By New Times
By Connor Radnovich
By Robrt L. Pela and Amy Silverman
By Ray Stern
By Keegan Hamilton
By Matthew Hendley
By Monica Alonzo
By Monica Alonzo
The project broke ground in 2005, at the height of the real estate boom. The towers rose in the following months, using about 55,000 cubic yards of concrete on a tight, five-acre construction site. The buildings topped out by the beginning of 2008 — at the start of the recession.
Soon, the money faucet ran dry and workers fled the site.
The shorter Tower 1 was left at about 90 percent complete. Tower 2 is about 75 percent done. Two brutal Valley summers have taken their toll, destroying cabinets, doors, and other furnishings.
It would be easy to point to the economy as the reason Centerpoint has remained a lifeless shell. And, for sure, the housing market's crash and credit crisis has played a role. How the project arrived at this sorry stage, however, is more complex.
Developers Ken Losch and his partners at Avenue Communities/Tempe Land Company made a risky bet — and lost — on a project that was too fancy.
They used an unconventional lender to fund the deal — Mortgages Ltd. This was the company that went from relative obscurity to Arizona's most sought-after lender of short-term commercial building loans, then blew up as the recession hit. By late 2007, Mortgages Ltd. had squandered about $1 billion of its investors' money and could no longer afford to fund development projects.
The founder's son and company CEO, millionaire partier Scott Coles, committed suicide in June 2008. The timing of his death made it appear that the fiscal disaster of Centerpoint — which was Mortgages Ltd.'s largest note-holder and the receptacle for tens of millions of its investors' dollars — may have nudged him over the edge.
After Coles' death, accusations flew that the dead CEO had been running a giant Ponzi scheme and gouging clients with exorbitant fees. The Centerpoint developers later claimed in court that Mortgages Ltd. had committed fraud by lying about the lending company's fiscal health.
Besides Losch and company, hundreds of Mortgages Ltd. investors — not to mention a few dozen would-be condo buyers — were left in the rubble of the financial collapse.
A lot of hope — and about $180 million in materials, labor, and attorney fees — is invested in the towers.
Investors, builders, city boosters, and would-be residents still look eagerly toward the project's completion. Some (certainly not all) continue to hope that the towers will not only be finished, but will turn a profit for investors and rise the tide for all of downtown Tempe, as originally planned.
Yet it's uncertain whether anyone will ever inhabit the structures that loom over Tempe's landscape.
Like so many properties in the Valley, Centerpoint is upside-down on its mortgage — but most foreclosures don't see debts of $135 million.
Listen closely and you'll hear speculation around Tempe that the towers will be imploded. As in, everything on the property will be torn down and something more practical, like a parking garage, will be built.
Most experts seem to pooh-pooh that idea because the project is worth millions (even in its unfinished state) and would cost millions to demolish. But simple arithmetic shows this drastic conclusion may not be far-fetched.
The developers testified in court that another $75 million would be needed to finish both towers, including the ground-level retail sections. With such an infusion of cash, the first tower could, theoretically, be finished in six months. But that would raise the debt to $210 million.
Assume for a second that the 375 units in the towers could then be sold for an average price of $300,000, raising about $113 million. Add to that the $35 million that the buildings are worth now "as is," according to an appraiser hired by the developer, and their total worth falls far short of the $210 million debt.
If the towers are completed, the value of the project will go up — maybe way up. But, without question, the venture still would be risky.
The Valley's condo market has tanked, along with the rest of the state's economy.
A project similar to Centerpoint, though smaller, opened last year in downtown Phoenix. The 44 Monroe condo tower is 34 stories with an eighth-floor pool and spa. As of late August, a reported 10 of the 196 units had been sold.
A wealthy person or group could spring up to fund Centerpoint's completion, believing that the investment will be sound — albeit in the very long term. The longer the towers stand unused, the higher the potential for problems, including fire and depressed property values.
But in the present economy, selling tickets to an implosion may be the only sure way that Centerpoint can recoup any money.
Even if the towers do get finished, it doesn't mean they'll be full of condos or provide all the wonderful amenities originally promised. The units could be rented out as apartments or maybe sold to Arizona State University for use as student housing. Perhaps Centerpoint could be a hotel. Or office building.
The towers already have a head start as a homeless shelter.
The ostentatious Centerpoint plan practically made city leaders drool.
In landlocked Tempe, the only way to build is up, and the city has been coddling would-be developers of high-rise condos for years.