Urban Phoenix mansions reborn at half price

By Bob Christie

Associated Press

Published: Sunday, Dec. 12 2010 10:48 a.m. MST

PHOENIX — Modeled on a turreted 1890s-era mansion, the sturdy, brick Chateaux on Central seems an unlikely symbol for the nation's devastating housing collapse.

But the luxury 21-unit project just north of downtown Phoenix was halted in mid-development, chained and padlocked, marred by a suicide, its rear units partially without roofs and exposed to the elements. And so it sat, month after month, years passing, the only sign of life the occasional sweep of a police spotlight as officers checked for vagrants.

Now, more than five years after construction began, a new investor is putting the townhomes on the market for $1.4 million to $2.46 million — half the original price — and optimists hope it shows that big residential projects are poised to sell after being shuttered by failed lenders or plummeting prices.

The Chateaux was audacious from the outset. After all, the well-to-do could drive to nearby Scottsdale, plop down a few million and get a showcase mansion on the side of a mountain with city views from an infinity pool.

Chateaux on Central's original developer envisioned urban mansions along a commercial street, the smallest a 5,200-square-footer priced at $2.8 million. The showcase 8,200-square-foot mansion would have an asking price nearly double that.

The project was conceived in high times. After construction began in early 2005, masons and other tradesmen toiled for nearly two years on the massive brick, steel and concrete structures. Each four-story unit with a basement would have multiple verandas, a top-notch security system, an oversized two-car garage and commercial-grade ThyssenKrupp elevators.

Then the housing and financial crisis hit with a vengeance. The first bank financing the property got into a dispute with developer Central PHX Partners in late 2007, and the developer sought bankruptcy protection.

A private lender, Phoenix-based Mortgages Ltd., refinanced the endeavor but then went belly up itself.

Owner Scott Coles, a financier well known locally for his philanthropy and lavish parties, was found dead in his home on June 2, 2008. According to a police report obtained by The Arizona Republic, Coles, 48, dressed in a tuxedo, took an overdose of drugs and alcohol and lay down on his bed to die.

Beneath this pall, construction stopped and chain-link fences went up.

While Chateaux on Central was unusual in its architecture and its luxury, its failure became commonplace in foreclosure-wracked locales nationwide.

In Las Vegas, investor Carl Icahn paid $150 million early this year for the unfinished, $2 billion Fontainebleau Las Vegas hotel/condo resort and plans to wait for the economy improve before resuming construction.

In south Florida, one Miami Beach development, South of Fifth, echoes the Chateaux project in both scale, price and history, said Peter Zalewski, a partner in the Miami-area brokerage and consulting firm Condo Vultures LLC. The developer owed more than $75 million on the completed beachfront, 28-unit luxury project when it was taken back by its lender.

Zalewski said he recently brought an offer for the property at half its previous price, but it was rejected because the owner wanted slightly more.

Mortgages Ltd. was among the largest private commercial lenders in Arizona and had more than $900 million in loans outstanding when it failed, leaving a host of shattered projects across metropolitan Phoenix.

The company ran into trouble when the real estate market crashed, and the firm couldn't raise new capital from investors or meet some of its loan obligations.

Central PHX Partners lost its stake in Chateaux through bankruptcy, and the remains were put on the market for liquidation.

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