by Jane Larson – Jun. 2, 2010 09:52 AM
The Arizona Republic
Los Arcos Crossing, the failed shopping center on McDowell Road whose latest developer vowed to turn it into Scottsdale’s “center of life,” is headed to foreclosure and a possible sale by the end of the year.
Phoenix-based developer PDG America has defaulted on its loan, and lender ML Manager LLC plans to take ownership of the property at a trustee sale Aug. 5, said Mark Winkleman, chief operating officer of ML Manager. The Peoria-based firm was formed by investors as a successor to Mortgages Ltd., the high-flying Phoenix investment firm that collapsed in bankruptcy after chief executive Scott Coles committed suicide in 2008.
The potential sale of Los Arcos Crossing comes as Scottsdale is pushing for redevelopment of the McDowell Road corridor, a once-thriving strip that has lost auto dealers, grocery stores and other retailers as residents and growth moved northward.
The city is inviting developers’ proposals for 3.7 vacant acres it owns between the shopping center and SkySong, the ASU Scottsdale Innovation Center. Some developers have already indicated interest in combining the two parcels into a bigger project, Winkleman said.
“They’re interested in (whether) this could be a bigger deal,” he said.
One of those interested is Global Entertainment Corp., a Tempe-based company that has proposed building an event center that would host community events and commercial performances.
Having a larger parcel would allow the company and its partners to put the center on the city land and develop the rest with restaurants, shops and possibly a hotel, said Global’s chief executive officer, Richard Kozuback.
“We really do think this would be a good catalyst for growth,” he said. “Generally, an events center or performing arts venue tends to bring in traffic, which corresponds to spending and economic development.”
Three other developers responded to the city’s request for conceptual proposals this spring. Kitchell Development proposed a neighborhood retail center and multifamily housing; Mark-Taylor Residential suggested multifamily housing, possibly combined with a small entertainment venue and retail; and Cassidy Turley BRE Commercial’s idea was for a “green” hotel.
The city expects to issue a more detailed request for proposals for its site this month. Proposals would be due in mid-August, and the City Council could review them in October, economic vitality director Harold Stewart said.
PDG America acquired most of Los Arcos Crossing in 2007 with plans to develop it as Scottsdale CentroVida, a $150 million mix of townhouses, apartments, restaurants and neighborhood shops. The property lies just east of the SkySong campus.
Mortgages Ltd. financed the deal. PDG made its last loan payment in June 2008, leaving an outstanding balance of $24 million, not counting interest and late fees, Winkleman said.
PDG’s chief executive officer, Rick Sodja, said the deal fell apart because Mortgages Ltd. failed to fully fund its loan to PDG for assembling the property. PDG has sued the investors and has tried to work with other developers, he said.
Winkleman said that barring a settlement or bankruptcy, ML Manager plans to hold the trustee sale, take ownership and choose a real estate company to market the property.
ML Manager’s board would have to accept any offer, and investors and the U.S. Bankruptcy Court would have to approve it.
The city’s timing for redeveloping its land is “excellent,” Winkleman said, because ML Manager might be selling its property at the same time as the city is negotiating the sale or lease of its land.
“As much trouble as Mortgages Ltd. got into, the properties aren’t the problem,” he said. “It’s just that the loans were above what they’re worth.”
If the property is marketed in September and October, approval of any sale could come in the fourth quarter, he said.
ML Manager’s portion of Los Arcos Crossing covers about 14 acres, including the empty Bashas’ grocery store building, a second building that once housed an LA Fitness and smaller shops, a closed gas station and an AutoZone.
Besides the Los Arcos Crossing and city properties, the area includes:
• The .68-acre site of the Buggy Bath Car Wash, at 7569 E. McDowell Road. Manager Andrew Sanchez said the carwash owns its site. It has been there for 32 years and “we plan to stay,” he said.
• The .57-acre site of Advanced Auto Service and Tire Center, 7505 E. McDowell Road. An executive from Advanced Auto, which owns a dozen other centers around the Valley, was not immediately available for comment.
• The 2.8-acre site of Los Arcos United Methodist Church, a block south of McDowell at 7425 E. Culver St.
The church has not been approached by possible buyers, Pastor Cynthia Kristopeit said. If it is, “we will weigh our options,” she said in a statement.
Los Arcos Crossing was created in 1988 when Scottsdale-based Dawson Cos. Ltd. combined the former Valley Plaza shopping center on 74th Street with the Lionel Playworld near Miller Road. The Lionel model-train and toy store closed in 1991, and the Bashas’ pulled out in 2008.
