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
Condo towers are becoming popular in western U.S. cities that have seen their populations boom in recent decades. Not everyone believes in the "drive-'til-you-qualify" home-buying philosophy — some want more urban lifestyles that don't require as much dependence on automobiles.
Tempe, the state's most densely populated city, seemed as good a place as any in Arizona to build a condo high-rise. The city approved several condo projects in the mid-2000s, and Centerpoint was the biggest.
A decade earlier, the college town had begun making over the Mill Avenue shopping and nightlife district in earnest. Sidewalks were adorned with shade trees and public art. Millions of dollars were spent on the ambitious Town Lake and its surrounding environment. After the failure of a deal to build a luxury hotel, multi-story office towers and residential buildings began to rise on the lake's shoreline — but too slowly.
What the area really needs for long-term health, experts figured, is more people actually living there. Besides paying property taxes, these residents would take the elevator down in the morning to eat breakfast at a nearby restaurant, shop in a downtown grocery store, and utilize public transportation on their way to an event at Gammage Auditorium or an exhibit at Tempe Center for the Arts.
The addition of more people to downtown Tempe would then bring in more businesses, visitors, and residents, thus creating a perpetual money machine for the 21st century.
Enter Ken Losch, David Dewar, and Jamie Lawson, the principals of Avenue Communities. The company purchased the land and the rights to develop condo towers on the site at Sixth Street and Maple Avenue from MCW Holdings, which owns the Brickyard on Mill.
Losch, a millionaire racecar driver who stands in as the group's public face, hit all the right notes with his enthusiasm for the high-amenity, high-rise lifestyle. In newspaper articles in 2004 and early 2005, the company claimed it would generate more than $240 million in condo sales at the four planned towers and boost spending in downtown retail shops by $20 million.
The city lapped it up, ultimately offering Losch and Dewar's company $2.7 million dollars in waived development fees. The company also made a deal to revamp the historic Hayden Flour Mill, which the city bought from developer MCW in 2003.
These were the giddy times of the real estate bubble. In one 12-month period between 2004 and 2005, home prices in Arizona went up by more than 30 percent — more than in any other state. Just about any property could earn money in the hot market.
Building four luxury condos at once in downtown Tempe appeared an obvious act of hubris. The company seemed to realize it, scaling back the project to two towers. But even that seemed to be over-reaching.
"The majority of Realtors did raise an eyebrow to the prices," says Tom Tokoph of Urban Realty and Development, who specializes in condo sales. "Everybody was kind of like, 'Hmm, that's aggressive.' But you know, it's a one-of-a-kind project in downtown Tempe. They were pushing the lifestyle."
But about that lifestyle — well, Mill Avenue is no SoHo. And, these days, empty storefronts are abundant.
Richard Lorenzen, an attorney for Radical Bunny, the largest group of Mortgages Ltd. investors, recalled the first time he heard that the skyscraping condo towers were to be built in downtown Tempe.
"You just kind of go, 'Wow, are you kidding?" he says. "There's nothing else like that in [metro] Phoenix, in terms of the size and price [Losch] was envisioning. Nothing. So he decides to do two at the same time."
It is hard to know how much, or whether, Tempe Land Company should be faulted for pursuing the unthinkable. In February, during a hearing related to the company's bankruptcy, an attorney for the company noted how Losch has insisted that the record reflect that he was in "active negotiation" with potential new investors.
"And, yes, debtors are optimistic," attorney Steven Berger said of his client at the time. "That's how skyscrapers get built. If it was left to us lawyers, there would be no skyscrapers because we're realists and pessimists."
Proponents of the tower project pointed out that Losch and Dewar's company showed prowess for building plush condos in the mid-2000s, with the Third Avenue Lofts in Scottsdale, and two projects near the Grayhawk community.
But it shouldn't have surprised anyone that Losch and Dewar were guys who might end up leaving investors high and dry: They've done it before.
As two of three principals in Magellan Companies, a Canadian-owned enterprise with an office in Phoenix, Losch and Dewar have been accused of shady dealings, fraud, and losing way too much of their Canadian investors' money.
Neither Losch or Dewar would comment for this article, much less take New Times into the Centerpoint buildings for a look.
As a November 4, 1999 New Times article ("Straits of Magellan," Terry Greene Sterling) detailed, some Canadian investors claim the company screwed them out of tens, or even hundreds, of thousands of dollars apiece.
The article revealed that Magellan's third principal owner, Les Litwin, had been sued in a real estate case unrelated to the company. A judge ruled that Litwin had obtained a loan with fabricated sales figures.