February 21, 2011
Host: Ted Simons
- The Centerpoint condominium towers in downtown Tempe have finally been sold. Mark Winkleman of ML Manager LLC discusses the transaction.
- Mark Winkleman - ML Manager LLC
| Keywords: business
Ted Simons: Good evening and welcome to "Horizon." I'm Ted Simons. The Centerpoint condominium towers in downtown Tempe have finally been sold. Construction started in 2005 and ended three years later, when the lender, mortgages limited, filed for bankruptcy. The partially completed towers have been vacant ever since. But on Friday, it was announced that the towers have a new owner, and a fresh start. Here to talk about the deal is Mark Winkelman, chief operating officer for M.L. manager, the company that was responsible for finding a buyer. Good to see you again.
Mark Winkelman: Much happier times than last time I saw you.
Ted Simons: I told you we’d bring you back with better news and we got you here with better news. Who are the new owners?
Mark Winkelman: It's the same guys as last time. ZAREMBA, a national company based out of Cleveland, Ohio. They do retail and multifamily and they've had some projects here in town and had been working on Centerpoint, they say, for two years.
Ted Simons: What was the sale price?
Mark Winkelman: $30 million. The price did not change from last time.
Ted Simons: It was the group that had a deal pretty much in place the last time.
Mark Winkelman: We were ready to close with them the first week in October, the money had been sent and the documents signed and ready to go but then it didn't happen.
Ted Simons: We’ll get to that hitch in a second, but back to what this deal, the particulars, when was this deal done?
Mark Winkelman: Done in terms of --
Ted Simons: Finalized.
Mark Winkelman: Friday afternoon.
Ted Simons: So that's it --
Mark Winkelman: The title company was -- there were so many documents and she said if we don't get this wrapped up and signed, I'll never get these 100 documents -- or whatever it was -- signed. That was about 4:00 Friday afternoon.
Ted Simons: OK, back to the hitch. Between the time ZAREMBA thought the deal was done and then we had the problem and Friday, were others interested? Were there serious offers from other people?
Mark Winkelman: I was deluged with phone calls after it became known that the sale be hadn't gone forward. But that typically happens on a high profile project, but what normally happens is something happened to the buyer, they lost financing, they found something they couldn’t deal with, or there were a problem that prevented them from performing. That wasn't the case here. Everybody would call up and say, we're ready to go and we’d like to buy this and you're polite to people and we needed to sell this, but after a while, so many of these phone call, look guys, we had a buyer that had gone through the due diligence and $30 million cash ready to close. That wasn't enough money to do it. How much more do you guys have? And then they would kind of hem and haw and, they were thinking less.
Ted Simons: Let's now get to the hitch and what we thought was the deal last time, we thought we had a deal with the same group, what happened?
Mark Winkelman: Well, as you recall, last time, it broke down because we had a number of subcontractors and suppliers that didn't get paid and there were a lot of people that lost money and that's one group of them and they were trying to say, we have priority and we deserve to be paid. The title company has -- as they typically do will ensure over that sort of thing and we went to the closing, thinking we would be able to give the buyer an insurance policy that they got it free and clear of the liens and, the 11th hour, the title company changed their minds. And we had to do is figure out how to solve that problem and this was -- I've been in the real estate business 27, 28 years, I don't think I've ever worked on a administer complicated deal than this one, that ultimately got done. We had to figure out a way to bridge the gap and we ended up -- instead of fighting with the lien holders, it was an issue of is our loan in first place or their liens in first place? Instead of fighting, we bought their positions. They asserted liens with attorneys fees in excess of $30 million. We were going to win or they were. We bought their position, and negotiated a price. I forget how many -- 20-some assignments of those rights and September up an entity to hold -- set up an entity to hold it. And title -- since the original loan was done and last summer and we'll take those policies and we've informed the title come we intent to collect and we've shown damages and intend to get the money back at the closing that the investors didn't get and this is a bit strange. A $30 million deal, and our investors got zero money at closing on Friday.
Ted Simons: I was going to say -- let's ask about that, as far as what this sale means to investors, what does it mean?
Mark Winkelman: It's the largest asset that mortgages unlimited had. A high-profile project and it's important, it was 15% of the overall portfolio but for the specific investors in this, this is why it's so difficult and the structure so complex, they literally are not getting any money at closing. We had other obligations that had to be paid off. Loans and closing costs and unpaid real estate taxes, and so when it comes, as the water fall, when we paid the money for the mechanic lien holders, there's no money left. We had to go to court to get approval and a handful showed up and there's well over 1,000 investors in this deal and you're going to sell this for $30 million and we get zero? What's up. We had to explain the issues and we had an army of lawyers look at this and we're -- not saying it's a sure thing, but highly confident we'll get the money back through the policies and we're going to have to fight for it.
Ted Simons: I was going to say, it's a court case waiting to happen isn’t it?
Mark Winkelman: It is and part of what the investors said was, alright if we have to take it on the come, we have to make sure there's new money to fight the war and there's $3 million held out of the proceeds, put into a separate account to make sure we have enough money to fight the legal battle to get the money back from the title insurance company.
Ted Simons: That battle is about to rage, but those towers now are off the books.
Mark Winkelman: Yes, they're somebody else's opportunity.
Ted Simons: Let's talk about them quickly, what these towers are. How much is needed to complete these things from what you understand?
Mark Winkelman: Good question. I don't know if I ever asked ZAREMBA specifically, we had so many people look at it. The estimates as low as $35 million and as high as $50 million, $60 million. Somewhere in between. Still a lot of work to be done.
Ted Simons: And a lot of work, you were mentioning this earlier, there are areas, common areas where is it looks like a whole bunch needs to be done. Then you go up a elevator and walk into a units and it’s pristine, it’s beautiful.
Mark Winkelman: It looks like somebody could be living in them. That's just the staging and construction, but right now all the outside looks like a construction site. But workers, I'm told, are on the site today and they've got a tight time frame, they intend to have the 22 story building open in time for the fall semester at ASU this year.
Ted Simons: And seems to be the target, student housing, luxury student housing, I guess.
Mark Winkelman: It is nice. Nicer than what I lived in as a college student.
Ted Simons: No kidding. How many stories on each building?
Mark Winkelman: 22 on one and 30 on the other.
Ted Simons: How many units overall?
Mark Winkelman: Roughly 380.
Ted Simons: Does this deal, and is it deal unique in and of itself or show that things might be -- the battleship could be turning a little bit as far as real estate in Arizona?
Mark Winkelman: Well, you know, people like to look at -- point at this condo thing and look at all of these ill-designed projects. What you've seen, one area of the market that's active is multifamily and that's apartments and condominium projects and people say if you're priced right, people will rent them or buy them and we had $135 million as a loan, the original developer claims to have $20 million, $25 million additional of their own money and just sold it for $30 million. If you put another $40 million, at $70 million -- that's half what it was originally going to cost so the rents can be less, the sales price if they ultimately sell it can be less. I think it's a matter of -- I honestly don't think we had too many condominium projects, probably too many planned but the ones out of the ground was caught up in the meltdown of the economy and real estate market.
Ted Simons: From where you sit, real quickly, last question; are these the kinds of projects that are rentals, most seem to be rentals that could become condos at a later date?
Mark Winkelman: Absolutely. They were designed and built as condos and that's the business strategy a lot of these folks, we'll rent them now and get some income and when things stabilize you probably won't see them selling for the prices -- these were going to sell for $700 and $800 a foot, I don’t think you’ll hit that. But you may be able to sell them and a lot of folks, that's their exit strategy. Time will tell what ZAREMBA chooses to do.
Ted Simons: Alright, well Mark congratulations, as I mentioned, we were going to get you back on here when it sold, and it did.
Mark Winkelman: Thanks very much, I appreciate.
Healthcare Safety Net
- As Arizona contemplates removing 280,000 people from its Medicaid rolls, we’ll take a look at the state’s health care safety net and whether or not it’s prepared for the additional caseload.
- Dr. John Swagert - CEO, Mountain Park Health Center
- Janice Eertl - Director of St. Vincent de Paul's Virginia G. Piper Medical and Dental Clinic
- Dr. Nicholas Vasquez - Arizona College of Emergency Physicians
| Keywords: health
Ted Simons: Record-setting job losses in recent years have placed a tremendous strain on Arizona's healthcare safety net, which is a loosely connected web of public and private health centers, clinics and hospitals that care for uninsured and under-insured Arizonans. That safety net will be tested once again if 250,000 people lose their Medicaid eligibility due to state budget cuts. More on that in a moment, but first, David Majure shows us one piece of Arizona's healthcare puzzle.
Narrator: Mountain park health center is a community health center with five valley locations serving about 54,000 people. This location near baseline road in south Phoenix is its largest. Caring for about 25,000 patients. As a federally funded health center, Mountain Park provides health coverage for those with private insurance, government insurance or no insurance whatever.
>> Actually this is generic medication.
Narrator: Uninsured patients pay what they can afford on a sliding scale based on their income. There are more than 120 community health centers throughout Arizona, most located in poor and under-served communities. They're all a vital part of Arizona's healthcare safety net.
Ted Simons: Here now to talk about Arizona's healthcare safety net is Dr. John Swagert, CEO of mountain park health center. Which we just saw in the last video. Janice Ertl, director of St. Vincent de Paul's Virginia G. Piper Medical and dental clinic. And Dr. Nicholas Vasquez from the Arizona college of Emergency Physicians. Good to see you all here, thanks for joining us.
Nicholas Vasquez: Thank you.
Ted Simons: John we’ll start with you. We just saw what your operation deals with. Give a cursory definition of a healthcare safety net.
John Swagert: We try at mountain park to provide a primary care home that patients can get all of their medical needs met in one place. Without having to bounce in and out of emergency rooms because that's really the only other available healthcare for people who don't have insurance.
Ted Simons: How coordinated is the healthcare safety net here in Maricopa County and in Arizona in general?
Janice Ertl: Well, I think that's what we were kind of talking about. We think there's really no true safety net here in Arizona or maybe in the whole United States, I'm not sure.
Nicholas Vasquez: Yeah.
Janice Ertl: Yeah
Nicholas Vasquez: We were discussing it before, when you say safety net or healthcare system, it implies a level of coordination or a level of oversight. Or even a level of information sharing. And that just doesn't exist. Really, healthcare is really a mall of independent businesses that all select which market they want to play in. The people you have around this table are some businesses that get support either from public entities or private charities to take care of people who can't pay for the products otherwise. But really, it's much more like independent businesses than a coordinated safety net or healthcare system.
Ted Simons: Is it a lack of coordination that there are possible ways to fix this? Is it just the wild west out there? How do you survive? What kind of cooperation do you get?
Janice Ertl: Well, you know, we're a charity, and we're very fortunate because we -- there's a number of people in this community who volunteer their services. Physicians and clinicians who volunteer their services so we're able to get people in quicker, but yet as a charity, we can't take care of people for their whole lives. So we try and educate and stabilize them and keep them on for nine to 12 months and then move them to a community health center at some point in time.
Ted Simons: Talk about what you see on a day-to-day basis. Again, what I'm hearing now seems to be a lack of coordination in the safety net.
John Swagert: I disagree there's no safety net. I think Mountain Park provides a safety net. The problem is it's not scaled to the level of the problem. Maricopa County has something like 600,000 uninsured people and we can take care of 50,000 and coordinate their care. We just don't have resources to expand that to all 600,000 people.
Ted Simons: What are you seeing on a day-to-basis, from the underinsured and uninsured?
Nicholas Vasquez: Mostly what we see are insured. Most of the patients who come to emergency rooms are people who have insurance and have a doctor but couldn't get in. It's really much more people are voting with their feet and looking for convenient, accessible care rather than waiting to go elsewhere. Many times, specialists are three months out or six weeks out. And if you get a cold or backache or toothache, whatever, the normal randomness of life, you want someone to take care of you now. If it’s get it now versus waiting six weeks, most are choosing now.
Ted Simons: Is that what you're seeing as well as far as a day-to-day basis?
Janice Ertl: We've been taking care of the uninsured working poor and new we're seeing the lost my job, lost my insurance folks. $240 a week in unemployment doesn't go far. And we're seeing the kids who are no longer eligible for kids care and poor kids without insurance. And there’s been a mental health cut and we're seeing those folks too. But we're seeing much sicker patients now than we saw three or four years ago. Much sicker. People are waiting way too long sometimes to get healthcare.
Ted Simons: Is that what you're seeing as well?
John Swagert: Certainly we are. It's a -- it's a problem that -- that, especially exacerbated by the economy where so many people have had to slide into sliding fee scale and our clinics and they wait too long and go in and out of emergency rooms.
Nicholas Vasquez: It's not just the uninsured. I don't want to sound cynical but really a lot of insurance companies, who I'm not going to vilify, but they've offered lower priced policies that include a high deductible, 2,000, 5,000, 10,000, something where people get to pay that deductible at the beginning of the year. You have to choose whether you want to spend that money on your medical care and it definitely decreases demand and makes people choose to wait. Sometimes they choose wisely and sometimes they don't.
Ted Simons: If that's the present scenario, what do you see, what are your thoughts on proposed Medicaid cuts here in Arizona?
Janice Ertl: I think we're doing what we can. I mean, we all understand the fact that the budget needs to be cut. It's just that we don't always -- we're not always sure that our elected officials are not just targeting the weak target, such as the poor.
John Swagert: I think in many ways, we're offered a false choice. People don't stop getting sick because we decide to stop covering their healthcare costs. We still see people getting sick they just go to the emergency room instead of going to a doctor's office where the cost would be less so the cost of these illnesses is just transferred instead of through Medicaid or AHCCCS, it’s transferred through the rest of us through higher insurance premiums.
Ted Simons: Where will these people go?
Nicholas Vasquez: The only place that they're guaranteed access to care is an emergency room. There are a lot of well intentioned altruistic people who work hard to take care of people. They're just overwhelmed. The emergency rooms aren't an endless supply of care. They have to maintain profitability. I hate to use the word profitability, but that's what a hospital looks at and if a hospital starts being exposed to a lot of uncompensated care, they have and will close emergency departments.
Ted Simons: From the other angle here and what we hear on this show, when we have lawmakers here and what they'll say that there are lots of ways for these folks who wind up getting reduced -- cut off from the Medicaid rolls. Lots of ways for them to receive healthcare. Is that valid?
Janice Ertl: You're talking about people on AHCCCS and very low income and oftentimes there isn't a lot of health literacy that goes along with it. These are people who oftentimes get on AHCCCS because they're sick too. These are generally sick people losing their insurance. So it's -- it's a little bit tougher, I think a lot of them are just going to do without until they can't.
John Swagert: Mountain Park is a big part of the safety net and we do get federal funding that helps us take care of these patients and I think we have a big part of the answer and we can grow. But our federal grant is fixed and it doesn't grow with the number of patients we see so eventually our resources run out.
Nicholas Vasquez: Don't you think if it was a coordinated system or a system responsive to the demand that your grant would grow? There would be a response by the safety net to respond to increasing demands and instead it shrinks or pales into the challenge?
John Swagert: Well, I just -- this is why I'm a doctor and not a politician.
Nicholas Vasquez: Me too.
John Swagert:I think it would grow and we believe we can do more if we had more resources.
Nicholas Vasquez: And I believe you can do a lot. We've talked about how many patients I refer to you. I have a lot of faith in your system. I guess what I'm worried about, the idea there's a healthcare safety system and I don't think there's a coordinated system to respond to the challenge we have and as soon as we do away that, and get to the reality, the better off we will to handle this difficult time.
Ted Simons: Others see a reality of folks taking advantage of the system. Of the healthcare system as it stands. We've had lawmakers even say, I think the quote was, "I'm tired of coddling these people." This sort of attitude. How much of a problem is that?
Janice Ertl: You know, we're a charity clinic and you would think there'd be a lot of people abusing us. It's not what you think it would be. There's always a few but it's not the vast majority, I don't think.
John Swagert: The typical Mountain Park patient is a working poor person who either lost a job or has a job that they couldn't afford to continue paying for health insurance coverage and these are people that come and see us in after-hours clinics and trying to get by. I just don't see very much abuse of that system in our clinics.
Ted Simons: What do you think?
Nicholas Vasquez: You know, this is a difficult question for me. Because there are people that sometimes you would say, all right, these folks don't need to be here, but where else are they going to go? When you ask why do people go to the emergency rooms, it's out of convenience or they need something that they can't access otherwise. You have few choices and don't know your options and not exactly worldly when it comes to the options for your condition. You're going to go to the first place that you think of and that's the closest location you can find and I ask people to think about that. If you empower emergency departments to start being judges and jury, you better on the other end have a place for them to go.
Ted Simons: I got to get to more criticisms here. I want your responses. The idea that we cut Medicaid rolls, that this would put us in line with most other states. They seem to manage, shouldn't we be able to manage as well?
Janice Ertl: I don’t know what other states are doing. I thought other states were a little bit higher in their Medicaid programs than we were until I read that in the paper.
John Swagert: I think if it's purely a cost thing you’re looking at, trying to save the state money, I think -- again, I say this is a little bit of a false choice. If these people, without -- without Medicaid coverages, these people don't get vaccinations and take care of the things that if you leave untreated get much worse and you roll the clock forward five years and suddenly, the population is sicker and people who are more expensive to take care of and there's a lot of suffering we might have been able to avoid. From a cost-effectiveness standpoint, I think the voters of Arizona were pretty smart when they realized we could save money if we invest in this group and get them healthy enough to get them back to work.
Ted Simons: What do you think about the idea, states seem to have one level and all we're doing is going to the level they're at.
Nicholas Vasquez: I don't think that's a good choice. It's an argument that's made to reach the idea we're going to cut off Medicaid funding. But our state is really not -- not -- not a state that has a diverse economy enough to really handle these cuts. It's not like there's a lot of people out there who are getting their insurance through private employers. In fact, most employers are pulling back that insurance coverage. Most of our state is a service economy. You pull the rug out from underneath them you have a lot of people who hold on as long as they possibly can until they can't anymore and then it's very expensive to fix them. We'll allow them to suffer with the disease but won't allow them to die. We allow them to get sick enough until we go, man, I really want to take care of this. I'll spend the money then.
Janice Ertl: There's couple of patients we had to send to the emergency room in one day and I bet their total hospital bills were over $100,000. People just present way too sick.
Nicholas Vasquez: When you ask the question, how much can people go without when it comes to healthcare, how much pain, illness, from what I have seen, it's a lot.
Ted Simons: Is there any – last question we got about 30 seconds, don’t mean to put oyu on the spot. Is there anything we can learn from other states, other municipality, counties, what are -- can we do something? Can we learn?
John Swagert: The sad part of this argument is we're forgetting that Arizona's Medicaid system, AHCCCS, we should be teaching other states. It's one of the cost effective medical systems in the country and instead, we’re looking at ways to cut it when we should be learning and teaching other states.
Ted Simons: Alright, we have to stop it right there. Thank you for joining us. We appreciate it.
Janice Ertl: Thank you.