Mortgages Ltd. - Commercial - Hard Money

Update - 2008-06-30: Mortgages Ltd on Friday filed an "emergency motion" in BK court to obtain $125 million from Southwest Value Partners according to an article in AZ Central.

"Phoenix Suns majority owner Robert Sarver's real-estate company could help bankrupt Mortgages Ltd. continue to fund some big-ticket developments and keep running its business."

Grace Communities opposed. The court will have a hearing on 2008-07-01 at 2:30pm.

Original Listing - 2008-06-25: Mortgages Ltd., a Phoenix, AZ hard money commercial lender, has obtained bankruptcy protection under Chapter 11 as of 2008-06-24. The following announcement appears on their web site:

"As many of you have read in the June 24, 2008 edition of the Arizona Republic, on June 23, 2008 Mortgages Ltd. filed a motion to convert a petition for an involuntary Chapter 7 (liquidation) Bankruptcy to a voluntary Chapter 11 (reorganization) Bankruptcy. The original petition was filed on June 20, 2008 by one of our borrowers who has loans in default.

Under the circumstances, we are pleased to announce that on June 24, 2008, the judge granted our motion, and Mortgages Ltd. is now in a voluntary Chapter 11 bankruptcy."

The announcement goes on to state interest payments to investors have been suspended, but they "are working to get permission to resume payments as soon as possible."

An Omnibus Declaration by Interim CEO Laura Martini filed with the BK court on 2008-06-23 gives detailed insight into the company's operations as well as the conditions and events that led up to the bankruptcy. In it, Martini states "While it stablizes operations, MLtd has suspended efforts to attract new investor money, and MLtd has suspended efforts to make new loans." Mortgages Ltd. had $925 million in outstanding loans on 70 projects outstanding as of the Ch. 11 filing.

Following the "apparent suicide" of former CEO Scott M. Coles on 2008-06-02 (reported in the Arizona Republic), lending operations, development projects and the solicitation of funds from new investors were suspended in a management meeting on 2008-06-10. Staffing levels were cut from 42 to 25 employees.

Mortgages Ltd.'s significance in the AZ market, especially Phoenix, is substantial:

• From Martini's declaration: "In business since 1963, MLtd holds the oldest mortgage banking license in the state of Arizona."
• From MISH'S Global Economic Trend Analysis: "The important point is this is not another residential mortgage lender blowing up. Mortgages Ltd. is a commercial real estate developer [emphasis added]. They have contracts to fund some of the largest commercial projects going on right now in downtown Phoenix."
• From the Arizona Republic: "The financial storm brewing around Mortgages Ltd. has touched two key downtown Phoenix projects, a blow to ongoing efforts to reinvigorate the city's heart."

Here's more commentary we received from tipsters recently:

" I believe they just do loans in Arizona and have been a source of hard money deals for 20 years. They have stopped funding loans recently and there are talks of bankruptcy."

"Private mortgage lender to BIG condo construction projects as well as lender to individuals for home mortgages in the Valley of the Sun. Has been around for 45 years. Note that Scott Coles (age 48), sole Director and Owner / Trustee of this organization was found dead on 6/3/08 (persistent rumors indicate suicide which has not "officially" been confirmed yet). Company was founded by father of Scott Coles. State of Arizona Finance Dept sent auditors immediately to review the books. Lawsuits are flying both from investors and customers. Company has hired MCA Financial (turn-around specialist) and is trying to reorganize - however, bankruptcy rumors are also flying."

"Lawsuits" as mentioned in the latter tip, likely refers to the initial involuntary Ch. 7 BK filing brought by KGM Builders, Inc., Central & Monroe, LLC., and Osborne III Partners, LLC. We found no other open pending cases against Mortgages Ltd. in public records. According to Martini's declaration, "MCA Financial Group Ltd was hired along with Barry Monheit... to assist the company in coping with the effects of the liquidity crisis and the real estate down turn."

We will continue to update this listing as additional information becomes available. Feel free to comment or contact us with any more details you can provide.