The first resale listing at the Belvedere has just hit the MLS. #810 is a whopping 549 SF 1 bedroom unit purchased 5 February 2008 for $270,560 ($565/SF). $10 down payment! It has been listed at $310,000 with the note "Please call listing agent regarding this property due to showing restrictions and more information as to the status of this unit." 15% appreciation?
Note to Title Company: This unit had 14 mechanic’s liens attached to it, as do every unit the the complex. Construction and service contracts were written referencing each APN individually, so non-payment by the developer resulted in liens following the individual units. And where can you go to get financing for a unit with liens in a project facing foreclosure?
The first phase of the Belvedere contains 160 units and most of the common spaces and amenities for the entire development, which can expand to 377 units if the second tower is developed. So right now, each unit is going to be carrying HOA dues supporting a project that is designed to be more than twice its current size (dues are prorated on a SF basis per unit). A little over half of the first phase units have been "sold", though at least half of the sales look like inside "friends and family" deals and buy-backs from the master developer. The last "legitimate" sale looks like it was back in March.
I skimmed the CCRs today. A couple of clauses shouted RED FLAG. The developers maintains " the right, but not the obligation, to create Common Elements. and Limited Common Elements." Translation - "We don’t have to build any of the things we promised you on the promotional tour. We meant to build the pool and rec center, but we didn’t. So sue us - you signed off on the CCRs when you purchased your unit." There is nothing preventing the developer from turning Tower 2 into rentals, student housing, or just King’s Inn Jr. And as long as the developer controls the HOA, they can amend the CCRs in just about any way they see fit.
Buyer beware. Actually read those CCRs, and understand their long term consequences.
31 comments
Mike, I’m glad you brought this example up. Where do you find the liens filed? I checked the recorders site and did not come up with any liens. I was trying to find same for another property.
Nevermind, they came up the second time I tried.
15% appreciation in the last 8 months? For this property???
Delusional is inadequate as a word. Hallucinatory perhaps? A psychotic break with reality? Maybe there is something in the Diagnostic and Statistical Manual of Mental Disorders that properly describes it.
Mike perhaps we could contact the realtor who is associated with this listing and request an explanation of the market anaylysis leading to this asking price?
And remember, the developer tried to burn it down. Still large black burn holes in the building. If you walk by at street level, the bottom floor units still look unfinshed. Why would anyone in a million years buy at the Belvedere when they can get a unit at the Palladio, Montage, Arlington Towers, Park Towers or Riverwalk with a balcony?
More interesting stuff. Chiao has purchased 6 units this year, and went NOD on one this week and one last week. This week’s one was purchased March 31 for $285,000 with 20% down
Smith has purchased 8 units including a group of 4 in May, and one went NOD last week. The unit was purchased 10 January for $275,000 with 18% down, and the 1 July payment was missed. 2 months after you buy 4 units you start defaulting on an earlier purchase?
My recollection is that both Smith and Chiao have connects to Menlo Oaks Corporation, the master developer (who also bought 4 units back in May). I feel a certain slime factor going on.
Anyway, insiders are walking away from their 20% down payments on 2008 purchases without even bothering to list the properties, and #810 thinks the market is 15% appreciation? One of the Lessingers over at ReMax is the listing agent - they are normally as good as real estate agents get. What were they thinking picking up this turd of a listing?
I’ve never understood this property - these appeared to be hotel rooms redone to be hotel rooms you could own.
What’s the latest thinking on the Montage these days? Developer keeping a 51% interest and conrolling the HOA, as we’ve discussed briefly before? These two properties are within blocks of each other.
Wazoo….
My wife and I stopped by the sales office at the Montage about two weeks ago. The cute young sales staffer told us they were 40% sold and would be moving the first people in at the end of October. I commented that when their website first went up, it said 50% had been sold. Her response was that she didn’t work there then and knew nothing about that. I then commented that they really have not “sold” 40%. They have deposits on 40% of the units. I noted that highrise condo buyers have been fleeing in droves all over the country and forfeiting their deposits, and inquired if the Montage has had any such thing happen. She said she didn’t know anything about that. I then asked her if she could give me an estimate as to how many people would actually be living there by year end. She said she wasn’t sure. I then asked her when Ruths Chris intends to start tenant improvements. She wasn’t sure about that either.
A few years ago, my wife and I walked into a restaurant one day and I asked the waitress if I could get a marinara sauce on my pasta. She said she didn’t know, because she had only worked there for six months.
I am not sure if she was the same person.
What’s the advantage of keeping a 51% interest and controlling the HOA?
Interesting RI - in the RGJ story about the “grand opening” party for the Montage a few weeks ago, the developer stated the first residents would be moving in around the end of December 2008. When the project first started, I think the advertised move-in date was the end of 2007 if I remember correctly. You were told October. The CCR that Mike reviewed had no date in writing at all.
It all sounds a bit dodgy to me.
Renonative -
I can’t tell you what the advantage is in the developer[s] of this project retaining 51% ownership interest, but I can tell you the DISadvantage.
Although [for reasons I’ve previously discussed] very few buyers can actually secure purchase money financing for anything, Fannie and Freddie guidelines used to prevent loans to purchasers in CIDs where more than 50% of the units were non-owner occupied.
Now if we’re returning to the [rigid] guidelines of the 1990’s, I’m certain this one will be part of the package.
Hypothetical: (does not relate to this project; taken from an experience we had long ago involving a large planned community development and control of actions of the HOA)
Assume a developer is in arrears on HOA assessments on lots it still owns; further, that completion of various community common areas and project amenities is tardy.
An HOA under the control of the non-developer purchasers/owners can start collection steps against the developer; cause the HOA to initiate legal action to enforce the completion duties of the developer; hire experts to create reports showing breach of various project completion obligations such developer is believed to owe its purchasers; and at the least, adopt critical resolutions which have the unintended affect of creating adverse publicity for the developer.
But if the developer controls the HOA, those steps won’t be taken. Control of the HOA’s voting membership units = control of its board of directors = control of its officers = control of actions taken by the HOA.
I am not saying at all that this applies in the case of any particular project being discussed in this blog, only responding in general to a question posted as to why generally speaking some hypothetical developer might theoretically want to retain control of its HOA. If the developer is at or close to the midway point of sales anyway, and the sales market is poor anyway, then maintaining majority control for a limited time period can be advantageous in some circumstances.
For $310,000 you can get a nice studio unit in the Palladio or Montage, with a deck and much nicer amenities and a much nicer building. Whoever pays that for the Belvedere either has bad taste, or hasn’t gone condo shopping in the other buildings.
I know the Montage intimately, and yes they have deposits on 40% of the units. None of the units are ’sold’ yet because closings haven’t happened yet. They are shooting for a December move-in. And to be fair, I have been around a lot of condo projects and none of them actually open on time. Palladio didn’t, Riverwalk Towers didn’t, even the condo tower I used to live in downtown L.A. was 7 months late. There were a lot of challenges with gutting the building to that extent.
There are a few people of course who want out of their contracts, but it’s not the rush of people trying to get out of their contracts like all of you think.
The problem for the Montage isn’t going to be how many people are trying to get out of their contract; the question will be will these people, who easily qualified for a loan back when they put their deposits down a year ago, will be able to qualify for financing in this market turmoil? Nearly everyone who have contracts there actually WANT to live there. I know, because it’s partially my job to communicate with the owners. There were a LOT of happy owners at the party you mentioned Grand Wazoo, and for the record it was not an ‘opening’ party, it was an appreciation party for all the contstruction workers and owners and everyone who made the project a reality.
When their website first went up, the 50% was referring to reservations (it even said 50% RESERVED), not actual contracts with 10% deposits, and it went down because most of the speculative investors pulled out of their units early on when it was time to convert the reservation to a contract.
Why 51% and control of the HOA? I wrote on this 2 months or so ago, and while I don’t know their motivation, at least in the commercial lending world, they can’t get rental-property multifamily loans unless they own 51% and fully control the HOA. Therefore, I suspect they are hedging their bets and might just have to stop selling and start renting the units. If they lease it up, they could qualify for a MF loan, again, only if 51% and HOA control.
That’s the textbook answer to how the financing market ‘works’. Problem is, the financing market is not working now, so even if they leased up, it would be difficult at best to obtain financing for this asset, even with Fannie or Freddie MF loans, and my guess would be the debt would be nowhere near enough to pay off their construction loan.
DowntownMakeOverDude,
When December comes and the sales start actually consumating, could you remember to update us all? My guess is very few of your 40% deposit-up units will actually close. Problem is, we won’t find out definatively why: could not secure loan, lost job, cold feet, shear chaos in the financial markets, found better deals elsewhere, etc. Even a person whose real excuse for not closing is X might state to you the reason is Y; or, you might employ a bias in reporting for some reason (your employer, head in the clouds, economic incentive, etc.). But if you have any inside scoop come December, we’d all appreciate hearing real numbers and real rationale (apart from anecdotal).
“For $310,000 you can get a nice studio unit in the Palladio or Montage,”
HAHAHAHAHAHAHA! $310k for a freaking studio?! Only a fool would close on such a horrifically overpriced, depreciating asset. These people are going to walk, if they have half a brain. A $310k studio in cowtown, I mean downtown Reno? (shaking my head)
Thank you for the info but it sounds like this is all speculation. Being an interested party that has toured the project recently it appears to me that most, if not all, of the common amenities promised are already installed. It also doesn’t make sense to discuss MF loans on the remaining inventory if you look at the amount of the Const debt and understand how renting the remaining units would further dilute the market value of the unsold inventory. Having met and discussed my concerns with Mr. Leal personally I’ve found that he’s not only a pretty sharp individual but he’s delivered on everything promised to me originally except the finish date which anyone with even the smallest amount of intelligence knows is a floating target. Why should a developer be expected to lower his price or refund deposit money if he’s delivered what he promised? The market tanked…it sucks but it’s reality and from what I’ve seen the project hasn’t skimped on any finishes. If the market would have continued to increase would it be fair for the developer to increase his price right before closing? The speculators (please don’t call them investors) rolled the dice one to many times and came up short on this one…live by the sword and die by the sword.
As for me I’ll wait until they close some units, make sure the appraisals are coming in where necessary, pick the brains of some of the new owners, and probably jump on a unit early next year.
Renonaive,
“The speculators … rolled the dice”?! Tell me the developer did not pro-forma unit sales, prices, and his investors’ IRR models using the tidy profits from the speculative market.
“Live by the sword, die by the sword”??!! Its called real estate development and by its very nature it is speculative. Tell me, this developer had exactly how many sticky pre-sales before breaking ground on such a risky investment? My bet is exactly Zero. He was just as much a speculator as the buyers were.
My bet is that now the lender is calling him, oh, daily, saying ’sell those units quick or else we won’t extend the loan when it comes due’. If so, then yes, it makes every bit of sense to rent the remaining units. (That said, I have no knowledge if there is a loan, or when it comes due on this particular project.)
“Why should a developer be expected to lower his price…”? Uh, yeah, could it be because the market won’t bear his ‘price’?
Only one lawsuit I have seen so far, CV08-00583 - TERRY ZHENG VS L3 DEVELOPMENT LLC, but I am aware of a couple of other on the way (unless of course Montage decides to refund down payments). According to Montage contract you had two years to back out of purchase with no loss of down.
I agree 100% with your comments and do consider the developer a speculator. Difference is that he held up his end of the bargain and will finish the project as originally conceived aside from the completion date.
My comments relate to the purchasers that I’ve seen on this, and other, blogs discussing how to get out of their contracts and basically vilifying these developers. The same people that were flipping properties in the good times and complaining if a developer wouldn’t let “investors” into their developments.
If this developer wants absorption then absolutely he needs to reposition his pricing. That said it’s not his duty to refund the deposits of the speculators that now realize that they’ll not be able to sell their unit for 100k profit the day after they purchase it. They took a risk and came up short…maybe I should call General Motors and see if they’ll give me back my original stock purchase price since they’re not doing so hot now. You’re a lender (I assume from the name)…would it be fair for the developer to ask for his deposit back since things aren’t going as well as originally planned?
First, Palladio has been consistently selling a few units every month above the $500,000 mark, and now only has 15 units left, and they are all the crappy ones facing First Street with a lovely view of the JC Penny building. Not only are the original units selling, but RESALE units are selling, usually for 20-35% more than what the original owners bought from the developers just a few years ago. That’s not a debateable point, that’s a fact. Arlington Towers, Riverwalk Towers, and Palladio all have decent occupancy rates. Downtown Reno gives people an urban life without the crap and expense involved with living downtown in another city like L.A. or NYC, of which I have lived in both. I socialize with people who live downtown on an almost weekly basis, because (shock) most of them read my web site and it’s a small town and I see them out and about at the meetings and stuff. And I hear waaay more compliments than complaints. So let’s not get into a downtown trashing session.
Second, Renonative is right; Fernando, the developer, has not skimped on ONE SINGLE portion of the building, amenities, and residences. This is a building you wouldn’t expect to find in Reno. I urge people to take a tour of the project (Bantering Bear I bet you haven’t even seen the inside of it) you would realize why the majority of buyers for the Montage are not backing out of their purchases unless forced to with the lending market the way it is.
CommercialLender, I’ll definitely keep you updated when closings start happening, although with Mike M, Reno Ignoramous and other smart commenters on this blog, I can guarantee you when those closings start posting, the numbers will be plastered all over this blog from one or all of these keen data miners.
That being said, it’s a tough position for the Montage to be in. How can you lower your prices when so many people already bought units at the higher prices? Wouldn’t you have to offer those people a unit upgrade, or increase in square footage or something?
DowntownMakeoverDude,
Finally a voice of reason amongst all the chaos.
I typically just read these things and don’t get involved but this site blows me away because of the non-stop doom and gloom bickering that takes place. I appreciate the actual facts that the site delivers which is why I visit but if I was an out of towner looking to get some info on Reno real estate I’d probably move elsewhere because it seems that everyone here absolutely hates where they live and would love nothing more than to see everything fail around them.
As far as Mr. Leal and the Montage I’ve had the opportunity to personally meet the man, ask him direct questions, and get honest answers face to face. As Downtownmakeoverdude mentioned I would recommend that anyone wishing to pass judgement on Mr. Leal or his project go meet with him personally and view what’s he’s created. Personally I admire a person that will finish what he started inspite of everything falling down around him. I wish him, and the project, the best as they try to sell the remaining units. Hopefully I’ll get to enjoy one myself some day.
Here are the Palladio sales as of August. I don’t have Septembers numbers haven’t looked this month. The resales are noted in the column. The Montage is a nicer building than Palladio, although their pricing is about 10% higher than Palladio. Once they open, my prediction is sales will trickle in, trickle being the keyword. Much like the Palladio.
UNIT
SF
PRICE
$/SF
CLOSE
PREV $
PREV $/SF
1001
1502
$767,500
$511
08/05/08
$530,050
$353
1010
1510
$550,000
$364
08/01/08
806
760
$264,000
$347
07/31/08
1111
1743
$830,000
$476
07/30/08
$695,000
$399
1208
869
$359,000
$413
07/28/08
$337,000
$388
809
1182
$395,000
$334
07/18/08
705
876
$263,300
$301
07/15/08
901
1502
$750,000
$499
07/01/08
$502,470
$335
509
999
$310,000
$310
05/29/08
703
1365
$505,000
$370
05/22/08
508
826
$243,600
$295
05/12/08
1004
1964
$780,000
$397
05/09/08
1211
1536
$780,000
$508
04/30/08
$544,740
$355
906
761
$244,000
$321
04/28/08
1107
715
$240,000
$336
04/01/08
DowntownMakeoverDude,
First of all, there were WAAAAY too many Mike’s posting to this blog, so I appreciate your using this moniker. If it were up to me, I’d like to see only MikeZ posting as a Mike since I believe he was the first, and everybody else go with another name (ie. GreenNV, etc.).
Moving on, I thought you lived over in the Holcomb area in a house, not downtown per se. Am I incorrect? At any rate, comparing downtown Reno with NYC is laughable. Aside from the obvious discrepancies, NYC has innumerable eating establishments, shopping opportunities, and entertainment possibilities. The same can be said for many, many of the other large cities in this country, but not little Reno. The past few years when I drove through downtown it was awful, and I mean awful.
Aside from a few token establishments like Silver Peak, downtown Reno offers next to nothing in terms of shopping, eating, or entertainment, aside from gambling. Is there even a grocery store? The area still needs a massive makeover. Sure, there have been baby steps, but there needs to be giant steps, I mean huge leaps. The place is dying.
aw crap figures that didn’t come out formatted right. http://www.downtownmakeover.com/palladio.html here is a link to the same data properly formatted if anyone is interested.
Downtown Makeover Dude, you are banging the drum for the Montage as loud as you were for Grand Sierra 2 years ago, so excuse me for being a little suspicious.
That said, the Montage looks very nice, but they need help marketing it. Fewer politicians invited to parties and more media to get the word out, Fernando.
I am not comparing downtown Reno to NYC or L.A….those are cities with HUGE population differences. I am just saying for people relocating to Reno from larger cities who like that urban lifestyle, like myself, downtown Reno isn’t so bad. I drive maybe 10 miles a week, it does have eating, I eat downtown all the time. I go out nearly every weekend downtown, in fact there are so many bars/lounges/live music I am surprised they all can stay in business. Entertainment? There’s Pioneer theater, 20+ yearly annual events that happen downtown, a movie theater, a smaller independent theater with great shows (Bruka), a Port of Subs just opened downtown, we’re getting a permanent market on West Street with 19 mini-shops including a bakery, boutique grocery, burger place and more,opening next month, soon our old post office will be converted to retail with an additional river plaza, the trench trench cover is nearly complete and micro-retail will be going on that as well. Yes downtown is making baby steps, but it’s certainly not dying. I can’t count on one hand how many redevelopment projects there are currently underway downtown, even in this economic slump.
(The area between Virginia, Wells, Mill St. and Plumb.
I got tired of all the Mikes too, especially since one of them seems to be a fan of downtown as well. He was a bit rude, and I am proud to not have perosnally bashed anyone on this blog so I came up with a different name.
I do live on Holcomb, but downtown is a 5 minute walk for me and the center of my eating, entertainment, movies, theater, friends, etc.
The neighborhood I live in never gets discussed on this blog
Sure, downtown Reno is no NYC or L.A, but it offers a similar lifestyle on a smaller scale, and I am living proof of that. Remember downtown Reno 10 years ago before the downtown theater opened? It was a wasteland.
GSR? I was excited about their plans, the indoor water park, etc., and was dumb enough to believe that it was all going to be built. Who WOULDN’T be excited about getting the nation’s indoor water park? Boy was I wrong about that. Since then, I’ve learned many o’ things about GSR, their management, and the entire plan.
However the Montage, and all of its amenities, are nearly complete. That’s a whole different story.
I also got excited about the Waterfrotn Project, Wingfield Towers, Denovo (the now defunct Kings Inn project) and all the other kool-aid shoved down my throat by developers who never intended to build their projects. Am I gullible? yes. I’ll admit that
Renonative,
IMO, a deposit secured a contract to buy a place at a set price, and if the buyers don’t go thru with it for no fault of the builder, then no, they should not be refunded their deposit. IMO.
As for lowering prices on future sales after former sales were consummated, well, we all understand the quandry. And it would suck for those who already bought at higher prices, especially ‘innocent’ non-speculators. But reality is not utopia, and if I bought stock X yesterday for $10 but today it went down to $9, then do I magically get my $1 back? No. If I fly on a flight and pay $400 but the guy next to me pays only $300, does that chap my hide? Yes, but I don’t deserve money back.
Good question and thought provoking on many levels (’fairness’, contractual law, caveat emptor, etc.), but this whole mess we/the economy are/is in is due in very large part to a lack of personal responsibility. Should a homeowner be bailed out simply because their loan reset and now their 100% purchase money loan is actually ~135%? No. Should condo buyers be refunded money because another unit sold lower? No (unless a contractual stipulation to do so). Should people be able to file bankruptcy to avoid their wild-credit-party hangovers? No, except the law says otherwise. Should the government be able to take from me, who never dafaulted on anything and has no debt but was prudent and frugal instead, and give to the person who levered to the hilt and bought a house above their means, and the shiny new cars, and the overpriced lifestyle, just because the market turned away from them? Hell no, except certain politicians feel otherwise.
Should we take the good with the bad? Absolutely.
What will change Reno’s economic condition and that of the US? Letting the market correct itself (while watching out for the truly poor and destitute - as I spend a lot of time and money to do and encourage each of us to find ways to help with the truly needy). This includes letting the developers lose properties, speculators lose their shirts, home prices decline, industry workers lose jobs, and the market to find its ‘bottom’. Otherwise, with the total lack of personal responsibility and the massively increased government intervention, we’ll only make matters worse in the long run, possibly even in the short run as well.
I’ve ranted too long. Have a great weekend everyone.
Commerciallender
Agreed, Agreed, Agreed ….. especially the have a great weekend comment.
I got a closing letter from the Montage today with a 12/1/08 estimated closing. It is my understanding that EVERYONE who had a contract had gotten a letter.
Talked to the mortgage guy listed in the the letter and he state he had NOT ordered a single appraisal.
El Diablo: Do you know who is the plaintiff’s attorney in CV08-00583 - TERRY ZHENG VS L3 DEVELOPMENT LLC?
SJ
stjoe:
According to the banner program on the Washoe Courts website, the plaintiff’s attorney is Doug Fermoile. L3 development is represented by the lawfirm of Maupin, Cox and Legoy. The case has been assigned to the arbitration program.