Tuesday, June 28, 2011

Glendale's Westgate City Center changed face of city

Westgate City Center, Glendale, Arizona David Kadlubowski/The Arizona Republic

Westgate City Center, a retail-and-entertainment center with opulent fountains and flashy billboards, opened in Glendale in 2006.

Ten years ago, Steve Ellman surveyed miles of Glendale farm fields in a helicopter and decided this was where he would build a massive sports-and-entertainment district.

The developer had fashioned a career out of envisioning what others doubted.

He promised Glendale officials their sleepy suburb would soon boast a state-of-the-art hockey arena and an urban entertainment zone.

Ellman made his dream a reality. Westgate City Center opened in 2006 with fountains and fanfare.

The Phoenix Coyotes played there, and the Arizona Cardinals moved in next door.

Then, a deep recession pummeled the region.

The fate of the hockey team was in doubt. Still, in February of this year, Ellman told West Valley leaders that a housing shortage could occur in three years.

"Hold onto your property. You will have tremendous profit," he told a Glendale audience as a speaker at Mayor Elaine Scruggs' state-of-the-city speech.

In the background, however, problems lurked.

Even as Ellman uttered those words, lenders were demanding nearly $500 million in unpaid loans used to build Westgate. The money was 2 1/2 years past due.

Last week, Ellman announced that the flagship project of his 39-year career faces foreclosure and will go to auction.

Whether this signals the end of Ellman's control of Westgate isn't yet known.

Selling a vision

The developer first saw the farm fields of his future Westgate in 2001 at Loop 101 and Glendale Avenue.

For three years, he had tried to sell Scottsdale on a plan to revive the faded Los Arcos Mall with new shops and a hockey arena for the Coyotes. Then Glendale came forward.

City leaders wanted Ellman to help push Glendale's economy beyond housing development. They were thrilled by his vision of Times Square-style flashing billboards, restaurants and glass-paned offices.

In a month, Ellman had an initial deal with Glendale, calling for him to build a $180 million arena and commercial center.

Glendale's mayor beamed and pronounced the 2001 vote "historical."

The sports district could attract 10,000 to 15,000 jobs to the Loop 101 corridor by 2012, city official Jim Colson predicted at the time.

Glendale projected that even in a dismal economy, the city could generate enough to pay off its arena and reap an extra $100 million, mostly from sales-tax revenue at Westgate. In a normal economy, that could soar to $475 million.

A city consultant called it "real revenue, not smoke."

Those numbers haven't panned out.

A fraction of the predicted jobs have sprung up thus far in the sports district, and Westgate sales-tax revenue alone has not paid the city's arena debt.

Still Mayor Scruggs points to companies that have moved to Glendale and the city's exposure on national television.

"We have built a solid foundation and created a strong vision," she has said.

Problems arise

Westgate experienced hitches early on.

Ellman changed his deal so that Glendale took out loans for arena construction instead of him. He defaulted on a $7 million loan. He was two years late opening Westgate.

Just months before it opened, he cut ties with the Coyotes, selling the team to Jerry Moyes, a Glendale trucking magnate who had heavily invested in Ellman's dream. Three years later, his former partner declared the team bankrupt.

The Coyotes were the anchor to the dream, pulling fans to Westgate. The city scrambled to save the team.

Ellman, no longer an owner, was not publicly involved. When fans planned a rally to support the Coyotes, Westgate refused to allow the gathering.

Ellman said he supported the city's efforts to find a buyer and didn't consider purchasing the team since other ownership groups were hot in pursuit.

"We did what we could to support these buyers," he said in an e-mail Friday, though he didn't offer specifics.

Ellman cited the two-year struggle to find a team buyer as one reason Westgate is on the road to foreclosure. The real-estate meltdown was the other.

Ellman would not say why he failed to make the balloon payments on several loans. His spokesman confirmed they came due in November 2008. That was before the worst of the recession and the Coyotes' bankruptcy.

An auction for Westgate's buildings, built in part with a $97.5 million loan from iStar Financial, is scheduled Sept. 19, according to Hadden Schifman, a commercial real-estate analyst with Phoenix-based IBIS Report.

Other loans from Credit Suisse for $376 million are in default, he said, and the land around Westgate will go to auction.

Ellman isn't the only developer struggling. Many tracts of land purchased and offices built near Glendale's sports district have gone to auction as some developers opted to let go as values tanked.

Few can dispute Ellman raised Glendale's profile. He landed the city its first professional sports team, the Coyotes, and then set up a white tent in farm fields as he pitched the area to the Cardinals.

He wowed skeptics when Westgate debuted as a colorful complex with Bellagio-like fountains, shops and a movie theater. It has attracted millions to Glendale.

The crowning moment was hosting Super Bowl XLII in 2008.

Westgate itself pumped about $8 million in sales taxes last fiscal year into Glendale's coffers.

Ellman once pointed proudly to a map of sports venues and commercial projects popping up and took credit for starting it all.

"We brought a billion dollars to a freaking cotton field," he said.

Future uncertain

Even if Westgate goes to auction, it isn't likely to shut down.

Lenders may allow foreclosed homes to sit empty and vacant land to grow weeds. But no one wants a commercial complex as large as Westgate with rent-paying tenants to stop bringing in business.

Ellman hopes to remain a part of the development.

"Westgate will always be my favorite project," he said. "Just as Phoenix has 24th and Camelback, Tempe has Mill Avenue and Scottsdale has Old Town, Glendale has Westgate."

The developer told Glendale leaders last week that he hopes to strike a deal before the auction with lenders to keep Westgate. At the least, he believes he could stay on with a new owner as property manager.

Failing that, Ellman will continue to own Westgate's towering billboards. The sign advertising was set up under a different company.

"I don't think he's going to give it up without a fight," Glendale Councilwoman Joyce Clark said. "It is obvious when you talk to him that Westgate is something very near and dear to his heart."

But others could be interested at the right price.

One possibility: a new Coyotes owner could benefit from remarrying the team to the entertainment complex.

Matthew Hulsizer, who was in negotiations to buy the Coyotes, said he would consider purchasing Westgate if he took over the hockey franchise. But on Monday, the National Hockey League confirmed Hulsizer had pulled out of talks with Glendale.

Cardinals President Michael Bidwill, whose team plays next door, has development aspirations, with skyscrapers planned near the football stadium.

"We aren't pursuing Westgate but are obviously following the recent developments," he said Friday.

Whoever owns the Glendale center, a new economic landscape offers scant hope of completing the course charted a decade ago, including $2 million condos that were to be built in a 10-story tower.

"Years from now, our initial vision will still be evident," Ellman said. "Our original plan, with modifications to address a changing market, was sound."

by Rebekah L. Sanders The Arizona Republic Jun. 28, 2011 12:00 AM

Glendale's Westgate City Center changed face of city

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