Straits of Magellan

Page 5 of 5

When New Times asked Magellan to respond to complaints of mismanagement and low returns on investment, publicist Resnick answered with a single question in her October 22 letter: "Which limited partners and properties are you referring to?"

In a follow-up letter on October 29, Resnick wrote: "For the most part, Magellan projects have performed close to or exceeded projections. In a few cases, some have performed below expectations. That's the nature of the business."

She noted that one Magellan limited partnership called "Longmore Estates" paid off handsomely -- investors recouped equity plus a whopping 22 percent annual return, she says.

But not all investments have been Longmores.

In 1997, a homeowners' association sued Magellan in Maricopa County Superior Court, alleging consumer fraud, breach of fiduciary duty and negligence in connection with Magellan's allegedly shoddy construction and poor management of Scottsdale Mission, a condo complex.

Magellan denied wrongdoing and said the case was baseless.

Magellan and the homeowners' association are reportedly nearing an out-of-court settlement.

In faraway Canada, limited partners wondered what to do.

The troubled property drew the attention of Brad Seutter and Dave Miller, two Alberta realtors.

The Canadian duo isn't granting interviews to newspapers, but letters they sent to investors make it clear they have a game plan: get enough limited partners to vote out Magellan as managers of certain properties, then assign management to Seutter and Miller. The next order of business: demand forensic audits.

Seutter and Miller organized the limited partners in Scottsdale Mission and fought a successful battle in Superior Court to remove Magellan as general partner of the project. Seutter and Miller then replaced Magellan as general partners of the Scottsdale apartment complex.

Seutter and Miller also organized Canadian investors to oust Magellan from Morada, a Magellan project in San Diego that has been in receivership for more than a year.

The duo claims it has the votes to wrest control of Canterra, a Phoenix apartment building.

They have their eyes on Palomar, a Magellan condo project in Sun City West that was taken over by a receiver and is now facing bankruptcy.

They are also trying to organize investors in three other Valley properties -- apartment buildings in Chandler, Scottsdale and Tempe.

Magellan's response to the Seutter-Miller attacks is to write investors seeking their loyalty while simultaneously poking holes in the Miller-Suetter takeover proposals.

Miller and Seutter bombard investors with letters contradicting the Magellan rebuttals.

And so it goes.

Gordon Grant, a computer specialist from Calgary, Alberta, says he invested about $100,000 during the mid-1990s in two Magellan properties that are being targeted by Miller and Seutter for takeovers.

Since Grant claims to have gotten only about $15,000 of his money back, he wholeheartedly supports the takeovers.

If investors don't organize and protect themselves, says Grant, no one will take care of them. Not the AG in Arizona. Not the regulators in Canada.

"There are no protections for investors whatsoever in the system," he says.

No protection, maybe, except for Zorro on the Internet.

"Here is my message to Big Business who takes advantage of the weak: It's time for you to play by the rules," Zorro writes.

"If you don't, you will force your victims into creating new websites . . . and YOUR name will be on it."

Contact Terry Greene Sterling at 602-229-8437 or at her online address: [email protected]

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Terry Greene Sterling