At the peak of his success, developer Michael F. Teufel had acclaimed projects all over Tucson, earning praise for innovative designs and community accolades for business growth.

Then things went bad.

Now, Pathway projects across Tucson sit unfinished or with residents complaining of poor workmanship. While Teufel blames the downturn in the housing market, others blame him.

A Southeast Side town-home complex, Aldea del Rey, is blemished by partially built homes overgrown with weeds. Another project, Sky Ranch in Marana, shows scars from cracking stucco on many houses. Two Midtown condominium developments, Placita Escondida and Stone Crossing, remain incomplete, with fencing up around vacant buildings.

At a Pathway custom-home project in a posh Catalina Foothills development, at least two lots were abandoned by the builder after no work except hole-digging.
In cases where homes are unfinished, buyers say they lost from tens of thousands to hundreds of thousands of dollars in upfront payments. Other buyers whose homes were completed have laundry lists of repairs, including leaking windows, ceiling fans with no switches and hot tubs that don’t heat up.

“I think they bit off more than they could chew,” said Sky Ranch buyer Lucia Zegarski, who is dealing with stucco cracks.

Although the company hasn’t filed for bankruptcy, it has effectively collapsed in the past year.

“Pathway is going to go out of business,” Teufel said. In a brief telephone interview, he blamed the housing slowdown.

But many builders and developers have suffered through the housing slowdown without generating the same volume of complaints.

Nearly 40 complaints against Pathway have been filed with the state Registrar of Contractors in the last few years, an unusually high number, said agency spokesman Brian Livingston. Pathway’s license was suspended by the registrar in May.

More than two dozen lawsuits have also been filed against Teufel or Pathway by home buyers, subcontractors, lenders and investors — some of whom allege Teufel either stole funds or shifted assets to avoid payment. A few projects have been taken out of Teufel’s hands and placed under court-appointed control.

Meanwhile, people who bought homes from Teufel are finding they have limited recourse.

Buyers who filed lawsuits are giving up, assuming Pathway has no money to cover any judgment they might win against the company. Payouts from a state recovery fund, available to those who filed complaints with the Registrar of Contractors, are capped at $200,000 per licensee, Livingston said. Each of the roughly 40 complaints seeks from thousands to hundreds of thousands of dollars.

“Hopefully, there will be some funds available when we get the claims submitted,” said Larry Aronow, who paid $512,000 for a home that needs about $50,000 in repairs.

100 homes at a time

Founded as a custom home-builder in 1993, Pathway Developments took off in the early 2000s, said Mark Mansheim, the company’s former chief operating officer. Mansheim worked for Pathway from 2000 to 2005 and watched the company grow from handling just a handful of homes to developing as many as 100 at a time.
“There weren’t enough hours in the day to keep up with the work,” Mansheim said.
He described Teufel as “a great visionary” and “very charismatic.”

Rapid expansion earned the company a Wells Fargo Copper Cactus Award in 2003. The company handled both residential and commercial projects. In 2004, Teufel pitched an ambitious $40 million renovation of Downtown’s Santa Rita Hotel, but it fell through.

The growth became difficult to juggle, Mansheim said. Disagreements between Teufel and his wife, Jennifer, who later divorced, also disrupted the work environment, he said. Ultimately, “I couldn’t handle the stress anymore,” Mansheim said.

Complaints pile up

In 2006, complaints and lawsuits against Pathway over construction delays and poor workmanship started to accumulate.

One buyer, Preston Schrader, paid $38,000 in deposits to Pathway in 2005 for a home and waited for more than a year without seeing construction begin. Finally, he filed suit, hoping to recover the deposit. But he ended up losing in arbitration because the contract did not specify when work would start, Schrader said.

Judy Westin filed a complaint about her unfinished Aldea del Rey town home after trying numerous times to contact Pathway. The property is partially built and “growing tumbleweeds all around it,” said Westin, who lives in Tennessee.

“Of course, we would just like to have the money back that we put down,” Westin said. “It’s very sad.”

A real estate agent who represented Pathway, Scott Niles, said the developer fell behind in the boom, then hit the brunt of the slowdown.

“The market was so quick,” he said. Then “everything kind of fell off a cliff.”

Several other Pathway buyers were reluctant to discuss their complaints for a news story because they feared being sued by Teufel.

Teufel said he is “working out a plan” to pay back people harmed by his company’s failure but declined to provide details. “I don’t know what the plan is at this second,” he said.

Questions of fraud

Two suits against Pathway came from investors in high-end projects in Stone Canyon and Sabino Estates. After hiring a forensic accountant, the groups alleged that Teufel took about $5 million from the partnerships.

Steven Russo, an attorney who manages both groups, said he is surprised “no investor group stepped forward and sought to raise any criminal complaints” against Teufel for fraud. Russo is hoping to recover the funds through litigation.

In January, National Bank of Arizona sued Teufel for defaults on $6.5 million in loans, alleging that he transferred assets to Jennifer Teufel and to his father, Michael P. Teufel. Other banks have sued Teufel for more than $14 million in unpaid loans.

Russo said he suspects Teufel has not filed for bankruptcy protection because he has assets he does not want to disclose in court. Teufel denied that claim but declined to answer whether he is planning a bankruptcy filing.

Bankruptcy provides for either an orderly liquidation or reorganization of a company and gives filers relief from pending lawsuits and creditor claims.

A certified bankruptcy attorney unaffiliated with Pathway, Randy Nussbaum of Scottsdale, said corporations in financial distress might decline to file bankruptcy if they cannot afford the filing costs or if they have information they do not want to reveal in federal court. Companies must be candid about their finances or else face penalties for perjury, he said.

Uncertain future

Some of Teufel’s developments may wind up in the hands of a former business partner, HSL Properties. HSL Executive Vice President Omar Mireles said his company is buying Pathway’s defaulted loans and might take possession of the properties after they enter foreclosure. He declined to specify properties except Midtown developments Stone Crossing and Placita Escondida, which are being transferred to HSL after they were placed under court supervision by a lender.
HSL, the owner of the Santa Rita Hotel property Downtown, also took back that redevelopment project last year after Pathway abandoned it.

As difficult as things might be for buyers of unfinished homes, Teufel indicated his future also looks grim. “It’s just a sad situation for me,” he said softly. “I don’t have any future plans.”

Credits: Arizona Daily Star

Marana officials expect to save as much as $5 million in utility costs over the next 20 years after the Town Council approved a contract to use an allocation of hydroelectric power.

The one megawatt of power, which Marana will get annually for 20 years beginning Oct. 1, comes from the Parker-Davis Project. That project generates hydroelectric power with a dam on the Colorado River near Lake Havasu City.

“We’re very fortunate that we happen to be in a good spot,” Marana Utility Director Brad DeSpain said of Marana’s proximity to power lines running from the Parker-Davis Dam to a power plant in Cochise County run by the Arizona Electric Power Cooperative.

One of the cooperative’s members is Trico Electric Cooperative Inc., which is based in Marana and is one of the two suppliers of electricity to the town and its residents. The other is Tucson Electric Power.

Hydroelectric power is a cheaper form of electricity because it does not require fuel to be burned. Using hydroelectric will save Marana between $7,000 and $22,000 a month depending on the time of year, said Karen Cathers, manager of contracts and regulatory affairs for Trico.

DeSpain said the hydroelectric allocation will be used to power the town’s municipal facilities, lighting for its ball fields, streetlights and also its water department. DeSpain said it will also eventually be used to help power the town’s wastewater department once Marana has officially taken over that operation from Pima County.

“Once we get wastewater there will be no problem for us to use that megawatt,” DeSpain said.

Credits: Red Orbit

Sales of existing homes in the West edged higher overall in July, as many buyers took advantage of falling prices in foreclosure-ravaged areas in California, Nevada and elsewhere, according to two reports Monday.

About 1.1 million preowned houses and condominiums were sold last month in the 13-state region, up almost 1 percent from the same month last year, according to the National Association of Realtors. But the median home price in the West plunged by more than 22 percent versus a year ago to $273,200, the association said.

Nationally, existing home sales were down 13.2 percent from July last year, but rose 3.1 percent from June. The U.S. median home price slipped 7.1 percent to $212,400 compared with July 2007.

The Western region, where sales of foreclosed homes are translating into sharp price declines, was clearly a large drag on the overall market.

Five Western metropolitan areas — Los Angeles, San Diego, San Francisco, Phoenix and Las Vegas — were among the top 10 markets with the steepest median home price declines in the nation last month, according to The Associated Press-Re/Max Monthly Housing Report, which analyzed all home sales recorded by all local agents, regardless of company affiliation.

In the Tucson market, the number of home sales in July fell just over 20 percent from July 2007 and 8.6 percent from June, according to data released earlier this month by the Tucson Association of Realtors. The median price in July was $199,900, down 7.9 percent from July 2007 and slightly lower than June’s median price.

The Las Vegas metro area, where foreclosures have flooded the market since last year, was the hottest market in the country last month, according to the AP-Re/Max report.
Sales almost doubled versus a year ago, and rose 16 percent from June. The median home price, meanwhile, tumbled 25 percent to $220,000 versus a year ago.

“I think our market has probably reached its bottom,” said Rosa Herwick, a broker and owner of Century 21 JR Realty in Henderson, Nev.

Herwick said bank-owned homes and short sales — meaning the bank agrees to accept less than the value on the mortgage — accounted for much of what was sold last month in Las Vegas.

Large housing markdowns are also helping some buyers in California overcome their affordability hurdles.

Ysidro Simental bought a three-bedroom, two-bath house in Corona, Calif., about 50 miles east of Los Angeles, that would have been beyond his reach financially just two years ago.

The home previously sold in 2006 for $510,000 and eventually ended up in foreclosure. Simental, 56, landed the house at an auction for $347,000 and moved in two weeks ago.
“We couldn’t have bought it for that (higher) price,” said Simental, a warehouse clerk. “We weren’t ready to buy before … it just happened the market went down and we were just happy that prices have fallen down for us.”

In the Los Angeles metro area, sales surged by nearly 31 percent last month compared to a year earlier. The median home price fell to $335,000, a drop of nearly 35 percent from July 2007, according to the AP-Re/Max report.

Elsewhere in California, San Diego saw sales jump 8.3 percent, while San Francisco’s sales rose 3.1 percent.

Steve Roberson, a broker with a Century 21 My Real Estate Co. in Downey, about 13 miles southeast of Los Angeles, estimated 70 percent of the sales his office handled involved short sales or bank-owned properties.

Elsewhere in the West, sales remained on a downward track last month, reflecting the broader, national housing slump.

Seattle and Portland, Ore., were among the top 10 metros in the nation with the most pronounced drop in home sales.

Sales also fell in Denver, Honolulu, Salt Lake City, Albuquerque, N.M., Billings, Mont., Boise, Idaho, and Anchorage, Alaska.

“We’ve basically been going through this standoff between buyers and sellers,” said Michael Tenore, district director the Seattle area for ZipRealty Inc. “We’re just seeing more and more increases in inventory and sales coming down.”

Tenore said buyers are looking for big discounts, but many sellers remain reluctant to lower prices — although that’s changing.

The median home price in Seattle fell to $340,000 last month, a drop of 6.9 percent from a year ago, according to the AP-Re/Max report.

“I can’t buy another house until I sell my house up there,” said Stephanie Kuhn, who moved to Orlando, Fla., because of a family emergency, but has yet to find a buyer for her condo in the Mount Lake Terrace suburb of Seattle.

The two-bedroom, 1,100-square-foot condo has been on the market since March, but is drawing little interest.

Kuhn, stuck with mortgage payments and now rent for her apartment in Florida, has lowered her asking price from $239,000 to $224,900. She’s even offered to throw in $1,200 to help the buyer pay the homeowners association fees.

“That’s rock bottom,” said Kuhn, 47. “I can’t go any lower.”

Fearing she won’t be able to sell the unit soon, Kuhn is considering renting it out or walking away.

“I can’t keep paying out on a mortgage for an empty house,” Kuhn said. “Nobody is even looking at it.”

Credits: AZStar.net

Tucson Electric Power Co. has signed a deal with a Maryland solar-energy company to finance, build, install and maintain 15 megawatts of solar power in the next five years.

The deal with SunEdison LLC would provide so-called distrubuted solar generation — installed at ratepayer sites rather than at a central utility location — to commercial and government customers in the service areas of TEP and sister utility UniSource Energy Services.

“For perspective,’ said TEP spokesman Joe Salkowski, “we have one megawatt of distributed solar generation in Tucson right now. This will add significantly to the distributed solar resources in our community.”

Valerie Rauluk, Arizona market developer for the company, which is based in Beltsville, Md., said SunEdison has already signed up its first customers for the systems, and plans to build at least three megawatts a year for the next five years. A megawatt, or one million watts, is enough to power to meet the needs of 150 average Tucson homes.

This particular plan is for ground-mounted photovoltaic systems, Rauluk said, and will not be available to residential customers.

TEP serves about 400,000 customers in the Tucson area; sister utility UniSource Energy Services serves about 240,000 customers in Mohave and Santa Cruz counties.

The government or commercial customers will sign an agreement to purchase power from SunEdison for 20 years, Rauluk said, at a price comparable to what they currently pay for electricity. SunEdison, in addition to designing and building the systems, would also maintain them.

“You pay for the energy that comes off the system,” Rauluk said.

Rauluk said the company has plans to offer similar deals to Arizona residents in the near future.

“We are in the process of developing another proposal for TEP, APS (Arizona Public Service Co.) and the co-ops (utility cooperatives) that has some unique features that would allow everyone to participate in solar,” she said.

SunEdison has built similar systems for schools, auto dealerships and stores such as Kohl’s, Walmart, Costco and Staples in Hawaii, California, Connecticut and New Jersey, according to its Web site.

Rauluk said details of the Arizona plan will be released at a later date.

The company will bring an “interactive solar exhibit” to the University of Arizona on Oct. 18 and 19, she said — part of a “City Tour for Solar” organized by five renewable energy companies. It is stationed this week at the Democratic National Convention in Denver, Rauluk said.

Credits: AZStar.net

Tucson will accept applications for grants and deferred loans for home repairs beginning Sept. 2. The aid will range from $7,500 to $15,000.

The applicant must own the property and live in it as his primary residence.

Roof repairs, heating and cooling system replacements and structural and some other repairs can be made with the repair funds, provided under the Tucson Annual Rehabilitation Program.
Eligible applicants will be chosen by lottery. To apply, call 791-4636 for an application, or submit an application online at www.tucsonaz.gov/fixhouse.

Credits: Tucson Citizen