Concrete Bungle: Tempes Twin-Towers Condo Project Collapses Financially, Leaving Investors in the Rubble
The lofty Centerpoint Condominium towers broke ground in 2005 and were supposed to give downtown Tempe its own slice of Manhattan.
Four years later, they've delivered just that — except the slice resembles something out of the film Escape from New York. Not quite the Chamber of Commerce's dream.
The almost-completed 22- and 30-story buildings at Sixth Street and Maple Avenue are dark, shiny hulks at night — tombstones for the Phoenix area's devastated real estate market.
Without air-conditioning, the interiors roast at 190 degrees in the summer heat. And since construction stopped in July 2008, the towers have been a playground for drunken trespassers and transients.
Not so long ago, condominium agents were taking prospective residents into the towers to pitch the units. Prices started at about $300,000 and soared to more than a million for the spacious penthouses. The lowest-priced units were just 600 square feet or less — but what a view!
Nowadays, a different kind of visitor is enjoying the scenic vista. People like . . . We'll call him Dave.
On a warm evening in May, head buzzing from numerous rounds of alcohol consumed while barhopping on Mill Avenue, the young man prepared to relieve himself from the roof of the tallest building in the East Valley.
To fulfill his ill-considered plan, he realized he'd need the help of two friends — and they agreed to hold his arms tightly while he hung his butt over the side of the low, concrete wall.
"We were pretty drunk," says Dave.
After climbing the spooky, silent stairwell of the largest tower, the three buddies were now partying at more than 330 feet. Creepily, the rooftop glowed red from the large, blinking aviation-warning lights. Far below were the lights outlining the two bridges over Town Lake, the light-rail bridge and the Loop 202 freeway; the galaxy of Phoenix extended out to the horizon.
The trio saw evidence of the many trespassers who had come before them. Beer bottles lined the rooftop's edge; more bottles and dozens of cigarette butts were also strewn across the roof.
Dave sat on the wall — and was overcome by a wave of good sense. His friends were laughing so hard that he figured they'd drop him. He abandoned the college-boy idea.
The team decided to explore their environs on the way down, checking out the half-built condo units of the north tower. Wood floors and countertops had been installed in some units. Slabs of uncut granite, dry wall, and other raw material "were everywhere," he says. They ventured onto balconies that were bordered only by rickety two-by-fours, but the place didn't seem too dangerous. So, a few weeks later, Dave brought a couple more of his friends to the towers for a romp.
This time, the door they had used on the third floor of the parking garage was locked. A security guard in a truck rolled up as they looked for another entrance. He forced them to leave the garage and jump back over the chain-link fence. Because the guard was "so cool" they came back in moments later, only to be nabbed by the same guy. They had judged him right — the guard had no interest in busting anyone and merely told them once again to scram.
"He said he catches kids up there all the time," Dave says.
It's not just "kids," though. The buildings — expected at one time to be worth more than a quarter-billion dollars upon completion — have become a hangout for transients, too.
The trespassing free-for-all led Tempe's development services director, Chris Anaradian, to fire off a bluntly worded e-mail on June 3 to one of the developing company's principals, Ken Losch.
"Heads up, guys . . . The Tempe Police Department is sending officers over to Development Services today. They want to understand how we can pressure you to mitigate the large numbers of trespassers who are routinely entering the empty buildings at Centerpoint," Anaradian wrote. "Evidently, the upper floors of the project have been routinely trespassed by our local homeless population."
The problem is challenging. Losch's bankrupt company is existing on emergency funds, and security is expensive.
The Centerpoint condo project was supposed to open its first tower in spring 2008, along with first-floor retail shops. The taller tower was to open a few months after that.
From the beginning, the project was designed to be over-the-top.
The initial plan called for four high-rises with 800 units. The project was later broken up into two phases, the first consisting of two towers and 375 units.
A 23,000-square-foot common area on a seventh-floor "backyard" connecting the towers was to feature a white-sand beach next to a pool, a kitchen with on-duty chef, a wine lounge, an "electronic lounge" with large-screen TVs and video games, a spa, a gym, and concierge services.
On the first floor, residents and the public would be treated to a gourmet grocery store with coffee drinks and gelato, a bakery, and other shops. A new Italian restaurant was to be built in partnership with one of the Valley's top chefs, Michael de Maria. The Trattoria M was to be equipped with a "wine aficionado room" and private "chef's table" room, plus a casual dining area. (De Maria, who closed his Michael's at the Citadel restaurant in Scottsdale two years ago to focus on Centerpoint, did not return calls for this article).
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.
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.
In the early 1990s, Magellan found thousands of Canadians to invest an estimated $100 million in various real estate deals, including some apartment complexes in the Phoenix area. The investors would own a portion of the properties and collect interest as their values went up.
At least, that's the way it should have worked. Instead, some people lost 50 percent or more of their investments. They blamed Magellan for mismanaging the properties and misusing their money.
The complaints grew so loud that, by 1996, the Arizona Attorney General's Office had opened an investigation into Magellan. A search warrant issued in the case contained allegations of possible fraud and tax-law violations. The investigation didn't go very far.
Investors made only slightly more headway in January 1999, when the Alberta Securities Commission found that Magellan had taken money from one investment property and spread it among other properties. The money was returned to the account, but the commission fined Magellan $44,000 and banned it from doing business in the province until 2001.
"We barred these individuals from our marketplace for two years, and, presumably, investors in the future will take some heed of that," commission spokesman Dave Linder told New Times at the time.
Investors didn't take heed, and for some, that was a good thing. Take the Third Avenue Lofts, for instance. Dewar and Losch reportedly made money for their investors on that project.
But success may be in the eye of the beholder: According to local real estate blogs, the investors flipped the condos before the crash, and the new buyers got burned when property values sunk.
No matter to Tempe Land Company. With a solid record of condo building behind it, the firm got $150 million in loan guarantees from Mortgages Ltd. to start building the first two condo towers.
In March 2008, Scott Coles, David Dewar, and Ken Losch flew to Toronto together for a desperate meeting with a capital investment company.
The conversation among the rich hipsters might have had its lighter moments. Coles, 48, had recently hosted a high-profile Super Bowl party at his mansion on the side of Camelback Mountain, featuring entertainment by rapper Ludacris. Losch might have reminisced about getting his souped-up off-roading truck stuck in the mud recently while racing the Baja 1000.
But the overall mood on the airplane must have been grim.
Coles must have known that the world would soon see him as a failure. He'd driven his dad's company, the 45-year-old Mortgages Ltd., into a quagmire — the lending company, which had acted as a bank to dozens of clients, was out of money. (See "Scott Coles: The Story Behind the Life — and Death — of the Flamboyant Owner of Mortgages Ltd.," July 31, 2008, and "Scott Coles, the Millionaire Owner of Mortgages Ltd., Leaves Behind Broke Investors, Unbuilt Buildings, and Lots of Unanswered Questions" September 18, 2008, both by John Dickerson).
The lender had given Losch's company only $120 million of the $150 million loan before running out of gas.
Now the men were traveling to Canada to beg for $60 million for Mortgages Ltd., which needed the money to keep pumping millions of dollars toward the completion of Centerpoint.
Losch had first learned Mortgages Ltd. was in trouble about six months earlier, he told the bankruptcy court during a hearing in March of this year.
He recalled that his account representative from the company, Laura Martini, came into his office one day in September and announced she would be out of a job in two weeks; Mortgages Ltd. no longer had liquidity, she told him.
Losch testified he'd met Coles only twice before that day, but he immediately set up a meeting. He said he was surprised to learn that the company had no reserves and was paying loan installments with collections from other borrowers.
It turned out that Martini's "two weeks" claim had been an exaggeration, but the company's problems were real. Losch talked to Coles nearly every day after that in a mad scramble for replacement financing. Starting the same month, the loan installments from Mortgages Ltd. suddenly began coming in short — or not at all.
Coles was flat-out lying to his investors, assuring them in a letter on November 7, 2007, that their money was safe. Meanwhile, he was frantically seeking more loans to pay off other loans.
Five months later, Losch had helped line up $60 million from Tricon in Canada. Negotiations went on for the better part of a day. Tricon was interested, but the deal depended on Coles. And soon after everyone came back to Arizona, Losch recalled, "Scott just said, 'Nope, I won't do it.'"
Tricon wanted a guarantee that if the condo project went belly-up, it would get first dibs at the collateral — the buildings themselves. Coles' investors already had the primary claim to the towers. Screwing them "would create more problems for me than I would know what to do with," Coles complained to Losch.
Yet Coles, the financial whiz kid, came up with a solution — or so it seemed. He went back to his own investors and found they were willing to kick in a few million more, as long as their money would be backed by the preferred "first" position among creditors in case of bankruptcy.
Days later, Coles agreed to give Tempe Land Company a separate loan for $45 million. Again, the developer wouldn't be getting the full amount up-front. Coles doled out a mere $9 million to the Centerpoint project from the second loan. Losch's company had already burned through $120 million from the first Mortgages Ltd. loan.
"And then Scott was back in default again," Losch told the court. "Not another penny came in after that."
Tempe Land Company began withholding payments to subcontractors, from the architect to the concrete pourers, eventually owing several of the companies a total of more than $24 million. Mortgages Ltd. filed for Chapter 11 bankruptcy in mid-May 2008. Two weeks went by. Then, on Saturday, June 1, Losch called Coles at home to tell him some more bad news:
The principals at Tempe Land Company had determined that their best option was to declare bankruptcy, too. That way, they could quickly find new financers to continue work on the towers. Naturally, the new investors, who would have to be approved by a judge, would move to the front of the line — ahead of Coles' investors — for the ultimate claim to the towers in case of liquidation.
At first, Coles was "panicked" by the idea, Losch testified.
That makes sense, because Mortgages Ltd. had more of its investors' money sunk into Centerpoint than any other project. Bankruptcy for Tempe Land Company meant the investors, such as those with Radical Bunny, might lose their shirts.
Coles seemed to warm up to the decision as the phone call went on, suggesting to Losch that they come up with a plan first thing the next week.
That night, Coles dressed in a black tuxedo, surrounded himself with a makeshift shrine to his second wife (who had left him) and chugged down a bunch of oxycodone, Ambien, and booze. Coles' 15-year-old son found his lifeless body the next day.
Scott Coles was dead, but the financial pain within Mortgages Ltd. and Tempe Land Company went on. Both bankruptcy cases, which bleed into each other, are monsters — perhaps the most complicated in Valley history. A February court motion related to the condo towers contains the names of 27 lawyers representing various clients' interests.
The time for playing nice was over. The relationship between lender Mortgages Ltd. and Tempe Land Company was getting ugly.
Losch had testified that he needed an emergency loan to put the rest of the windows in the towers, which would protect the building from rain and mold, and to get the air-conditioning going. Mortages Ltd. managed to scrape up $2.8 million from different investors and lent it to Losch, but the A/C never was turned on. Instead, Tempe Land Company used part of the money to pay itself. Mortgages Ltd. cried foul and pressed the court for a finding of fraud.
Then it was Tempe Land Company's turn.
Soon after filing for bankruptcy, Losch and his partners launched a civil complaint against Mortgages Ltd. The condo developer asked for tens of millions of dollars in damages, claiming Coles' company ruined the project by failing to pay the full amount of the first and second loans.
Further, Coles and Mortgages Ltd. representatives covered up the extent of the company's money problems and wrongfully charged $10 million in fees for the unfulfilled loans, the developer alleged. The claim is still pending in court.
Last month, Tempe Land Company persuaded a federal judge to allow it to convert from Chapter 11 reorganization — a plan that could have propped up the company if it found new financing — to Chapter 7 bankruptcy. This leaves the project in the hands of a court-appointed trustee.
The fallout for investors, workers, and would-be condo buyers is severe. Several of the subcontracting companies filed court motions to oppose the Chapter 7 move, stating that "a liquidation would likely result in payment to only a very few."
Phoenix attorney Christopher Simpson says the $24 million in lost payments to the subcontractors "endangers the enterprises that puts these people to work."
Yet Simpson still believes he can recover his clients' money. He represents two of the subcontractors: architect Gould Evans and Central Cabinets, which are together owed about $1 million.
David Hansen is not so optimistic. He has no faith that he'll see more than a fraction of his original investment. A retired school principal and real estate dabbler from Nevada, Hansen, now 72, wrote checks for 10 years to Radical Bunny, which in recent years put most of his money — about $1.4 million from his pension plan, personal savings, and 401(k) — into the condo towers.
He recalls a dinner at the Orange Table in Scottsdale a few years ago for investors in Radical Bunny (now also in bankruptcy), when advisers at the company touted the Centerpoint project.
"They showed the new rail line was going right there in Tempe [and] said it was prime property because Tempe was landlocked," he says. "They were saying this was a sure winner."
Hansen, who splits his time between homes in Alpine and Queen Creek, says bitterly, "If they only get 50 cents on the dollar, we'll be wiped out."
Radical Bunny investors like him were supposed to have been in first place for the Centerpoint project's deed, if it came to that. But besides the subcontractors, other investors "at the last minute, through several different devious means, were put in front of us," Hansen says.
Why did he put his money into Radical Bunny? Easy, he says; it promised a solid 11 percent interest, while most everyone else offered 6 or 7 percent. The chance to make money with money appealed to many people with lesser means, Hansen says. "Hundreds" of people took out second mortgages on their homes and plunked money into Radical Bunny. Many will likely lose those homes, he predicts.
Bankruptcy records reveal that hundreds of Radical Bunny debtors are owed hundreds of thousands of dollars each, and much of that is tied up in the failed Centerpoint project. Several, like Hansen, had invested well over a million dollars.
The Securities and Exchange Commission announced this summer it was investigating claims that Radical Bunny misled clients.
At least Hansen still has a pension to live on. But he'd hoped to bequest a small fortune to his kids, stepchildren, and grandchild, who could use it for college.
"Now, I have nothing to leave them," he says.
At press time, a judge was preparing to decide whether the condo project can be handed over to the group of former Mortgages Ltd. investors (the company is no more; just the debt survives). This new group is poised to make the tough choices. Is it better to off-load the towers at fire-sale prices (maybe to someone who would demolish them) and split the paltry proceeds, or to find a financial fat cat to fund the towers' completion, then sell them at a much higher price? Or maybe finish the towers and then try to sell the condos individually or in groups? Would the white-sand pool and other upscale amenities be part of any deal?
One thing seems certain: Losch, Dewar, and Tempe Land Company have thrown in the towel.
From the Loop 202 freeway, the Centerpoint towers look almost finished. Their windows, which reflect a light green color, appear intact. The buildings look no less habitable than the skyscrapers to the west in downtown Phoenix.
As you get closer, though, you see wind-whipped plastic in the place of some windows. Many of the balconies are bordered by weathered two-by-fours.
At the base of the towers, there's no hiding that it's still just a construction site: Raw dirt surrounds the north and east sides of the five-acre site, peppered with pipes sticking up from the earth. Piles of loose windows, some broken, lie in racks or stacked on the ground near other debris. Inside the cavernous, concrete-dominated space for a plaza and shops, temporary shelves are loaded with boxes and equipment.
The whole place is surrounded by a dilapidated chain-link fence that sports faded, ripped advertisements showing what life at Centerpoint was meant to be: great food and spirits, people laughing and enjoying the bird's-eye view.
Next door to the Centerpoint project, at Tempe Fire Station Number 6, Captain Don Jongewaard thinks about the Big One. He and the firefighters he supervises often "tabletop" about what to do in case of a fire at the towers. The first thing would be to call for backup from fire departments around the Valley, because a high-rise fire would be a major calamity.
Statistics show that vacant buildings tend to burn more than filled ones, whether from arson or other reasons.
"There's always a bigger risk, just because the place is not being kept up," Jongewaard says.
The towers were designed to make it easy for firefighters. Breathing-canister refilling stations are already installed on every third floor of each tower. Fire sprinklers are installed, too — but aren't operable.
Fire inspectors go up into the towers every few weeks to make sure there's no danger, city officials say. But the inspections missed something — the trespassers. Their reports say nothing about any intruders.
Assistant Fire Chief Marc Scott, the inspectors' supervisor, and the man in charge of fire safety at the Centerpoint condos site, says he had no idea that trespassers were gaining entry to the towers until New Times told him.
The three biggest causes of fires are "men, women, and children," Scott says wryly. "Transients going in and out of there . . . that could be a problem."
The reason the sprinklers are inoperable is that there is no water pressure to them. "Would I like to see the sprinklers turned on? You betcha," he says.
But water and electricity to run the pumps cost money, and that's in short supply for the towers.
Firefighters acknowledge that a towering inferno is unlikely in the unfinished buildings, which are made mostly of concrete and contain few furnishings.
The point is, empty buildings are nothing but a problem.
Large, unfinished construction projects are eyesores, reminding citizens that life isn't always peachy. Property values near them tend to fall or stay roughly the same year after year. City leaders were happy to see the towers' windows installed after most of the other work was halted. Without windows, the condo towers would have that bombed-out appearance, like Elevation Chandler at the intersection of Loops 101 and 202 — another Mortgages Ltd. project.
Centerpoint's exterior may not look so bad, but the extreme heat has taken its toll on the interior. In arguing for the emergency loan funds, Losch testified that temperatures in 2008 soared to 190 degrees and warped $3 million worth of cabinets. In another court transcript, one of Tempe Land Company's lawyers stated that some doors and furniture were also affected by heat last year.
This summer was even hotter.
The developers and their employees testified that rain hasn't yet penetrated the towers, but the buildings aren't entirely sealed. It may take luck to avoid a mold invasion like that at the Brickyard during its construction phase, resulting in an $11 million remediation.
If a super-investor were to swoop in with the $75 million needed to get the Centerpoint project going again, city officials say building permits are still active, that inspectors stand ready to examine each completed task by workers; fees are deferred until the project is done.
If that were to happen, in a few months, condo buyers could be moving in, they say. The towers would once again look like Tempe's crown jewels — instead of symbols of the failed economy.
Jay Novak, 31, a home-theater installer (and son of Phoenix attorney Ed Novak) had hoped to be one of those new residents. He was one of about 40 people who paid up-front earnest money for one of the condo units.
It's frustrating, he says, because his condo on the 12th floor of the shorter tower appeared finished to him. The last time he went inside, about the beginning of 2008, even the appliances were installed. He wonders how they've fared in the blistering heat. But he figures it's not really his problem anymore.
He doesn't expect to see his $50,000 down payment again. The condo contract stated that the deposit money would go into a "non-neutral" escrow account and would become the developing company's property if something happened, he says.
"It's in big, bold letters — and we all signed off on it," Novak says of he and the other buyers. "There's no way I'll get my money back."
When he's ready to buy another home, he says, he'll get something more traditional. But if the next owner of the condo towers is willing to reimburse his loss and cut him a deal on a nice one-bedroom, well, it all depends on the price.
Such is the case with the entire project.
Karl Guntermann, a real estate expert at the W.P. Carey School of Business at ASU, expects the project to be finished and the condos sold — even if it takes a few years and becomes a major loss to the original players.
"Real estate is what happens when someone takes advantage of someone else's misfortune," Guntermann quips.
"Tempe wins, regardless of what happens," the professor adds. "At some point, Tempe's going to have a whole lot of real estate on the tax rolls."
Anaradian, Tempe's development director, agrees that the city's long-term future looks bright, despite the setback of Centerpoint. He challenges his staff to step into a metaphorical time machine and travel 15 years into the future to see what the city will look like.
For now, though, we're all forced to stare at evidence of the bleak present: the dark, unfinished towers of Centerpoint.
UPDATE: Investors had sunk an estimated $180 million into the two towers before work on them was stopped, but in February 2011 the unfinished project was sold for just $30 million to Zaremba Group, an apartment company from Ohio. The California Teachers Pension Fund was the major investor for the deal. Zaremba completed the towers and in late July of 2011, the first renters moved in. Although the towers contain apartments often filled with fun-loving college students instead of owner-occupied condos, as originally planned, Tempe officials point out the situation is better than having unfinished towers.
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