Out with the old

Page 5 of 6

Michael King, FSAL's attorney, contends his clients are motivated by another, less selfish reason. JPI, he says, has promised to take care of the needs of Desert Crest's residents, at least for the next year or two.

King and JPI say that the corporation plans to honor the HUD contracts requiring half of Desert Crest's apartments to be low-income housing. JPI envisions building the apartment complex in phases. The first units would go to the 50 subsidized residents, who would no longer find themselves in a retirement center but in a blend of apartment dwellers. Still, JPI's obligation to supply Section 8 housing would run out in 2000.

As for the other 50 nonsubsidized residents of Desert Crest, King says JPI would be as "sensitive" as possible to help them with the transition. King says that MMT, if it were to foreclose on the property, would not have to honor the HUD agreements or treat residents sensitively.

MMT attorney Lance Jurich refused to comment on the case.
Mac McCullough and other Desert Crest residents scoff at the notion that JPI's plans can be characterized as taking care of their needs. Half of them will be kicked out, McCullough says, and the other half will be put into a living situation they can't accept at their age.

"To put them in these apartments, you're going to kill them," he says.
Residents and neighbors want to know why FSAL and its parent FSL appear to have ignored other solutions, including Lyle Six's suggestion that the foundation find a way to save Desert Crest. But residents will have to convince FSAL to put their proposal for saving Desert Crest before the bankruptcy court for the judge to consider.

Bankruptcy attorneys say Six's idea makes sense.
Desert Crest's major problem is that its mortgage is worth more than the property that secures it. FSAL estimates that today Desert Crest is worth about $3.2 million. But it faces $5 million in debt. Under a Chapter 11 restructuring, Judge Baum could accept a plan to reduce Desert Crest's mortgage to its present worth, $3.2 million.

With an infusion of cash, FSAL could also pay off the relatively minor debts to The Home Depot, SRP and dozens of others.

And if FSL, FSAL's parent company and an agency of the Roman Catholic diocese, would forgive its $152,000 claim, FSAL could be in a position to continue running Desert Crest. (Or at least save it for another buyer that would promise to keep it intact.)

FSAL attorney Mike King pauses for a long minute when asked about such a scenario. Then he says that the Foundation for Senior Living, FSL, "has never approached us about that."

King didn't explain how he expected Guy Mikkelsen, executive director of FSL, to "approach" Guy Mikkelsen, president of FSAL, to discuss such an option.

Mikkelsen himself, after granting an initial telephone interview, did not respond to repeated calls.

Marcia Busching, attorney for Desert Crest residents, thinks she knows what Mikkelsen would say to such a plan.

"I agree that the best thing would be to do a cram-down of some sort where Desert Crest would retain the property. My sense is that [Mikkelsen and FSAL] feel they've explored that to the nth degree and have no other choices. I think they saw JPI as their best alternative," she says.

Busching doesn't understand FSAL's reasoning in the purchase agreement with JPI. "They certainly come across as though they're trying to do the best for the residents, especially with this huge debt load. But it looks like there have been other options which have not been pursued."

She says with increased media and public scrutiny, however, FSAL might feel pressure either to find another buyer who will run Desert Crest or keep it itself.

Some people believe much of that pressure should be applied to the diocese and Bishop Thomas O'Brien, who has remained silent about the matter.

The bishop did not respond to an interview request.
State Senator Chris Cummiskey, who lives near Desert Crest and has joined his neighbors in opposition to its razing, has also been unable to get Bishop O'Brien on the phone.

"The diocese is doing its best to pretend that this is not a problem for them. . . . But I think the developers are feeling the heat," Cummiskey says.

FSAL seems to believe, however, that Desert Crest is worth more dead than alive. And until a guardian angel (or public outcry) convinces this corporate George Bailey that it has a moral obligation to survive despite substantial challenges, the foundation will apparently wish Desert Crest had never been born.

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Tony Ortega
Contact: Tony Ortega