In Phoenix A Major Developer’s BK Speaks To The Devestation In CRE

Here’s an Arizona slant on the commercial real estate implosion.

From the Arizona Republic:

One of the area’s largest and most influential commercial developers has entered bankruptcy proceedings and plans to wind down its operations permanently, a company official said.

Phoenix-based Opus West Corp. filed for Chapter 11 reorganization Monday in the U.S. Bankruptcy Court’s Northern Texas District. Four affiliate companies, including Opus West Construction and three land holding companies, also filed with the court.

Opus West’s ongoing construction projects are separate legal entities and are not part of the proceeding.

Opus West, the Valley’s second-most-prolific commercial builder in 2008 after retail giant Vestar Capital Partners, owes its largest creditor, Bank of America, about $205 million, according to court documents. In all, the company’s estimated debt exceeds $330 million, and its creditors total more than 200.

Opus West is a subsidiary of Opus Corporation which is headquartered in Minneapolis. the company has been around since 1953, so we’re not talking about some fly-by-night that hasn’t been through recessions and tough markets in the past. These guys are about as competent as they come or at least one would have thought they were.

By all accounts, Opus West started restricting its development efforts over a year ago. They presumably focused on projects already underway. I suspect that there’s a lot more to the story than is known now but it does point up the depth and severity of the recession in commercial real estate. When it takes down the best then you can be pretty certain that it’s going to cut deeply.

My guess is that this represents a pretty ominous sign for the Phoenix banking community. If a company like Opus West can’t make it with trophy properties it suggests that those down the food chain are equally stressed. Once you start peeling away the veneer of value, loss recognition becomes unavoidable. The industry is heavily invested in this sector, so it’s hard to see how this doesn’t take down a bank or two.

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