There are a handful of 3 story, 3 bedroom, 4 bathroom, 3,000+ square foot town homes zoned for both light commercial and residential use located minutes from downtown Scottsdale about to go to auction.  The official “public” announcement won’t go out until Wednesday so if you want the jump on everyone else then contact us now.

I’d like to respond.

First of all, I believe that we real estate agents have a responsibility to speak objectively.  Those agents who “sugar coat” things or never write a “negative” about a building aren’t doing themselves or the buildings any favors.  The public is looking for reliable information.  The public also knows that there are several sides to every story.  If an agent only paints a pretty picture then his or her opinion will not be trusted.  Or at least that is my opinion.  I instead write things the way I see them.  If I really like something I say so.  If I think something doesn’t make sense, I write that too.  Because of this people value my opinion and often hire me as their agent.

Secondly, I hardly see how a blog post about lock box policies can hurt condo values more than the actual policy itself.  Gang, if you believe that in order to get the highest price possible for your condominium it is better to show it to 50 prospects than 5 prospects then you should understand my point that interfering with agent showings of the condos is bad for values.  Is it possible for agents to show the condos if they have to make appointments with every single listing agent?  Of course.  Does it hamper and impede showings?  Absolutely.

Let’s put this on a personal level.  Let’s say I’m showing properties to a client who lives out of state.  I show them Camelview Village, I show them Galleries at Turney, I show them Scottsdale Waterfront, and I want to show your condo for sale at Biltmore Towers.  Unfortunately, for some reason your agent is not available to meet with us to show us the condo at a time that works for my clients.  Well, guess what?  We won’t see your condo.  That’s reality.

Here’s another example of what I mean.  Let’s say you want to buy a car and you visit a car lot that has a unique new concept that allows individual car owners to sell their cars on that lot “on consignment.”  In this case, the lot manager doesn’t own the cars and doesn’t have keys to the vehicles and for security purposes locks each car up in its own private garage.  For a prospective buyer to see a car he or she has to schedule an appointment with the individual owner.  If the buyer wants to see multiple cars on the lot he or she has to schedule multiple appointments.  Pretty cumbersome huh?  Can I imagine cars actually selling?  Sure.  But who is most likely to sell thier car first and for the highest price?  Probably the seller who is most available to show his or her car at any given moment.  In contrast, the car owner who is the least available to show his or her car will have a much harder time getting it sold.  In fact, I would argue that the car owner who is least available to show his or her car will ultimately have to lower the price in order to entice buyers to work around the seller’s schedule.

I’m sure you would agree that a car lot like my make believe example wouldn’t work very well and yet that is the environment what the HOA at Biltmore Towers is creating by outlawing lock boxes.  Again, I understand the importance of security.  But for heaven’s sake, lock boxes are used across this country and they are secure.  Certainly, there is a better solution for a modern high rise building than to ban lock boxes.  Other buildings have figured out solutions that offer a higher level of security for their residents AND a reasonable level of access for real estate agents.

I’m sorry that I ticked some of you off but in the long run I think you’ll be grateful if posts like this motivates the HOA to find a more flexible and secure solution.

Real estate agent lock boxes are no longer allowed on the property!  This means that agents looking to show OBT to prospective buyers or renters will have to make appointments with the various listing agents to do so.  Can you imagine trying to coordinate a client’s schedule with three or four or more Realtor’ schedules?  This policy will discourage agents from showing the building.

It is true that some other high rise buildings prohibit lock boxes.  However, those buildings have doormen or other on-site personnel who make it easy to show the property.  OBT is one of the only buildings, perhaps the only building,  in the valley which doesn’t have a doorman or on-site personnel but outlaws lock boxes.  In contrast, some buildings have actually spent money to make it easier for agents to show their condos.  For example the Home Owner Associations at Third Avenue Lofts and Biltmore Square installed metal bars in central locations so that all Realtor lock boxes can be hung in one, easy to find and secure area.  Doing so eliminated the “clutter” of lock boxes being hung in random places around the property and it makes it super easy for an agent to show multiple properties.  I can tell you from personal experience that before Biltmore Square installed the bars I HATED showing the community and rarely did.  Now that the HOA installed the lock box bar it is super easy to show properties there.  It seems to me that Third Avenue Lofts and Biltmore Square are encouraging agents to show their condos.  In light of the current economic mess that sure seems like the right attitude to me.  Optima Biltmore, how ’bout making it easier to show condos there, NOT harder!

I understand and appreciate the value of security.  Great security is one of the reasons that I live in a high rise.  But there are better solutions that banning lock boxes.  This is a big mistake and believe me this policy will hurt property values in the building.  If Realtors find it very difficult to show a building then guess what?  They won’t show it.  If people stop showing the building then values will go down.  If you are an owner of a condo at Optima Biltmore Towers then I strongly encourage you to contact your management company and insist that they come up with a better solution.

Answer:  You’re not the only one.  Many prospective buyers are “sitting on the fence” and not buying now for this very reason.  But, more and more people are pulling the trigger.  Here’s why.

• The United States housing market just wrapped up its best season in three years and prices are up 3.6% since April.
• Talk of a new “wave” of inventory about to hit the market may be exaggerated.  We believe that the vast number of homes that are expected to come to the market as foreclosures are already on the market as short sales.  This means that the majority of these homes are already counted and will not contribute to a flood of new inventory.  “Authentic new “supply” (housing starts) currently hitting the market is actually quite low. In fact, it hasn’t been this low since at least 1959 (and probably a lot longer, but we don’t have data prior to then). This year, builders will begin construction on somewhere around 620,000 units, a number that’s about 32% below the old record low of 906,000 set–you guessed it–last year” (Home Prices: Sustainable Bottom or Dead Cat Bounce? By: Morningstar   Monday, October 12, 2009 7:38 PM).
• Most of the urban condos built early in the boom already “busted” meaning they sold as short sales or foreclosures.  In many of these buildings we are seeing price stabilization and/or price gains. 
• In some urban condo communities sales prices are low enough for investors to buy and rent the property out and net a positive cash flow.  We have seen an absolute flurry of buyers in some of these recovering buildings.  Competition is hot for the right condo in the right community.
• We expect interest rates to go up and soon for two reasons.  First, it is very likely that the US will experience high inflation in the not too distant future.  Interest rates go up during times of inflation.  Secondly, interest rates are currently artificially low due to US government influence.  Investors (other than the US government) are not buying mortgage backed securities because the rate doesn’t support the risk.  In other words would you yourself loan money today for someone to buy real estate if you were only going to earn 4.5 or 5% for the next 30 years?  Probably not.  But that’s the going rate today.  Would I feel better about loaning money if I was going to earn 8 or 9 or 10%?  Probably.  The problem is that mortgage interest rates are half that.  So “investors” like me aren’t loaning money for such purchases.  The US government can not loan money at these low rates 4.5 to 5% forever.  When the US stops loaning money rates will have to go up enough to attract other investors.  So, expect interest rates to go up for this reason and with the coming inflation.
• We believe that there is pent up demand for properties.  In many cases people stopped buying in 2005 or so.  Those folks have been sitting on the sidelines waiting for the dust to settle before they will buy.  However, there’s a point where people don’t want to wait, or can’t wait, any longer (i.e. pent up demand) and they buy.  There is strong evidence to suggest that things are getting there.  In downtown Phoenix, condo sales far exceed the supply (see chart below).  You’ll see that in 2008, inventory (the number of condos for sale) far exceeded the number of buyers so prices dropped and dropped and dropped.  In February 2009, the line representing inventory and the line representing the number of buyers intersected meaning that the numbers of buyers and the numbers of sellers were about equal.  Since then, dramatically more people are buying than people are selling.

Gang, there are always exceptions to any rule.  But it is our opinion that there are great deals out there for those who know where to look AND who meet certain other criteria.  If interest rates do go up, and I strongly believe they will, then you might want to take advantage of today’s low rates, take advantage of the many sellers who really do need to sell (at lower prices), and get yourself a great urban condo now rather than later.  Don’t be one of those folks who years from now say “boy I really wish I had bought when I had the chance.”  Call us at We Know Urban Realty and get our help.  We don’t sugar coat stuff and we know where the deals are and can show you why they are good deals.

David Wallach, the developer of Summit at Copper Square, has been pursuing a exception to the horn regulations so that the intersection would be treated as a “quiet zone” by the conductors. It appears that his tenacity is finally paying off. Below is a copy of an email that Wallach shared with me written by the man who has been helping him wth this issue:

“The 21 day notification letter was mailed on September 15th. From what Chris Becker has told us in the past it is often 2-3 weeks after the 21 days have lapsed that the horns actually go silent so I would not promise residents that it will be quiet on October 6th. There are also 2 minor sign issues which hopefully does not delay things with UP. We removed two signs from the drawings because of property owner concerns. UP has been very challenging to work with and I am crossing my fingers that they do not balk at the change. Jen can you send this out to the tenants please.

Dan Klocke
Director of Planning and Economic Development
Downtown Phoenix Partnership
101 North 1st Avenue, 14th Floor
Phoenix, AZ 85003″

Call or email us at We Know Urban Realty if you have any questions concerning this matter or if you are considering renting or buying a high rise condo at Summit at Copper Square

Put the power of the WeKnowUrban.com website to work for you. With 5,000 visitors every week and one hundred twenty rental inquiries every month we are THE agents to rent out your urban property right away.

In 2009 alone we will help over one hundred landloards and tenants with their high rise and urban property rental needs. So far this year we have helped over 82 people buy, rent, sell or rent out their urban properties. No other real estate company in the Vally works with as many urban property owners or urban enthusiast as We Know Urban Realty.

Every week, every month, that your urban condo sits empty costs you big.  Stop the bleeding now and contact We Know Urban Realty today. You’ll be glad you did.

Denver-based Condo Capital Solutions, led by Peter Wells and Marcel Arsenault were able to purchase the luxury condos at an unbelievably low price, around $317,000 per unit.  The Denver duo is very pleased with their purchase as previous Suncor offers were much higher and it was a very significant discount from the original construction loan.  The construction loans for both Edgewater and Bridgeview totaled just over $210,000,000.  It is tough to get a precise comparison without a breakdown of all construction costs, but either way, this was a great deal for Condo Capital Solutions and an unfortunate reality for Suncor, a subsidiary of Arizona Public Service Company owner Pinnacle West.

This deal is highly indicative of the extremely poor nature of the luxury condo market in the valley, but great news for buyers with some capital.  Around town, most other bulk sales or full buyouts of unsold units in a community are going for minimal fractions on the dollar and is drastically changing the shape of the condo market as we speak.  We wont be seeing anything sold for over $500/SF for many years, as those prices are simply unrealistic.  At Bridgeview, units originally started selling at much more than the average price of the recent sale’s price per unit of $317,000, which is a clear indication on how much cheaper they can be sold for now.  Here’s an example of another deal near midtown Phoenix called Citi at Camelback, which was selling on average for $275,000/unit just in 2006, and the remaining units were recently purchased for just over $70,000/unit.

It is clear that the condo market here in the valley is at or near the bottom and while many have suffered, others will make huge gains in the near future.  It is unknown how much Wells and Arsenault will market the remaining units at, or even if they plan to market them now for sale.  Many other condo projects and condo conversions around town have been quickly changing or reverting to rentals ever since the market fell apart.  As for Bridgewater, it might be harder to lease them as problems could spark with the HOA, but either way, people with capital will have once in a lifetime opportunities all over town.

Here are some other distressed projects that have or will be sold in the near future:

Summit at Copper Square’s unsold 74 units will be sold at trustee sale on October 14, 2009, unless developer David Wallach, principal of W Developments can work out a deal with the new lender, Stearns Bank of Scottsdale.

Century Plaza developer Equus Development recently filed Chapter 11 Bankrupty protection, most likely to avoid foreclosure on a unpaid loan balance of $23 million with M&I Bank.  The original construction loan, in the amount of $42 million was for a conversion of an office tower into 145 luxury condominiums.  To date, only 14 units have been sold, and the property is assessed at $19 million.  Someone will come in and buy nearly 90% of the tower for an extremely low price, but it might not be in the near future as bankruptcy can elongate the process far more than a 90-day notice of trustees sale.

Biltmore Palms’ remaining 37 units were sold to a Canadian investor for $4 million, which equates to just over $108,000/unit.

As new bulk sales or remaining unit buyouts come to our knowledge, we will post and elaborate as soon as possible.  Opportunities are out there that will most likely never be seen again!

The reason I question the claim that the building is worth $19M is that at that price and with 141 condos remaining that equates to a value of approximately $135,000.  This may sound cheap until you know that only 40 or so of the remaining condos are finished, that there are rumored to be infrastructure issues (namely problems with one of the two chiller units and rumored sewer issues), the previously mentioned debt to value disparity and potential legal battles with the developer, AND the fact that whoever buys the note or property will want to make a profit in a currently stagnant (at best) high rise condo market!  $19M seems high to me.

Having said all this I really do want to see Century Plaza succeed.  I really like most of the floor plans, the common areas are fantastic, the location is one of the best in the Valley (that is if you are into using light rail and walking and enjoying great (non-corporate) restaurants and bars etc…) and more.  I just think that it will be a while before the dust settles and I feel confident enough to recommend that people buy there.