The person who had sent me the e-mail was outraged to think that the original investor would be able to buy the note at a discount, roughly one third of the original construction loan amount.  I don’t quite agree.  I do agree that it seems odd or perhaps even a little shady that a developer can go into receivership and then buy the note at 39 cents on the dollar if no one else will buy the note then what’s the big deal?  If someone is willing to pay over two times as much for the note as anyone else, shouldn’t the bank take that money and run?  And IF the new note holder can turn the high rise condo building around into a viable project then the entire real estate market wins, even the folks who paid for and closed originally (well they don’t win but they’ll be better off than they would have been).  Think about it, if you paid $400 per square foot for your condo and the developer goes under then your investment is at serious risk.  If someone comes along and buys the note for 15 cents on the dollar then that new owner can sell the condos CHEAP and still make a ton of dough, leaving you with an asset worth maybe $130,000.  If instead an investor pays 39 cents on the dollar for the note and can still sell the condos for a profit then maybe your place is worth $260,000; still a far cry from $400k but certainly better than the first alternative.

Frankly, I think it will be very hard for someone to pay $27M for the construction loan and make the condo project a success.  Afterall, IF the market value of high rise condos are rougly half of what they were during the boom then that doesn’t leave much room for error (or a stagnant market or unforseen problems etc…) .  But then again, who knows?!  I hope that I’m wrong and that Century Plaza turns out to be an enormous success.  I have heard that sometimes the first investor buying a construction note fails and then a second investor will come along and pick up the pieces for a much lower price and ultimately turn the condo project into a success.   We will see……

There are some strings and limits, but make no mistake — you can obtain FHA financing to help purchase a condominium.

The Federal Housing Administration offers a program geared toward prospective condo buyers. The single largest hurdle is that buyers must find a condominium that’s part of an FHA-approved complex. You can search a database of approved condo complexes by state, city and Zip code through the U.S. Department of Housing and Urban Development here. There are almost 6,000 FHA-approved condo complexes in California and more than 1,200 in Texas.

Prospective buyers can get a 30-year loan on a condo unit. There are other restrictions concerning the building, like that it must contain at least four units. But many condo complexes, both old and new, meet these and other FHA stipulations.

Beyond that, the FHA already opens doors to competitive rates and unique savings opportunities for qualified buyers. For example, you might only have to put down 3.5 percent as a down payment. On top of that, the recently passed federal stimulus package includes an $8,000 tax credit for new home buyers that can be used to defray closing costs or even that minimum down payment. Remember, though, that the FHA does not actually issue loans — it insures them through qualified lending institutions.

The FHA’s condo program does have a few financial restrictions. If the apartment is in a building that was converted from rental housing, no mortgage insurance may be provided under unless: (1) the conversion occurred more than one year before the application for insurance; (2) the potential buyer or co-buyer was a tenant of that rental housing; or (3) the conversion of the property is sponsored by a tenant’s organization that represents a majority of the households in the project. Eighty percent of FHA-insured mortgages in the project must be made to owner-occupants.

“June 9, 2009 

As you may know, the real estate industry has faced unprecedented economic challenges in the last year.  Crescent Resources is no exception.  In this environment, we have been working over the last several months to strengthen the company’s financial position and improve our ability to continue to provide the high level of services for which we are known.

 As a part of this, Crescent Resources, LLC and certain of its subsidiaries have filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court in the Western District of Texas, Austin Division. This step will allow us to bring our capital structure in line with the current economic environment and will provide significantly improved resources and financial flexibility going forward.

Importantly, we have secured $110 million in new financing to fund our business activities through this process.

At Crescent, we know that the value of our communities is directly impacted by the quality of the clubs and recreational infrastructure we have created. It is our goal to continue to work to enhance value by maintaining the high level of service that we have established.

We have many very attractive assets, a highly experienced team and strong relationships with industry-leading partners. Our focus remains on doing what we do best – to create, manage and sell first-class developments, communities and real estate.

 Sincerely,

 Andrew Hede

Chief Executive Officer”

Furthermore, the broker for Portland Place has assured us that the bankruptcy will not adversely affect transactions at the midrise condo building other than possibly slowing negotiations and contract acceptance minimally.  He also stated that the bankruptcy will not affected the developers approach to prices.  Will Daly

We just learned (fifteen minutes ago) that Crescent Resources, the owner of Portland Place in downtown Phoenix filed Bankruptcy yesterday.

An article in the Charlotte Observer stated:

“Duke [Duke Energy - a Fortune 500 energy producer] created Crescent in 1969 to manage its surplus land along the Catawba River, transferring title to 300,000 acres. By the 1990s, Crescent had become a prominent developer. Duke sold a 49-percent share to Morgan Stanley in 2006.

But the company reported a net loss of $420 million on $407 million in revenue last year as it liquidated properties in Arizona, Florida and Texas, three states hit hard by the real estate meltdown.

Restructuring its debt last June left it with a $50 million payment due by the end of 2009, $75 million in 2010 and $100 million in 2011, with the rest of a $1.2 billion loan due in 2012.

Rating agency Standard & Poor’s lowered Crescent’s corporate credit and bank loan ratings in April to noninvestment grade or “junk” status.”

We don’t know yet how this will affect Portland Place but we have calls out to find out.  We would expect one of two solutions to develop; either a restructuring of the debt for Crescent allowing some “breathing room” so that it can eventually sell the condos, brownstones and lofts at Portland Place or the sale of all the remaining condos to a major investor.  We’ll look into this further and post our findings.

Oh and for those of you who don’t know, Portland Place is a FANTASTIC building; one of my personal favorites.  So, if you’re into great architecture and a fun urban location, definitely watch this blog for news, as prices MIGHT be on the verge of going down.

4:00pm June 11, 2009 – Just learned that there should be no worry of Portland Place getting slapped with mechanic’s liens or anything like that as, according to our source, Portland Place has no outstanding debts.  So hopefully, this BK will buy Crescent time to restructure and come out stronger.  WD

Last week I learned of another sale that fell through for the same reason but at a different condo community; this time 525 Town Lake.  In this case the HOA receipts at 525 Town Lake are 36% under budget.  Expect prices there to drop as a result.  But be careful not to get lured just by the low prices as there is potential risk in buying in a community where the HOA is unstable or at financial risk.  I’m not saying not to buy there, just know what you’re getting into and know potential risk before doing so.

The AZ Rep reported today about problems at Summit at Copper Square.  I’m not privy to the financial matters at Summit but I will say this; the owner David Wallach is very hands-on and working hard to see the high rise condo building through these tough times.   He is currently renting out condos at very very competitive prices (contact us for details or to see the condos).  The added cash flow from the rentals will hopefully keep things afloat.   It’s amazing what a difference just a few months made during the boom/bust cycle.  Summit delivered condos starting roughly December 2007 and closed approximately half the units.  If construction had finished six months earlier I think that most of the condos would have closed.  But then again, if construction had been completed six months later I bet only 10% of the condo buyers would have closed.  

BTW, Mr. Wallach if you’d like a venue to refute or add to today’s article, feel free to e-mail me your observations or comments and I will gladly post them to this site.

Things have been pretty quiet at Century Plaza, at least in our circle.    For a while there we were hearing from prospective investors every single week.  Over the last month we have only heard from one party.  The guy was very very confident that he and his company would soon own Century Plaza.  IF they do buy the high rise and IF they are able to offer the condos at the prices he shared with me then expect some really great bargains in the future.  Keep watching this web site or give us a call to learn more.

I swung by Stella to shoot more photos last week; what a great community!  I’d put the quality, style and overall look up against ANY (except Galleries at Turney) infill row house style project in town.  I’ll post the photos in the next couple days so you can see for yourself.

Stay tuned for more…

Elegant Finishes at Artisan Parkview Rental

I’m not kidding when I say that this is one of the nicest condos I have seen for rent in downtown Phoenix.

It has been COMPLETELY redone to the nines with new wood and stone floors, European hardware and fixtures, upgraded lighting, marble vanities and tub surrounds, two tone paint, a brand new kitchen, two car garage and much more.

All this and walking distance from light rail, Chase Baseball Field and everything else that downtown Phoenix has to offer for $1,550 per month.

I’m telling you this is really really nice.

Use the “contact us” button in the top navigation bar to get more information.

The article goes on to report that the reason behind the shift is multi-fold including, “Empty-nesters don’t need the big house and don’t want to mow the big lawn. High gas prices are making long commutes less practical. The urban renaissance in big cities ranging from New York to Portland, Ore. — and the revival of charming, vibrant downtowns in small cities like Missoula, Mont. — is making the bedroom suburb and the strip mall seem positively dull.”

We at WeKnowUrban agree. I recently drove around downtown Phoenix on a Saturday night and was delighted with all the activities, energy, and people. ASU was showing a movie outside in a park, hundreds of kids were enjoying their prom, urban-ites were knoshing at the many new restaurants in the area (e.g. Sens, Hanny’s, The Pasta Bar, and more), and folks were just milling around. It was great! Such atmosphere is gaining traction in downtown Phoenix and we’ll will see a domino effect; more people will encourage more businesses, more business will draw more people, and the trend will continue.

Folks the pieces are falling into place. If you want to live “urban” give us a call and take advantage of the crazy low prices that are available today.