $1,100 a month.

His fine would be paid off in about 70 years at that rate, not including interest or penalties for late payment.

Brown and Bendell argued that both Shah and Hirsch were capable of paying much more, as evidenced by several recent transfers of large sums of money revealed in personal and commercial-banking statements and other documents.

Under Bolton's April 12 ruling, Hirsch is required to pay $1.6 million, the Walders are jointly required to pay $1.6 million, and Shah must pay about $927,000.

The outstanding judgment stems from a 2009 fraud lawsuit brought by the SEC against the former Phoenix-based Radical Bunny and its principals.

The SEC lawsuit accused the defendants of violating federal rules against fraud and failing to register with the SEC.

Hirsch, Shah and the Walders on May 20 filed for an appeal that still is pending.

Radical Bunny raised more than $197 million from nearly 900 investors and then used the money to make high-interest loans to commercial-real-estate lender Mortgages Ltd.

According to the SEC, the defendants then told investors that their money could be used only for commercial development, when in fact Mortgages Ltd. could use the money for anything.

Attorneys for the defendants have argued throughout the case that Hirsch, Shah and the Walders had operated Radical Bunny in good faith and had relied on the advice of attorneys and others they knew and trusted.

When Mortgages Ltd. went into bankruptcy, it had almost $1 billion in loans outstanding to developers.

Its then-chairman, Scott Coles, died of an apparent overdose of drugs and alcohol in June 2008. He was 48.

Since then, most of the firm's projects have stalled because of a shortage of money and the real-estate market's downturn. Several developers that had been getting loans from Mortgages Ltd. have since gone into bankruptcy.

SEC attorney Brown argued during a hearing in late July that all four defendants should be charged with civil contempt because of their lack of effort to pay. Possible penalties for civil contempt include fines and/or incarceration.

However, when Bolton asked Brown in July whether he believed any of the defendants was capable of covering the entire amount owed in a single payment, Brown said he did not believe so.

In his cross-examination of Hirsch on Wednesday, Brown focused heavily on a Phoenix-based company called Sunshine Instruments Inc., the bank records of which show multiple transfers and withdrawals of large sums of money by Hirsch.

But Hirsch said he had no financial interest in Sunshine, was not an owner and received no money for working on behalf of its owner, an Italian national.

The money he withdrew from Sunshine's account in 2011, totaling more than $30,000, was simply a loan, Hirsch said.

Arizona Corporation Commission records list Hirsch as the president and CEO of Sunshine Instruments and its sole director.

Hirsch told Brown he had made a mistake when describing his relationship to the company in commission documents. He said tax records show he does not own the company, which was incorporated in 1998.

The focus of Shah's cross-examination was a series of payments that his financial records show he had made in recent months, including a $10,000 payment to Sunshine Instruments.

Judge Bolton asked Shah why he had paid back in August what Shah described as an informal loan from Sunshine Instruments, rather than using that money toward paying off his court-imposed fine.

"I have no explanation for that," Shah said.

Bolton said she would rule on the SEC's request to hold Hirsch and Shah in contempt after both sides had filed motions on an argument raised by the defense that Bolton cannot use contempt as a means of coercing the defendants into paying their fines.

The final motion is due by Oct. 31.

Bolton closed out the hearing with harsh words for Hirsch and Shah.

"They didn't make any effort to show the court that they were willing to do anything," she said. "It doesn't show any concern for this court order that I previously issued."

by J. Craig Anderson The Arizona Republic Sept. 30, 2011 12:00 AM




Ex-leaders of Radical Bunny face SEC grilling

Residents fill long-empty Tempe tower

Moving trucks lined Mill Avenue side streets as more than 250 residents lugged their belongings into West 6th, the 22-story apartment high-rise in downtown Tempe that opened Monday after sitting vacant for years.

Business owners, developers and city officials watching the mass move into West 6th called the spectacle a much-needed boost for the Valley's real-estate market.

The 2008 bankruptcy of Mortgages Ltd., then the state's largest private commercial-real-estate lender, sunk dozens of prominent Valley developments.

West 6th, then Centerpoint Condominiums, was the failed lender's biggest asset. Investors put between $135 million and $180 million into developing the 22- and 30-story towers on 5 acres just west of Mill.

In February, the property sold for a bargain of $30 million to Zaremba Group, an Ohio-based developer with an office in Scottsdale.

"They've taken an eyesore and turned it into an icon," Tempe Mayor Hugh Hallman said of Zaremba finishing Tower 1 within six months of buying the property.

Kent Chantung, director of development for Zaremba's Scottsdale office, announced that Tower 1's 189 units are all leased. And leasing of West 6th's 30-story Tower 2, scheduled to open in December, is under way.

"After so much time of (the project) just sitting, and so much hard work to get it done, it's a real milestone," he said. "It's the largest project of its kind in the state right now. The towers are a bold presence . . . a signal that we're seeing in the Valley a resurgence of this type of investment."

Chantung said Zaremba is marketing West 6th nationally as a flagship property and proof to lenders that there is demand for luxury multifamily housing.

Residents moving in said that renting a two- or three-bedroom unit did not cost significantly more than similar newer apartments close to downtown Tempe and Arizona State University.

Three-bedroom units, at $1,995 a month, are the most affordable for roommates to share. Studios start at $945, one-bedrooms at $1,175 and two-bedrooms at $1,550.

Matthew Fabros, 22, is sharing a three-bedroom with fellow ASU student Nico Svoboda, 22, and another roommate.

Monday was the first time Fabros saw his apartment.

"The view is amazing," he said, as he peered at the Valley's skyline through the ceiling-high windows of his 18th-floor unit.

Svoboda's mom, Heidi, said she was surprised by how lavish the units were.

"This place is only a little more than where he was living before, but it's a lot safer and you get so much more," she said. "He's going to be living better than we're living. I mean, come on, he has granite countertops."

Svoboda and Fabros said they would save on gas money because the campus and restaurants and entertainment on Mill are within walking distance.

"I'll skateboard to get around," Fabros said, who counted Zuma Grill, Mill Cue Club and Canteen Modern Tequila Bar among his favorite downtown haunts.

Mill Avenue businesses are already marketing to the residents. Many businesses are working with the leasing office to offer residents discounts.

"We're getting hundreds of residents within stumbling distance," said Nic Kelly, Canteen's manager. "In this economy . . . we're welcoming them with open arms."

Zaremba is eyeing similar areas where high-end multifamily housing would flourish. High on that list are sites near Chandler Fashion Center as well as properties in downtown Scottsdale and the Scottsdale corridor.

Chantung revealed that he has looked into purchasing Elevation Chandler, a 10.6-acre site that remains undeveloped as ownership of the property is mired in legal proceedings.

Mark Stapp, an ASU real-estate professor and Valley developer, applauds Zaremba for completing West 6th.

But he cautioned that the commercial-real-estate market will continue to lag in recovery until jobs rebound and investors make more loans.

by Dianna M. Náñez The Arizona Republic Aug. 2, 2011 12:00 AM





Residents fill long-empty Tempe tower

Former Radical Bunny partners face contempt charges

A U.S. District Court judge on Tuesday ordered four defendants in a recently decided case against former Mortgages Ltd. investor Radical Bunny LLC to appear in court to face charges of civil contempt for failing to pay a judgment of about $3.7 million.

Judge Susan R. Bolton had issued an order on April 12 requiring former Radical Bunny partners Tom Hirsch, Harish Shah, Howard Walder and his wife, Berta "Bunny" Walder, to each pay their share of the penalty by May 12.

As of Tuesday, none of the defendants had paid their share of the $3.7 million judgment or submitted an explanation to the court as to why they had not paid, according to court documents.

The outstanding judgment stems from a 2009 fraud lawsuit filed by the U.S. Securities and Exchange Commission against the former, Phoenix-based Radical Bunny and its principals.

The SEC lawsuit accused the defendants of violating federal rules against fraud and failing to register with the SEC.

Hirsch, Shah and the Walders filed an appeal on May 20 in connection with the case. They also recently settled a civil class-action lawsuit brought by a group of former investors, agreeing to pay an undisclosed sum.

Still, SEC attorneys Spencer Bendell and David Brown argued in a brief submitted to Judge Bolton that neither the appeal nor the class-action settlement excused the defendants from paying the $3.7 million penalty as ordered.

Bolton's order issued Tuesday requires the defendants to appear in court on July 28 to explain why they should not be held in contempt for failing to pay.

According to the SEC, the punishment for being held in civil contempt can range from "incarceration, or monetary fines, or such other sanction the Court deems just and proper."

The SEC filed fraud charges against Radical Bunny in July 2009. The firm has since filed for bankruptcy protection.

Radical Bunny raised more than $197 million from nearly 900 investors and then used the money to make high-interest loans to Mortgages Ltd. According to the SEC, the defendants then told investors that their money could only be used for commercial development, when in fact Mortgages Ltd. could use the money for anything.

Attorneys for the defendants could not be reached for comment Tuesday, but they have argued throughout the case that Hirsch, Shah and the Walders had operated Radical Bunny in good faith and had relied on the advice of attorneys and others they knew and trusted. When Mortgages Ltd. went into bankruptcy, it had almost $1 billion in loans outstanding to developers. Since then, most of those projects have stalled because of a shortage of money and the real-estate market's downturn. Several developers, who had been getting loans from Mortgages Ltd., have since gone into bankruptcy.

Radical Bunny's investors forced it into bankruptcy in late 2008.

Purposefully misleading investors is a violation of federal security laws. According to the SEC, the defendants allegedly told investors they weren't subject to securities law.

The SEC also said Radical Bunny was not registered with them and did not register any offering under securities laws. In addition to the securities-fraud charges, Hirsch, Shah and the Walders are charged with offering and selling unregistered securities and acting as unregistered broker-dealers.

The SEC also alleges that Hirsch received at least $3 million, the Walders received at least $2 million, and Shah received at least $700,000 as part of a "vendor fee" for the money they pooled from investors to lend to Mortgages Ltd.

The former Radical Bunny executives' attorneys have insisted all along that the business was not selling "investments" and that the SEC did not have proper jurisdiction to prosecute the case.

by J. Craig Anderson The Arizona Republic Jun. 21, 2011 05:27 PM



Former Radical Bunny partners face contempt charges

Law firm accused of ties to schemes

Law firm Greenberg Traurig LLP will have to defend itself in court against allegations that it was an active participant in the fraudulent schemes of its former client, the now-bankrupt Phoenix commercial-real-estate lender Mortgages Ltd.

The Miami-based law firm also is the lead defendant in a related lawsuit, filed by ML Servicing Co. Inc., a company set up to service the remaining Mortgages Ltd. assets. ML Servicing accuses the firm of legal malpractice.

Plaintiffs in both U.S. District Court lawsuits accuse Greenberg Traurig and one of the firm's shareholders, Phoenix-based attorney Robert Kant, of helping the defunct lender misrepresent itself to investors as a financially healthy enterprise when it actually was on the verge of collapse.

Greenberg spokeswoman Jill Perry denied those accusations, saying the law firm "acted properly at all times in its representation of Mortgages Ltd."

The investor lawsuit, led by California-based former Mortgages Ltd. investor Robert Facciola, originated as a much bigger case, with investors from Mortgages Ltd. and its former lending partner Radical Bunny LLC on the plaintiffs' side and Greenberg Traurig, former Radical Bunny counsel Quarles & Brady and former Mortgages Ltd. accounting firm Mayer Hoffman McCann PC on the defendants' side.

All three defendants filed motions to dismiss the lawsuit, with one common defense argument being that each firm was merely doing the job it had been hired to do.

U.S. District Judge Frederick Martone agreed with defendants Quarles and Mayer Hoffman and dismissed the charges against them.

He also effectively dropped Radical Bunny investors from the lawsuit, granting all defendant motions to dismiss their specific claims.

Martone left intact only certain allegations made by the Mortgages Ltd. investors against Greenberg Traurig.

The lawsuit's plaintiffs argue in a complaint filed in May 2010 that the three large professional-services firms knowingly helped Mortgages Ltd. and former investment partner Radical Bunny LLC defraud investors.

It also argues that the legal and accounting firms should have reported the fraud to investors and legal authorities.

According to investors and court records, Mortgages Ltd. collected more than $700 million from hundreds of private investors in 2006 and 2007, in part by making false claims about the company's financial health.

"Mortgages Ltd. and Radical Bunny could not have perpetrated and concealed a fraud so massive without the complicity of lawyers and accountants," alleged the lawsuit, whose plaintiffs include investors Facciola, Honeylou Reznik and Fred Hagel. "These professionals provided a facade of legitimacy to the scheme."

Mortgages Ltd. and Radical Bunny are insolvent and in bankruptcy, whereas Greenberg, Quarles and Mayer are going concerns.

Now, only Greenberg remains as a defendant and only against the claims of Mortgages Ltd. investors.

Mortgages Ltd. financed several high-profile projects in the Phoenix area during the real-estate boom that began in 2005.

In June 2008, just weeks after its then-CEO Scott Coles died of apparent self-inflicted means, the lender was forced into bankruptcy by developers.

Since then, both the Arizona Corporation Commission and the U.S. Securities and Exchange Commission have found evidence of illegal dealings by the firm and its affiliated lender Radical Bunny.

Radical Bunny, which loaned money from almost 900 investors to Mortgages Ltd., was not registered as a securities dealer, misled investors about the degree of risk, and continued to solicit investment after its lawyers warned that doing so would violate securities laws, they said.

by J. Craig Anderson The Arizona Republic Jun. 16, 2011 12:00 AM




Law firm accused of ties to schemes

Radical Bunny told to pay penalties

A U.S. District Court judge has ordered four former executives of Mortgages Ltd. investment firm Radical Bunny LLC to pay more than $3.7 million in combined penalties, plus interest.

The order was issued Tuesday in response to a motion for summary judgment by the case's plaintiff, the U.S. Securities and Exchange Commission.

Judge Susan R. Bolton agreed with SEC attorneys that former Radical Bunny partners Tom Hirsch, Harish Shah, Howard Walder and his wife, Berta "Bunny" Walder, violated federal rules against fraud and failing to register with the SEC.

"The court finds that the individual defendants acted knowingly, in that they continued their violations after receiving advice to the contrary from multiple, knowledgeable sources," said the ruling, filed Wednesday in U.S. District Court for the District of Arizona.

Attorneys for the defendants did not respond Wednesday to requests for comment, but they have argued throughout the case that Hirsch, Shah and the Walders had operated Radical Bunny in good faith and had relied on the advice of attorneys and others they knew and trusted.

"(Hirsch, the Walders and Shah) acted pursuant to sound business judgments based upon known facts, circumstances and strategies in consultation with reliable professionals," said the defendants' original response to the SEC complaint, now part of the court record.

The SEC filed fraud charges against Phoenix-based Radical Bunny in July 2009. The firm has since filed for bankruptcy protection.

Radical Bunny raised more than $197 million from nearly 900 investors and then used the money to make high-interest loans to Mortgages Ltd. According to the SEC, the defendants told investors that their money could only be used for commercial development, when in fact Mortgages Ltd. could use the money for anything.

When Mortgages Ltd. went into bankruptcy, it had almost $1 billion in loans outstanding to developers. Since then, most of those projects have stalled because of a shortage of money and the real-estate market's downturn. Several developers, who had been getting loans from Mortgages Ltd., have since gone into bankruptcy.

Radical Bunny's investors forced it into bankruptcy in late 2008.

An estimated 4,000 investors are still trying to recover their money from Radical Bunny and Mortgages Ltd.

Purposefully misleading investors is a violation of federal security laws. According to the SEC, the defendants allegedly told investors they weren't subject to securities law.

According to the SEC, Radical Bunny was not registered with the SEC and did not register any offering under securities laws. In addition to the securities-fraud charges, Hirsch, Shah and the Walders are charged with offering and selling unregistered securities and acting as unregistered broker-dealers.

The SEC also alleges that Hirsch received at least $3 million, the Walders received at least $2 million, and Shah received at least $700,000 as part of a "vendor fee" for the money they pooled from investors to lend to Mortgages Ltd.

The former Radical Bunny executives' attorneys have insisted all along that the business was not selling "investments" and that the SEC did not have proper jurisdiction to prosecute the case.

Spencer E. Bendell, senior trial counsel for the SEC's Los Angeles Regional Office, said the federal commission proved several times over that Radical Bunny executives lied in order to solicit investments from their clients.

"We alleged and then proved to the judge that they committed fraud, that they lied to investors," Bendell said.

by J. Craig Anderson The Arizona Republic Apr. 14, 2011 12:00 AM



Radical Bunny told to pay penalties

Centerpoint project sold; summer debut planned

Jack Kurtz/The Arizona Republic The Centerpoint development has stood dormant for years. Now, the project, renamed West Sixth, has a new owner and is back on a timetable for completion. The towers, near downtown Tempe, may be ready for residents in August.

The delay-plagued Centerpoint residential complex has been sold, with the buyer pledging to immediately resume construction on the two luxury high-rise buildings, convert them to apartments and complete the project so that tenants can start moving in beginning in late summer.

Zaremba Group, a Cleveland-based developer, paid $30 million for the project in a deal with ML Manager LLC of Peoria that closed Friday. Zaremba will give the project a new name, West Sixth, to reflect its location just west of downtown Tempe.

ML Manager is the successor to initial lender Mortgages Ltd., which had extended $135 million in financing on the project. ML Manager was formed to dispose of and maximize the revenue potential from bankrupt Mortgages Ltd.'s remaining assets.


Zaremba had announced plans to buy the project last year but backed out over legal issues focused around liens placed on the property by unpaid contractors.

The twin high-rise project at 111 W. Sixth St. broke ground in 2005, with developer Tempe Land Co. intending it as a high-end condominium complex featuring an upscale retail plaza, restaurants and a winery. When the developer defaulted, the project was taken over by ML Manager LLC and lingered in an incomplete phase, with nearby businesses and residents complaining that it had become an eyesore.

The property failed to sell at a foreclosure auction in April.

The project consists of 22-story and 30-story high rises. Phase I, focusing on the 22-story building, will be ready for occupancy by Aug. 1 and include mixed-use retail and restaurant space on the ground floor.

Phase II, the 30-story residential tower, will be completed by December, Zaremba said. In total, the buildings will incorporate 375 apartments, which is also the number of condominiums that were originally anticipated.

The West Sixth development will feature amenities such as a 9,000-square-foot fitness facility with a yoga studio, tanning beds and lounge. The complex's resort-style pool area will feature cabanas, fire pits and barbecues.

Apartment rental rates haven't been announced.

"West Sixth offers unmatched amenities and will be the pinnacle for urban lifestyle," said Kent Chantung, director of residential development for Zaremba Group, in a statement.

Zaremba, which manages three other properties in the Valley, specializes in stabilizing distressed housing developments.

"West Sixth represents a significant contribution to growth and construction for the Valley and will expand Tempe's standing as a significant metropolitan destination," Chantung said.

Zaremba is a third-generation family business that started as a home-remodeling business in 1920.

MORE ON THIS TOPIC

Centerpoint timeline

2005

July: Groundbreaking for developer Avenue Communities' first two of four proposed 22-story towers near Mill Avenue and Sixth Street. The price per unit is expected to start at about $250,000.

2006

February: Attorneys for Phoenix question Centerpoint's height, saying it would affect the safety of planes from Sky Harbor International Airport.

October: Federal Aviation Administration gives the go-ahead for Centerpoint's 30-story tower.

2008

June: Mortgages Ltd., the state's largest private commercial real-estate lender, files for bankruptcy after the suicide of its CEO. Centerpoint, one of numerous of high-profile Valley developments backed by the lender, is in jeopardy.

December: Developers for Centerpoint had worked to get court approval for a second financier to back project. That effort does not result in financing and developer files bankruptcy. Second 30-story tower is about half finished.

2010

January: Towers in foreclosure with auction set for April.

April: Towers fail to sell at auction, and ML Manager LLC, successor to Mortgages Ltd., readies to market towers for sale. Area merchants complain that towers are rundown and transients are entering them for shelter.

September: Zaremba Group, a Cleveland-based real-estate firm, announced it was buying the complex for $30 million and planned to convert it into apartments. Tenants could be moving into 22-story Tower 1 by March, the developers said.

November: Zaremba Group backs out of the deal.

2011

February: Zaremba Group. closes Feb. 18 on a new $30 million deal with ML Manager. Zaremba announces the properties will be renamed West Sixth and should be ready for tenants to move in by late summer.

by Russ Wiles The Arizona Republic Feb. 22, 2011 12:00 AM




Centerpoint project sold; summer debut planned

Luxury-condo project in Scottsdale sold to New Jersey firm

A stalled luxury-condo project funded by investors in the now-defunct Mortgages Ltd. has been sold to a New Jersey-based real-estate firm for $19.5 million, a broker involved in the deal said Monday.

The project, called Ten Wine Lofts, is an 82-unit, multifamily residential complex near Scottsdale and Osborne roads in Scottsdale that was about 95 percent completed when construction was halted in 2008.

The seller was ML Manager LLC, the company created by Mortgages Ltd. investors after the Scottsdale-based commercial lender's June 2008 bankruptcy to dispose of remaining real-estate assets.

Ten Wine Lofts' buyer was Connell Real Estate & Development Co., of Berkeley Heights, N.J., which intends to complete construction on the project and then rent out the units as apartments, according to Phoenix-based real-estate broker Ric Holway, of commercial real-estate firm Hendricks & Partners, which represented both buyer and seller.

Holway said Ten Wine Lofts, 7126 E. Osborn Road, originally was valued at $44 million.

The sale price announced Monday of about $237,800 per unit was among the highest for any recent sale of its type, he added.

The project was ML Manager's second-most highly valued asset after Centerpoint Condominiums, which sold in September for $30 million to the Zaremba Group, a real-estate firm based in Cleveland.

Other recent ML Manager sales include a $1.9 million deal in October that included the 42-unit Belleview Estates apartment community and two adjacent lots at 4525 E. Belleview St. in Phoenix.

Mortgages Ltd., at one time the state's largest private commercial real-estate lender, filed for bankruptcy in June 2008, shortly after the reported suicide of its then-CEO, Scott Coles.

by J. Craig Anderson The Arizona Republic Nov. 2, 2010 12:00 AM



Luxury-condo project in Scottsdale sold to New Jersey firm

High-profile developer out of business - Phoenix Business Journal

by Jan Buchholz Phoenix Business Journal May 21, 2010


Grace Communities, a Scottsdale development firm that had several high-profile projects finished or in the works, is no longer in business.

“We shut our doors quite awhile ago,” said Ryan Zeleznak, one of the principals.

Four loans Grace obtained from commercial lender Mortgages Ltd. — to develop the Ten Wine Lofts in Scottsdale and the Hotel Monroe in downtown Phoenix, and to obtain two parcels of land in Scottsdale — are in default.

Grace also de­faulted on loans for property it purchased on the southwest corner of 44th Street and Camelback Road. Mortgages Ltd. had a second position on those loans and will not pursue settlements on them.

ML Manager LLC, the company administering Mortgages Ltd.’s loan portfolio following its Chapter 11 reorganization, has filed notices of trustee sales on all of the outstanding loans, but has postponed a few of them because of “ongoing negotiations,” according to Mark Winkleman, chief operating officer of ML Manager.

He would not elaborate on what those negotiations entail. Zeleznak would not comment, either.

The most recent notice of foreclosure was filed on a 9.7-acre plot of land near Highland Avenue and Scottsdale Road, dubbed Portales Place. Grace Communities was going to build high-end condos on the site, like downtown Phoenix’s 44 Monroe high-rise and the nearly completed Ten Wine Lofts near Scottsdale and Osborn roads.

Grace finished 44 Monroe, but failed to sell even a dozen units. In that case, the original lender was Corus Bank and the default was on an $87 million loan. The auction, which is being handled by trustee Brian Spector of Jennings, Strouss and Salmon PLC, has been delayed several times, but now is scheduled for May 28.

Grace also borrowed $27 million to restore a historic bank property down the street at Central Avenue and Monroe Street and convert it into the boutique Hotel Monroe. That property is vacant and little work was completed other than stripping the interior.

In all, Grace borrowed about $121 million from Mortgages Ltd.


High-profile developer out of business - Phoenix Business Journal

Investors in failed mortgage firm sue

by J. Craig Anderson The Arizona Republic May. 18, 2010 12:00 AM

Investors in Mortgages Ltd. have filed a $900 million lawsuit alleging that the now-bankrupt investment firm's lawyers and accountants should have blown the whistle on its risky lending practices.

The lawsuit's plaintiffs argue in a complaint filed May 11 in U.S. District Court for the District of Arizona that three large professional-services firms intentionally helped Mortgages Ltd. and former investment partner Radical Bunny LLC defraud investors.

The three firms, not named as defendants in previous Mortgages Ltd. lawsuits, are Miami, Fla.-based law firm Greenberg Traurig LLP, Milwaukee-based law firm Quarles & Brady LLP and accounting firm Mayer Hoffman McCann PC, which is based in St. Louis.

"Mortgages Ltd. and Radical Bunny could not have perpetrated and concealed a fraud so massive without the complicity of lawyers and accountants," alleges the lawsuit, whose plaintiffs include investors Robert Facciola, Honeylou Reznik and Fred Hagel. "These professionals provided a façade of legitimacy to the scheme."

Representatives of the two law firms have issued statements denying the allegations and expressing their readiness to defend against them in court. Mayer Hoffman McCann did not respond Monday to requests for comment.

Both Mortgages Ltd. and Radical Bunny are insolvent and in bankruptcy, whereas Greenberg, Quarles and Mayer are going concerns.

Mortgages Ltd. financed several high-profile projects in the Phoenix area during the real-estate boom that began in 2005.

In June 2008, after the death of Mortgages Ltd. Chief Executive Scott Coles, the lender was forced into bankruptcy by developers.

Last month, at the conclusion of an investigation that lasted nearly two years, the Arizona Corporation Commission ordered Radical Bunny to pay $190 million to investors.

It found that Radical Bunny, which loaned money from almost 900 investors to Mortgages Ltd., was not registered as a securities dealer, misled investors about the degree of risk, and continued to solicit investment after its lawyers warned that doing so would violate securities laws.

Investors in failed mortgage firm sue

Radical Bunny ordered to pay $189 million

by Catherine Reagor The Arizona Republic Apr. 14, 2010 12:00 AM

Phoenix-based Radical Bunny LLC has been ordered by the Arizona Corporation Commission to pay $189.8 million in restitution to its investors.

After a 22-month investigation, the commission has found that Radical Bunny fraudulently sold unregistered deed-of-trust investments. The group, which raised money from almost 900 investors and then lent it to Mortgages Ltd., was not registered as a securities dealer.

Investors in Radical Bunny were told that their money would be used to purchase fractionalized interests in notes secured by real-estate deeds of trust. However, the Corporation Commission found that Radical Bunny pooled investor funds to make unsecured loans to Mortgages Ltd.

The probe also found Radical Bunny continued to raise money from investors after being advised by lawyers that it was violating Arizona securities laws.

A separate administrative Corporation Commission investigation is still pending into Radical Bunny's former managers: Tom Hirsch, Harish Shah, Howard Walder and Berta "Bunny" Walder.

Radical Bunny is in Chapter 11 bankruptcy and controlled by a court-appointed trustee. The Corporation Commission restitution order can't be enforced until Radical Bunny emerges from bankruptcy. It's unclear what assets it will have to go toward paying the settlement.

Separately, the U.S. Securities and Exchange Commission is pursuing a fraud lawsuit against Radical Bunny LLC.

When lender Mortgages Ltd. was forced into bankruptcy in June 2008, Radical Bunny had made $197 million in investor-funded loans to it.

Radical Bunny ordered to pay $189 million

Chateaux on Central sold for $7 million

Chateaux on Central sold for $7 million

by Catherine Reagor The Arizona Republic Mar. 24, 2010 12:00 AM

Phoenix's cluster of brick minimansions called Chateaux on Central has a new owner. Wisconsin-based MSI West Investments paid $7 million for the 21 homes with elevators and rooftop terraces.

The high-profile project was started during the housing boom. Then, plans called for the homes, some with turrets and wine cellars, to each sell for $2.8 million and higher. The current deal breaks down to less than $350,000 a home.

Chateaux on Central, at Central Avenue and Palm Lane, has been tied up in Mortgages Ltd.'s financial problems for the past few years. When the original lender, Desert Hills Bank, filed to foreclose in 2007, Mortgages Ltd. took over with a $65 million financing deal. Then, Mortgages Ltd. was forced into bankruptcy by its creditors and investors in June 2008, and Chateaux on Central had been stalled ever since.

Chateaux's new owner intends to unveil its plans for the development soon. Central Phoenix neighbors of the project, including many office tenants on Central Avenue, will be happy to see the homes completed.

"We are very aware that the eyes of the community have been focused on this project for quite some time and that, with the acquisition, comes a tremendous responsibility to provide a top-quality development," said Bill Schmitz, president of MSI West Investments, which paid cash for Chateaux on Central.

MSI West Investments is a division of the food-industry firm Main Street Ingredients of La Crosse, Wis. Joe Morales of Arizona Realty ONE Group has been hired by MSI West to market and sell the homes.

Chateaux on Central is so high profile that it was featured in last year's New York Time's list of "Ruins of the Second Gilded Age."

Mortgage-fraud summit

U.S. Attorney General Eric Holder will be in Phoenix on Thursday for a mortgage-fraud summit. The event is part of the Financial Fraud Enforcement Task Force formed by President Barack Obama last year.

The Phoenix event will be the second summit for the task force. The first was held in Miami in February.

Mortgage fraud began to plague Phoenix's housing market during the boom, when illegal cash-back deals were happening in almost every neighborhood. Now, most fraud schemes in the Valley involve foreclosures.

A diverse group of Arizona market watchers, fraud experts, state and federal regulators and prosecutors as well as real-estate leaders have been invited to Phoenix's mortgage-fraud event.