THE EMPEROR'S NEW FORECLOSURES

JUST WHEN HE WAS GETTING HIS POLITICAL HOUSE IN ORDER, ANOTHER SYMINGTON ENTERPRISE DISINTEGRATES

Eager to jump in, Martinez conceived and designed the Cafe La Tasca himself, and spent several months in Mexico studying regional cuisines, bringing back the recipes he would use at his restaurant. He invested thousands of dollars of his own money.

When the doors opened, Martinez says, he waited for customers to come eat his specially crafted dishes. He is still waiting.

From the outset, Martinez and others who have watched the project say, the Mercado was a glass half-empty. Promised promotions and advertising never materialized. Not enough tenants could be found, and many of the storefronts sat empty.

There was only one set of bathrooms for the whole shopping center, Martinez says, but that didn't matter too much because few customers came. Parking was inadequate and the stores were not easy to get to.

Occasionally, Martinez says, tour buses would pull up at the Mercado. Camera-toting visitors would snap pictures, reboard the buses and drive away.

"The Mercado was supposed to cultivate the Hispanic culture," Martinez says. "The Symington Company doesn't know peanuts about the Hispanic culture."
In applying for federal grant money, Symington and his partners estimated that the project would create 235 new full-time jobs, many of them for minorities. At best, only about 100 permanent jobs were ever created, says Margaret McKeough, the city's business programs administrator who oversees the grant program.

The Mercado never has turned a profit, court records show, and has steadily sunk deeper and deeper into financial ruin. Martinez can point across the street to the thriving Arizona Center to see how a successful downtown project is run.

"People park here and go over to the Arizona Center," he says.
Over time, virtually all of the tenants fell behind on their rent, and then stopped paying it altogether, Martinez says. The Mercado Developers Limited Partnership, in turn, fell behind in its loan payments to the pension funds that invested almost $10 million in the project.

Lonnie Williams, Symington's attorney on the Mercado, says the pension funds share the blame for the project's failure. Time and again, he says, the pension-funds manager vetoed leases that would have filled the complex, holding out for higher rents that were unreasonable in the depressed Phoenix market.

McMorgan & Company, the San Francisco-based manager of the pension funds, blocked efforts by the Mercado management to sign a lease with at least one restaurant owner who wanted to locate there, according to a lawsuit the Mercado partnership has filed against McMorgan.

The suit, which charges McMorgan with trying to sabotage the project, also claims that the pension-fund managers squelched a deal that would have brought the Phoenix Museum of History to the Mercado, and refused to allow an existing jewelry store to expand.

Firefighters' union chief Pat Cantelme, who originally helped Symington obtain pension-fund backing for the Mercado, says McMorgan was unwilling to approve leases for several tenants that he tried to recruit for the floundering project.

"When they ran into problems, I was asked by Symington and the unions involved in it to help out," Cantelme says. "We brought them three leases that I thought were very good, and they were all turned down."
One of the proposed leases, Cantelme says, was with newly elected Congressman Ed Pastor, who was looking for a district office. McMorgan rejected the lease because the space Pastor wanted to lease was designated as retail, not office space, Cantelme says.

"It just seemed like everything we tried wasn't working," Cantelme says. "I think the pension funds thought the governor wasn't putting enough into the project. There was a lot of finger-pointing, and it turned into a disaster."
Last July, Symington and his partners stopped making any payments on their loan, says John McVay, one of the attorneys representing the pension funds. In December, the pension funds sued to force the project into foreclosure, and the Symington Company turned over the keys.

The Mercado is now scheduled to be sold at auction March 10. But that will almost certainly not be the end of Symington's troubles with the project.

In enticing the pension funds to invest with him, Symington signed personal guarantees on the loans, effectively pledging that, if the deal went sour, he would pay the money back out of his own pocket.

McVay says the pension funds plan to hold Symington to the guarantees and expect him to cough up the difference between whatever the Mercado sells for at auction and the $10.8 million they are owed.

When the deal closed, McVay says, Symington's personal finances appeared solid enough to back up such a pledge. Now, even one of Symington's attorneys implies that he probably isn't good for the money.

"I think any type of liability like that would be difficult for someone like him to handle, given the real estate market," says Williams, who declined to elaborate on the specifics of Symington's financial position.

The pension funds may not be alone in going after Symington for money. The governor also personally guaranteed the $2.7 million loan of federal grant money from the city. No payments are due on that loan until this summer, McKeough says, so technically it is not in default.

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