Court Allows Receiver to Sell Abandoned Arizona Apartment Portfolio for $123M
- Aug 25, 2010
Dees Stribling, Contributing Editor
San Diego–Maricopa County (Ariz.) Superior Court Judge Eileen S. Willett has ruled that San Diego-based Trigild can sell seven Arizona apartment properties that it currently holds in receivership. The properties were abandoned in early 2009 by the Irvine, Calif.-based Bethany Group.
As receiver, Trigild had asked the court to allow the sale of the properties to Standard Portfolio for $123 million. After the judge ruled in the company’s favor, Bethany Group filed a motion to wave its right to appeal to the decision and withdrew its objection to the sale.
The orphaned Arizona properties have been the object of some notoriety locally for issues of deferred maintenance, unpaid employees and suppliers, and vexed residents (Bethany Group cut off salaries and operational funding for all of its 60 properties nationwide last year). The 2,759-unit portfolio includes the 460-unit Laguna Village, the 320-unit Alante at the Islands and the 374-unit Santana Crossing in Chandler; the 432-unit Whispering Meadows and the 582-unit Tuscany Palm in Mesa; the 395-unit Sienna Springs in Phoenix; and the 196-unit Verrado Park in Glendale.
The case is unusual because sales of abandoned properties typically come after a foreclosure, which hadn’t happened yet for the seven Arizona communities. Bethany originally bought the properties through a subsidiary that took out a securitized commercial-mortgage loan for that purpose. LaSalle Bank, trustee for the loan, supported the sale.
Though a local ruling–and a legal precedent in Arizona, as it happens–other jurisdictions may also be influenced to allow receivers to sell abandoned properties ahead of foreclosure proceedings. “There are a number of advantages to this approach,” Bill Hoffman, president of Trigild, tells MHN. “For one thing, it gets the property to market sooner, which is important in a declining market. Also, it keeps lender/servicer off title, thus avoiding any direct connection or liability, and it allows the special servicer to modify the existing debt and let the buyer assume the modified loan.”
Hoffman also points out that Trigild was able to get a much better price for the properties using this kind of sale. “If Bethany Arizona had gone to foreclosure and then sold, which the defendant argued was the only ‘legal’ way, the highest cash offer for the properties was only $71 million,” he says. “By having assumable financing, we were able to get $123 million.”