I’m curious if these two readers you mention (I don’t recall who they are) purchased their units as “investments” or as primary residences. Many of these projects were built and sold based entirely upon speculation and the belief that “real estate only goes up”. $500k? OUCH!!

Urban condo projects require a demographic of young, unmarried professionals working top tier corporate or professional jobs. High rise condo’s and lofts are in high demand in SF, west LA and Manhattan, because that demographic and the high salary jobs that support and draw them are plentiful. I can’t figure out what buyer set the condo developers in downtown Reno expected to attract. Oh yeah, speculators from Stockton.
Given the long term decline of the gambling industry (in Reno) from indian casino’s etc, and the lack of young urban professionals (high salary corporate jobs) in Reno, what is downtown Reno’s economic justification to exist?

I think Paul is correct; interesting comments on this thread on urban condo living. I think you do need a group of high-earner Yuppies to populate those condo projects.

In downtown Los Angeles, we have many new condo and loft conversion projects being marketed currently. But we have an abundance of young professional DINKS to buy them, then walk to work. Despite this, many are now converting to rentals–they cannot sell them, credit and economic issues blamed.

The junior partners who have bought such units have told me the plus and minus points after having lived there a few months: On the plus side: no commute; handy for going back to the office in the evening; close to Lakers games and the Music Center; being surrounded by other young professionals like themselves; numerous new restaurants and music venues nearby; central location, the hub of the freeways, easy to get anywhere in the region on weekends. On the down side: spooky to walk alone to destinations at night, groups walking together, no problem; homeless people have not been relocated; streets are not pedestrian friendly, hard to connect between home and office, almost easier to drive, even to close destinations; area is totally dead on the weekends; $50 cab ride to the airport from home. More are happy with their purchase decisions than are unhappy, in my unscientific poll of young friends. But they all say it takes some getting used to and adjustment of habits.

But this is downtown L.A., and downtown Reno may be different.

As for the loan, it would be very normal for at least (1) 6-month extension to have been built into the original loan, possibly up to 3. In fact, I would be shocked if it did not have at least 1.

So, $500K for a condo in downtown Reno? No offense to all of us, including MakeOverDude, but this market just does not have that high end cache in today’s market. For a while in 04-06, it made sense simply because condos in the Bay Area were say twice that or some factor. But now there are condos in San Jose, brand spankin’ new, asking that or less and having a difficult time selling. The speculation on Reno was as much as anything a simple play on comparative values relative the rediculous prices in the Bay Area. So it would be only logical for condos in Reno to drastically drop in response to a moderate drop in the Bay Area, which is in fact what we are experiencing.

Hi guys what’s up.

1. It’s pretty hard to offend me, so don’t worry about that. I couldn’t afford a $500,000 condo nor would I want that lifestyle. I like being detached from other homes. I am happy living NEAR downtown (2 minute walk if that) in a cute old neighborhood with a yard for my two dogs.
2 A high percentage of Montage buyers are empty nesters, people who are retiring, and sold their houses (or trying to sell) in Caughlin Ranch and South Meadows, who are over yard work, house maintenance, and the other general headaches of owning a full home and yard. A decent percentage are locals. Another demographic is out of towners. At the Montage appreciation party, I spoke with 5 Montage owners for an extended period at that party, just socializing and stuff, and all were from the Bay Area, and all purchased their units as a 2nd home with the intent of eventually escaping California and moving up here. They like the events we have up here.
3. As for other demographics, why don’t you guys ask the people snapping up Palladio condos, particularly the 5 recent resales, all selling for 30% higher than what the original owners bought it from the developer for. The only units left now are the crappy ones facing 1st Street and the JC Penney building. And ask the people who have contracts with the Montage why they bought them.
4. You guys are right, there isn’t a feasible way Montage can sell their residences at current pricing.
5. Thank you Tom for bringing up downtown L.A., which I actually grew up in for decades, hence my love for urban life. I laugh when people say downtown Reno is kind of scary at night, because ANY downtown, even downtown Portland, is scary at night. Last time I was in downtown San Fran business district at night, I was propositioned by a scary manly looking tranvestite. It’s part of urban life.
6. I’ll say it again; if you don’t think a metro area of over 300,000 people shouldn’t have a downtown center, you are smoking crack. That’s urban planning 101. Even small towns like Gardnerville usually have a Main Street or small downtown center.
7. To say redevelopment has been all talk is to be misinformed. Since 2000, the City of Reno has built a very popular movie theater and riverfront district, a Reno events center that continuously packs in locals for shows, a bowling stadium that brings in tens of millions of out of town dollars in, beautified all the streets downtown, built a whitewater park which brings thousands downtown in the summer to enjoy the river, built a nice parking garage with retail on the bottom, converted the Riverside to artist lofts, built two courthouses, added free downtown bus service, we’ll soon have a $40,000,000 stadium and retail district filling in east downtown, built 2 public plazas, rejuvenated West Street, opened a year round market, and don’t forget all the little projects that add some flair like art on all the traffic boxes, unusual artsy bike racks and more. Oh yeah, ALL talk. What else to you expect them to do in just one decade? Fly to the moon?
8. Hmm what to do downtown? Between the 23 annual events downtown, the Pioneer theater, the movie theater, 20+ bars, Reno Events Center and Lawler Events Center bringing top artists, a slew of nice restaurants, the Bruka theater, some very unique shops, a soon to be baseball stadium, Wolf Pack games, Reno Bighorn D-NBA games, monthly wine walks, Nevada Museum of Art, the Artist’s Co-Op and Sierra Arts Gallery, swimming in the river in the summer, ice skating in the winter, 9 mile long riverfront bike path at my door step…yeah there’s NOTHING to do downtown and no reason to have a downtown. I keep myself busy.
9. Let’s see, only one forclosure within a half mile of my house, only 1 forclosure in 89501 downtown zip code last time I checked, and only 2 forclosures in old Southwest which borders south Downtown. Now, look at Spanish Springs, Sommersett, and the South Meadows area. You tell me, what neighborhood is more stable? Within the McCarren Loop, for sure.
10. Montage buyers will be finding out Friday morning the same news that I learned yesterday when I met with Leal.

That’s a tough one Bill D Drummer, I don’t know enough about economics to really say with any expertise. That’s maybe a question for EDAWN. Nevada has a nice tax structure for business, especially compared to some of our neighboring states, but recent businesses that passed on Northern Nevada for a west coast hub say we lack an educated work force. So how do we get one? Common sense says you have to have the jobs here first before people will relocate here, so I doubt we can get an educated work force from another state. Perhaps a look at our education system is in serious need, since we rank nearly last on every single education-related survey that comes out.

Every city has a downtown or central meeting place except the city of Pacifica!!!

Reno.. Has done alot to clean up downtown Reno in the last 20 years..

But the young kids only go downtown to go to the movies and spend money at the restaurants and bars and clubs..

Why would a graduate of UNR stay in town..When they can go to a bigger city and make twice or triple pay..granted home prices are much higher

Makeover Dude,

Would you be so kind as to identify for us the five resale units in the Palladio that have sold for 30% over the original contract price?

Thanks in advance.

Corus Bank? Never heard of it. Sounds like just another crappy bank about to fail.

The bond markets are frozen. No banks are able to borrow money from the bond market except via the FDIC’s Temporary Liquidity Guarantee Program. That is a program that allows some large banks to access the Full Faith and Credit Guarantee of Uncle Sam. Many many regional banks in this country will continue to fail, and the debt of places like Montage will eventually get consolidated on to the balance sheets of major banks such as JP Morgan, Wells Fargo, Bank of America and Citigroup. These major banks are under the umbrella of Federal Guarantees. In others words, we tax payers will eventually be on the hook for the debt of many Montages in this country. It’s not a pretty situation.

As an institutional investor in the bond market I hear things that scare me. Goldman Sachs is now calling for 8 to 10% unemployment. And last week, Morgan Stanley’s Head Economist for Fixed Income mentioned the possibility of 8 to 11% unemployment coming soon.

Save your cash. They called WWI the “Great War” prior to WWII. Welcome to GD II, if you get my drift.

I have to agree with the comments and thank you all for making this and adult post. What could have been “urine soaked alleys” turned into a nice intellectual discussion.

For you doubters, I have to back-up DMD on Palladio resales. I show 6. Resales occured April - August 2008. Format will be unit #, purchase price, resale price, purchase agreement date:

708 $320,000 $350,000 6/07
901 $502,050 $750,000 9/04
1001 $530,050 $767,500 8/04
1111 $695,000 $860,000 NA
1208 $337,000 $359,000 NA
1211 $544,740 $780,000 10/04

Those are the facts. There apparently ARE people who will pay $500,000 for a condo in downtown Reno right now. Are there enough to fill the Montage?

I also find those numbers very curious. When every house in Reno is down at least 20% from the 2005 high, and many down 30% or even 40%, how can these condos be heading in the opposite direction by 30% ? I’d like to know the details of these transactions. Such as: did the same appraiser do all these? What did he/she use as comps? Who was the lender?

Virtually every house, and every condo not in the Palladio, in Reno today is not worth was it was in 2004. And yet, these condos are up 30?

I’m not willing to say fraud has occured, but it is quite curious.

GreenNV posted:

“Those are the facts. There apparently ARE people who will pay $500,000 for a condo in downtown Reno right now.”

Nope, GreenNV, I’m not in agreement. I am convinced that he bulk of these resales are fraudulent. So sure, that I’m going to bring them to the attention of someone who cares, and CAN get to the bottom of it.

It’s completely obvious that it’s nothing more than a thinly veiled attempt to boost prices, in order to stimulate demand for the unsold condos by making them look cheap as compared to these resales. Mortgage fraud peaked during the end of this bubble, and the majority of these sales just don’t pass the sniff test.

To CommercialLender:

That’s the $64,000 question, isn’t it?

Before reading, realize that these are strictly back-of-the-napkin computations.

A ‘normal’ condo (not Montage) probably would rent for around $1.20/s.f., which would suggest a rent of about $1,000 for the 1 BR/1ba tower units.

If you take the position that Montage amenities and cachet are worth an additional $1.50/s.f. (which I don’t, but that’s another story), then the tower rents would be $2,400/month, roughly.

Larger units would command higher rents, say up to $3.50/s.f., and perhaps $5/s.f. for the penthouse spaces.

I’d appreciate any comments.

Yes, The notice has finally arrived and brings more questions than answers. I’m curious what other people think about the durability of the contracts now that L3 will no longer own the building. The contract was with 225 North Sierra Street LLC, signed by Fernando.

I posted the full letter over at my site. It sounds like the buyers will be getting sginificant discounts at least. You forgot to include that part StJoe55.

Well at least Corus bank ought to have some experience with it. Corus is the lender on belly-up failed high rise condo projects all across the country. Corus may end up owing half of Miami. Until the FDIC takes it over. Then we all can say we own a piece of the Montage.

Yep, Corus is offering one of the highest CD rates in the country. They need cash badly. Not a good omen.

I follow the banking industry pretty closely. Having to take back the Montage is not good news for Corus.

DowntownMakeoverDude posted:

“Corina, the good news is that the project isn’t becoming apartments, isn’t becoming rentals, is not going into foreclosure, and the buyers get discounted pricing before close.”

Dude, put down the Kool-Aid and take off the rose-colored glasses for a moment, will ya? I mean for god’s sake, this is NOT good news. Furthermore, there is absolutely no evidence that this will sell out and avoid rental status, and if it does (surely at steep discounts), it was still a miserable failure, as the bank takes a beating. You are very impressionable to say the least.

Gee, like I said earlier, I don’t think the concept of people living in downtown Reno condos is flawed. I do think the concept of people living in downtown condos that cost $500 a sq. ft. is flawed.

So if Corus is willing to take a complete bath on this project, and offer to sell and then finance these things at what ordinary people can prudently afford, then maybe there is light at the end of this tunnel. But Corus is going to have to take an immense bath for that to happen. I agree, we’ll see.

And really, Makeover Dude, your attempt to spin this as good news strains credulity. A more credible response is to acknowledge that the failure of the Montage is a blow to downtown redevelopment.

I’m not trying to spin anything I was just trying to find some positive news in some really negative news that’s all. But I guess that’s pretty futile at this point, so I give up. Going by what Fernando wrote it didn’t seem so bad.

So Mr. Leal has agreed to continue on to help sell his overpriced condos on behalf of the building’s new owner because of his heartfelt concern for downtown Reno and his genuine interest in the fine citizens of Reno.

Or could it be because Mr. Leal and his partner have signed personal guarantees of their company’s debt to the bank?

Why would anybody possibly go forward and buy in the Montage now? By the time Corus Bank takes its hits from all the failed condo projects it has financed across the country, many of which will fail in 2009, who knows what it will do. How can anybody be assured that a year from today the Montage won’t be the biggest apartment complex in Reno? Or essentially the biggest dormitory for UNR students?
And please don’t tell me that just won’t ever happen. We are in very uncertain economic times now. Anything can happen.

Smarten I think you are confusing a deed-in-lieu with a forclosure. Had this project been forclosed upon there we be almost no question we could get our deposits back. A deed-in-lieu doesn’t change the deed and doesn’t change our contracts.
In additional, the building is complete and delivered as promised, I just flew up to Reno and took a tour last week. Not sure there is anything left for the developer to ‘deliver’ on. He did in fact deliver what he promised to us.
It’s up to Corus Bank now. How much do we know about this bank? Anyone know? I do feel comfortable Leal is staying on since he has been my main contact there. The thought of having to instead deal with a faceless bank is unpleasant.

What is the health of Corus? That is the real question here.

MontageBuyer I suggest you do some homework for yourself, but notice how many people on this blog have already said how well known Corus Bank is as a lender on high rise condo projects all across the country. High rise condo projects have been its main customers for the last many years. So you reach your own conclusions about the financial condition of bank knee deep in high rise condos projects. But consider this:
Corus profit is down 83% ytd; half of all its high rise condo projects are in defualt; and, as mentioned above, Corus is currently offering a 12 month CD at 5.7%. If that CD rate, in comparison to rates offered by stable banks, does not scare the hell out of you, I guess nothing will.

Can Corus bank really enforce the contracts? Are they mentioned anywhere in the contracts? Neither L3 nor Fernando will own the building. Seems the validity of the contacts is in question. I would not just walk away from the money without a fight.

MontageBuyer2, Have you looked into financing lately? I’m curious because I have heard that Fannie Mae will not buy loans from lenders when the loan is made to buy a condo in a development with less than 50% units sold. I see this becoming a big problem bogging down closing sales for months to come.

I too have a contract on the Montage. I briefly spoke with my Reno based lawyer. He has some skill in Nevada real estate law.

His major concern is why would the large entity really want to run a rental operation out of a condominium. According to him, if the Montage remains a condo development, then the CC&Rs will continue to be the controlling document. If you cancel out the condo and go to apartments, it becomes a lot cleaner operation to run as an apartment house.

As to a personal observation to MontageBuyer2 who has a southwest view: do you really want to close on your unit, it more than half of the units on your floor will be rental units?

What if the Corus bank uses it powers as a majority owner of the units to modify the CC&Rs so part of the building becomes time shares? Would you still want to close? How will you feel if this change happens after you close?

As far as I am concerned, there is way too much risk at this time to proceed.

SJ

MontageBuyer, a deed in lieu of foreclosure is the moral equivalent of a consummated foreclosure sale where the property has reverted to the mortgagee without the formality of a procedural sale. It’s like pleading guilty to a crime without actually going to trial.

The simple fact of the matter is the seller of your unit NO LONGER HAS TITLE TO CONVEY because it has been foreclosed [or assigned] in favor of someone else. Now maybe this Fernando person has assigned his corporation’s right to pending contracts in favor of Corus Bank or some other person/entity but I would find this to be highly unlikely and disingenous [what, the seller can assign its interest under executory contracts to a third person yet you the purchaser can’t assign your interest to some third person (it’s called a lack of mutuality)? I don’t think so].

The simple fact of the matter is that you as a purchaser have no contractual relation with Corus Bank. Furthermore the entire nature of the project has changed from that originally represented to you. Go ask your attorney if you have an out [assuming that’s what you want to do].

So what do you think are the chances now that Ruth’s Chris restaurant will open up at the Corus Towers?

It seems to me that Reno Ignoramus may be right and that the only way out of this is if Corus is willing to take a massive hit. Corus may have to finance individual purchasers and then hold those loans in its own portfolio since they are not saleable into the secondary market. Corus is going to have to substantially drop the asking prices to attract buyers, which is fine since Leal’s prices were absurd and the source of this whole problem to begin with. I’m not sure what Corus can do to abate people’s fears that the project will turn into rentals or timeshares or whatever at some point down the road. A written guaranty? From a bank with the financial issues of Corus? Couldn’t such a guaranty be avioded in bankruptcy? And if the bank breaches the guaranty in the future? What are the damages for a buyer who relied on the guaranty? You get to hire a lawyer at $300 an hour and litigate with Corus for five years? Sounds like an invitation to buy a lawsuit to me.

The Montage is a disaster. It would appear to me that if Corus Bank now owns the Montage our contracts are no longer valid. It is a legal question. For those who want out of their contracts contact:

John R. Markowicz
Senior Vice President
CORUS Bank, N.A.
3959 N. Lincoln Ave.
Chicago, IL 60613
Email: jmarkowicz@corusbank.com
Telephone 773-832-3147

AnotherFoolWhoBought is absolutely right on. Any Montage buyers out there who think their “$500,000″ unit is worth anything close to that are in deep delusion and denial. So far, NOT ONE montage condo has been sold, really sold, as in escrow has closed kind of sold. So where does this pie in the sky “$500,000″ value come from?

The mind of Fernando Leal is where.

Look around the MLS folks, and see what $500,000 can get you today. It will get you even more a year from today.

If you think your 1200 sq.ft. condo in the Montage is worth one half of a million dollars, the it appears the Greater Fool theory is alive and well.

What did you like about Portland? After living here for 3+ years, we’re leaning in that direction as well.

I’m late to the discussion, but I’ve got a couple of questions:

1). The original loans are between 255 North Sierra LLC and Corus Bank. L3 Development isn’t named in any of the recorded documents. Is L3 Development the entity handling sales of the completed units? If that’s the case, there’s probably an assignment of proceeds between L3 Development and 255 North Sierra, which wouldn’t be affected regardless of the property disposition.

2). From what’s here (I haven’t read Mr. Fernando’s letter) it seems that Corus will take over the property ‘upon completion.’ Now, to me that sounds like when a C of O is issued on the total project. What’s the timing on that? As was mentioned previously, final maturity on the original notes is 5/15/09, barring any extensions granted subsequent to the original recordings. Is it likely that a C of O for the total project will be issued by then? Will it be done sooner? Has it been issued already? And does Corus define ‘completion’ by the issuance of a C of O, or is another definition floating around?

3). What will the final final final construction costs be? And how willing (and able) will Corus be in negotiating lower release prices if construction costs are as high as projected?

4). I don’t know enough about the project to make an educated guess about the potential rents to be generated if it was turned into apartments. But I do know that additional construction dollars may be needed to convert it to rentals, if in fact that’s a proposal on the table. Case in point: The Caviata project in Spanish Springs originally was to be a condo project. During the final phases of construction, the developer decided to convert it to apartments. But the conversion cost additional dollars for wider hallways, upgraded fire suppression systems, reconfigured exits and the like. How much will that cost?

5). How long will it take to absorb all these units?

As I said earlier, I welcome any comments.

Wells, BofA just changed the rules on condo’s they want over 50 percent of the condo’s sold before they lend..

That is another nice way of saying..go away we don’t want your loan

I have double verified this information. Loans can not be closed for Montage buyers at this time due to the low percentage of sales. There are two possible solutions. 1) Buyers wait until more units are sold, and the project meets the Fannie Mae and Freddie Mac requirement of 50% of units sold for new developments. Meanwhile Fannie Mae and Freddie Mac may raise the requirement to 70%. This could stall sales for months or longer. We’re in a brand new phase of the waiting game. 2) The other solution could be that Corus bank might provide all the loans to qualified buyers. Fellow buyers, what do you think of having only one possible lending source for your mortgage loan, no competition. I have heard that the Montage team has understood this dilemma for months. Yet, even in his letter, Fernando references the possibility that Corus bank might provide loans for people who can not get loans elsewhere. Well that would be all, not some, of the buyers who are not paying 100% cash for their home. Fernando did not acknowledge this new unfortunate reality. Distrust is growing because of this lack of direct communication.

This notion of Corus Bank providing the financing for individual buyers really needs to be thought through. If there are 370 units in the Montage, and Corus needs to finance 50% of them to get to the magical number where other lenders could make loans that could then be sold to Fannie or Freddie, then Corus would have to finance 185 units. At an average price of $500,000, that is $92,500,000 Corus would have to loan out to individual buyers. On top of the $200,000,000 or so that it has already lent to Mr. Leal to build the place. So we are talking about Corus loaning new money to individual purchasers to pay back itself on the old money it lent to Leal?

Reno Ignoramus says Corus would have to be willing to take an immense bath to make this work. Quite true.I think there are limits as to just how big a bath Corus, already in serious trouble with high rise condos all over the country, is going to be willing, or able, to take.

Their stock has gone from $30 down to $1.01. The $1.01 represents the dire hope of a FDIC/TARP bailout. This won’t happen. Not when far bigger/healthier financial companies are in the front of the line. It’s nearly impossible to find a weaker bank that is still alive. The market has already given up on Corus. It’s over.

So when the FDIC owns the Montage, do you think Ruth’s Chris will open a restaurant then?

Interesting article in the 12/4 TheStreet.com about Corus. Seems they’re using Corus as an example of a bank in financial trouble due to the vast increase in under performing loans. The stock is rated ’sell’. I’m not a big stock guy but that can’t be good for future stability.

Ahh cool, CorusFollower, excellent post. Really excellent. So Corus is not likely to offer financing to buyers it seems. Actually, auction seems to make so much sense now that you have mentioned it. But man, that seems like REALLY bad news. You are so right, why would I pay $420,000 for my $500,000 condo(ok, I understand that is Leal Land fantasy pricing) and then watch Corus auction off similar units in the Spring for $200,000?

According to this http://www.nytimes.com/2008/11/28/greathomesanddestinations/28auctions.html a very happy woman bought a condo for $225,000, original asking price was $511,000 this was at Edge Condos I mentioned in my post above.

I’m not trying to be a prophet here, but wouldn’t it be a strange twist of fate if this turns out in a way to fulfill Donwtown Makeover Dude’s fondest wish?

The overpriced Montage goes into the ditch, Mr. Leal has to give it back to the bank, the bank wants to get the hell out of town as quickly as it can, so it offers the condos at auction for about 40% of Mr. Leal’s fantasy pricing. Price per sq. ft. goes from $400 to $170. People who would never have even looked at the Montage now get interested. You know, ordinary folk, who could actually afford to pay $200K for a 1200 sq. ft. condo.

So either the Montage units will:

1) get converted to apartment rentals, (the St.Joe56 suggestion) or,

2) be sold at auction for drastically reduced prices from the original purchase contract, (the CorusFollower suggestion).

Under either of those scenarios, wouldn’t buying at this point be a huge risk? Am I missing something?

“Not all condominium projects have viable apartment fallback options (in fact, only a minority do), but obviously when such a fallback exists it adds a helpful level of security to our loan.”
To me it sounds like only a minority of their condo projects would be viable as rentals, and I bet the majority of those would be in Florida due to overall high rent one could fetch from ocean-front condos. What kind of rent could they command at the Montage? What kind of rent rates are at the Palladio for those that own units there and rent them out? Couldn’t they fetch more from even a $250,000 mortgage+hoa’s, than from trying to rent for $2000 a month? My guess would be since they are doing fire sales in Florida first before resorting to renting out the buildings, they would first try to sell the condos here at reduced prices. It’s a one shot deal. Kind of like Village at Idlewild…once they announced they were doing rentals as well as still selling units, I bet they have sold slim to no units since. But maybe rented a lot! Same with Montage…If Corus decides to turn it into rentals down the road, then they better be sure they never want to sell another unit in that building, because I doubt they would, even for $200,000. Am I right or wrong?
Also, it should be noted the choice to turn into rentals at Village at Idlewild was from the developer, the bank did not repossses that project to my knowledge, and the project originally started as apartment rentals then switched to condos midway through. Should have just stayed rentals.

Hopefully we’ll know soon what’s up.

Good comments. It really makes a person have to think critically. Downtown makeover dude - do you remember many announcements that brought on this constant onslaught of responses & counter responses? Just curious how this ranks with Reno.

I think 97 comments might be a record though for a post on RRB. What IS the highest number of comments you’ve receive for a post Diane?

I recall one thread where I posted my list of the ten best rock and roll bands of all time. It was comment number 100, and I wanted to get Diane over the century mark.
I do believe that 100 comments sets a record for a thread put up by Mike.

So to summarize - the project is beautiful, it really has done great things for Downtown - even with this setback. Fernando’s a great visionary that got caught in bad economic times.It could happen to anybody. So it turns over to the bank.

Corus is suspect. This is the 10th large condo project they’re foreclosing on. The likelihood is there are more to come, and they themselves may be in more trouble than the just owning the Montage. They have sold a number of their foreclosures at auction prices.

The general thinking is, even discounted there aren’t enough people that think these condos are worth the asking price. The probable course of action - Corus puts for sale at auction the balance of the condos they can’t close on, thereby slashing the value for those that bought. But at least they are sold, downtown gets 370 new residents (minimum) and we start to see the revitalization move move towards better days. Not bad.

The downside I guess is the people that originally put their money forward in the form of a deposit on the project, or who even still believe so strongly in Corus Bank they go ahead and buy. But then that’s business right? In the end no one died.

BB - But I can’t possibly understand how you can criticize this project?

The bottom line is those who invested got sold out.
They’re idiots if they go further, they’re idiots for buying. Nice.

To quote:
‘ No one died. Nobody was cheated.’
Well from my standpoint that’s a matter of perspective.

$100 to a homeless man is a lot of money.

I totally agree with Downbutnotout. The more RESIDENTS we can get downtown the faster the revitalization. I would definitely buy a unit at 55% off.

DonC posted:

“The moral is: it’s easier to evaluate flawed or brilliant business plans retrospectively than prospectively.”

Of course it is. But some of use were poking holes in these plans at their conception, long before ground was broken, and were ridiculed as if our thinking was flawed.

Most anyone can come up with 5 bucks for a cup of coffee, but not $500k for a condo. Big difference. That said, Starbucks isn’t looking so hot lately. The bubble made even the silliest plans look prudent, we’re now seeing all of the holes.

I understand the new prices are out for the condos at the Montage. Has anybody heard anything?

Wazoo -Maybe if we wait long enough they’ll pay these too? Or should those be comped also?

Are you a buyer stjoe? I was just told different terms - Corus is financing with a standard no-ARMs 30 year fixed with 20% down. Do not want to post my price, but happy with discount

Well, withot naming specific closing price, I received nearly 40% off my contract price. I would like to know what others received. I doubt Corus Bank will auction off the units. I did my own research, and Corus auctioned off units on only one of their ten South Florida Projects, and it was a one time fire sale only on only 144 units in a 600-unit project, for the Edge Condos. There are no other record of any kind. It would be ill-informed to say Corus systematically auctions off the units at each of their projects when it only happened at one, once, last year, in a market with 10,000+ condo glut. When you look at the discounts in that one auction, they already equal the discounts I received as a buyer at the Montage, 40%-ish off the asking price.
My purchase is a long term investment, not a short term. Do I care about short term investors (5 years or less) trying to wiggle out of their Montage contracts? No. Tough luck. All this talk of Montage buyers trying to get out of their contracts is ridiculous. Everyone else in this country who made horrible investments and purcahsed new homes in 2005/2006 don’t get to cry fowl and suddenly say ‘oops sorry I want to repurchase my home at today’s value and not when I signed the contract to buy it’. Anyone who purchased their condo here as anything other than a 2nd home or primary residence, stop whining and get out of the game. I got out of the game in 2003, and sold my Southwest Reno home at a ridiculously high price. I bet it’s not worth that now! Renting until the Montage is done. I want to move in dammit! open it already. Retirement here I come, yard free and maintenance free.

Thanks for the info LoftBuyer. Can others verify they are getting 40% off of original pricing?

It appears that all of the Montage listings in the MLS have been pulled. It will be interesting to see when they come back and at what ‘discounts’.

Billddrummer, it is well known that Corus is in deep trouble. Somebody posted above that Corus is offering about the highest 1 year CD rate in the country. Something like 5.7%. Obvioulsy it is sucking for cash. It has belly up condo projects all over the country.

Corus is in trouble like most all banks. But that 5.7% offering was a while ago and no longer being offered.
The real question is are these condo’s now priced right for a sale? I gather most readers here feel it is always going to be overpriced, but I sense there are many of us who feel, based on the product and what’s out there, we’re now in the price range that makes financial sense. If that’s true, and L3 stays on and develops an aggressive marketing plan (which is what I was told) then there shouldn’t be any reason for any but the very last of the units going to auction. And these will be the least desirable ones.If I’m wrong and the condos don’t sell, well then a price adjustment will have to be made again, either through lowering sales price or at auction prices. But that’s the case with all buyers and sellers right now.Can you time the market?

Am I being too simplist here? I have a contract to purchase the property from 225 North Sierra Street LLC. 225 North Sierra does not own the property. I should get my deposit back.

Tom said “but there is some clause in the contract that they claim allows them to assign their interest to Corus bank.”

Is there NOT some clause in the same contract that prevents the purchaser from making the same kind of assignment to a new purchaser?

So you mean it’s okay for the seller to assign the rights to its contract, but it’s not okay for the purchaser to do the same thing? I don’t think so.

And as I understand the situation, purchasers’ deposits remain in escrow. That means the seller can’t unilaterally cause their disbursal. That means a lawsuit is coming unless a whole bunch of purchasers who want out of their contracts retains a single attorney [are there any lurking out there?] to negotiate an extra-judicial exit.

Sorry Tom, my mistake.

Bond, your points are well taken. In the end though this building will be the best thing that has happened to downtown. It will once it’s filled, however that comes about. I for one toured it this week and am planning on purchasing now that I feel the prices reflect current value. By the way, the sales room was packed, which was a first.Will it pan out with Corpse? good question. Anyone know what happens to a place like this when the bank goes boobs up?

The ‘facts’ are:
1. No one is getting out of their Montage Contracts. You can huff and huff, but you won’t be able to blow that house down. Frankly, I am getting sick of hearing from speculative buyers who have wanted out of their contracts from day one. They represent a SMALL portion of Montage Buyers…THAT is a fact, and not speculation.
2. I was told by 3 buyers that all buyers can choose to purchase a less expensive unit, or a more expensive unit, they aren’t obligated to purchase the unit they contracted for. Just as long as they purchase something. I was told some buyers are actually upgrading to more expensive units. Some are downgrading as well to something they can afford.
3. Judging from buyer comments, no discounts for contracted buyers are the same. I don’t think there was a singular across-the board discount for all buyers, it probably depends on the price of the unit you purchased, etc. But from all the buyers that have emailed me, no one mentioned under 30% so far. However, there WAS an across-the-board price cut for unsold units, which I was told the new pricing should be released/marketed next week. Buyers are being presented with their options one by one. With 140+ contracts you can imagine that process takes a while.
4. They are hiring 3 real estate agents to help deal with the sudden demand.
5. The prices they are now offering units at are already approaching the levle of discounts they offered at the ONE auction sale they did in Florida for ONE of their many condo projects. (Whoever said Corus systematically auctions off units at all their projects is full of crap. On all of the South Florida real estate bogs I found, there was only ‘one’ fire sale in ‘one’ of the many projects Corus holds, and it was only 140 units in a HUGE condo project, and these blogs track these auctions like candy.
6. Corus’s stock may be trading low, but when I chatted with a financial friend of mine over lunch who mulled over Corus’ Q3 report, he said they had a huge cash reserve (over $1 billion) to help deal with troublesome loans, and that many of the loans they have in Florida, they don’t have 100% liability for because they were primarily mezzanine loans from other banks or something. Can anyone who has viewed Corus’ Q3 report elaborate on this or what it means? Financial guru, I am not. Also, not all of Corus’ projects in South Florida are in touble either.

Montage - the topic that wouldn’t die!

From a public records point of view, L3 and Corus have been dotting the t’s and crossing the i’s. The parcel maps for phases 3 and 4 have been recorded. Commercial Street, air rights, and everything else promised have been deeded over to the City. It looks like the deed in lieu has been completed, and assigned to a new entity - Montage Marketing Corporation. Everything looks like it is being taken care of.

1. I’ll cut L3/Corus a bit of slack on the lack of disclosure to the public. They one have one shot to get it right, and the first order of business is to attend to the existing contract holders.

2. Someone said the sales office was hopping. The times I’ve driven by in the last 2 week, it was closed and “whited” out. And I agree with whoever said that it is time to get the chain link fence down, the sidewalk open, and the project looking finished. I promise not to tag the townhouse units.

3. I am amazed by the reticence of the contract holders to discuss details on any of the 3 sites covering the Montage. Is there a non-disclosure agreement in place? Are they being shown some sort of “certified” new price list for the rest of the unsold units?

4. Very wise of the Montage to allow the contract holders to swap out units. With the price reductions and moving your unit down a few floors, your deposit can equal the 20% down payment need to get financing.

5. I’ve heard a range of 23% to 40% reductions, depending on when and how hard you negotiated your original deal with the Montage. That new price list for unsold units is key. If it is so good that it will create a buying tidal wave, why hasn’t it been released? Wouldn’t the rush of public interest help motivate the contract holders to sign on?

6. Are they really “hiring” Realtors or “engaging” Realtors? Salary, salary plus incentives / commissions, or pure commission? Just curious! Maybe I’ll get my license and get rich.

If it were me, I would be buying full page ads, listing all the unit prices at a level to create a frenzy, offer current contract holders deals below the new asking to compel them to sign on. I wish a true insider would step up and tell us what is really going on. Without that input, I wary.

DMD and GreenNV, I respect your intelligence and well organized thoughts. I am not an investor or any kind of expert on these issues. I am someone who was trying to make downtown Reno my home. It sounds like some people have contempt for me or others who are trying to get solid information and protect themselves. DMD, you say that there is no way out of the contract. Are you saying that there has been a court ruling or arbitration finding that has settled this matter?

TOW, you have to realize one thing. MakeoverDude is downtown’s biggest cheerleader. Which is fine. But in his enthusiasm for All Things Downtown, he often loses his perspective. His most recent comment on the Montage is an example. This comment is nothing more than a shill piece for the Montage and his infatuation with Fernando Leal. It is foolish for anybody to say that, unequivocably, a contract is absolutely bulletproof in the absence of a judicial determination. But that’s just Dude’s losing his balance again. Now he will probably come back and say that, well he didn’t intend to give legal advice.
As far as your desire to get FACTS about the Montage, I am in complete agreement with you. I imagine that sooner or later the Montage will have to produce a new price list, and will return to the MLS. Then at least we will know what price changes have been implemented. As far as “discounts” to current contract purchasers, we will be able to see what those purchase prices were once the deeds are recorded. Then a view of the ‘Montage market’ will begin to emerge, and people won’t have to be flying so much in the dark.
I agree with the sentiments of others that so far there has been more darkness than light shed on the Montage. I suggest we wait a couple more weeks to see if more light is shed. If the darkness and secrecy continue, I will have to conclude it is intentional.
Just remember to take whatever DMD says with a big grain of salt.

Walter, Thanks for the feedback. I appreciate it.

I have to chuckle at the notion that the Montage is having a hard time getting realtors to peddle units, to the extent that Dude has to send out a special post on his blog to attract potential realtors for the Montage. Accoding to Guy, there are 2,888 active realtors in Washoe County at this time. What’s the implication here? That the market is so hopping now that the Montage can’t find 3 out of 2,888?

The hype just never stops, does it?

To many above posters;

There seems to be a lot of distrust of buyers comments; I am a buyer,put my deposit in in 2006, and am still planning to buy. Like many, I’ve been up and down in real estate ventures the last 3 years. I still believe in the Montage and the Corus/discounted price offered. That being said, I didn’t the whole time, therefore some of my previous comments.

My wife and I have looked at everything that fits this parameter for a 2nd home in the City/Lake Tahoe Area we like to come to about 7-10 days a month,and this is still the best value for us.

I realize if you don’t come from my background,
there will always be analysis. But this is my buyers background. Everything I’ve read here at this site so far seems actually accurate. My condo was discounted 34.7% to be exact. I had my attorney look at the contract and he stated unless I could apply more pressure (i.e.more in the line of class action or at least a bunch of us)there wasn’t much chance of getting my deposit back.

I’m still waiting for written confirmation of my price, for detailed financing that is supposed to come available, and from what I’ve been told serious discounts for closing in a timely manner and paying cash (which I hope means financing from other than Corus). When it comes to me I’ll post it here.

That’s about it from buyers standpoint. I have a non-refundable deposit so patience has to be the key, right?

Lastly, no matter how this building gets filled, it will be the best thing downtown Reno will see. So relax about ‘I haven’t heard the real story yet’ This is mine, but it’s still unfolding.

Why on earth would someone take that much time to lie to me over something as trivial as a condo building, I have no idea. But they did.

——

Is it called libel and slander. If I publicly criticize the Montage and any of my statements turn out to be inaccurate in the slightest degree, I can be sued. Remember the powers that be at the Montage have yet, to the best of my knowledge, to state anything in writing as to discounts or financing. Everything is based on oral conversations between interested parties. Remember, an oral conversation in not worth the paper it is written on.

Now the non-lawyers among you might state I would never be sued and anyway I would win. Anybody 100% sure here. Anybody willing to pay 100% of my attorney fees. Heck just having a winning defense could bankrupt me.

All I know for sure is that I received a letter, sent certified return receipt requested, in October (?) giving me a 30-day closing notice of December 1, 2008. That day has come and gone.

By the way anybody want to make book on what week the first closing, if any, will take place. My money is on April at the earliest.

At a minimum, the powers that be have to have to (1) send out letters detailing discounts and financing., (2) give the recipients time to digest said letters, (3) process any new paperwork, (4) process any financing applications. (4) arrange closings, (5) etc.

SJ

If anyone is interested, the full price sheet is posted on my site.

ET - Good summary. One thing that was left out was location, I’ll be able to walk to the ballgames as well as a lot of other cool places. Since I was up last week, my wife and I walked to; the Bighorns game Friday (great game!) West St market (hung out at the wine bar) dinner at Harrah’s NY Eve, the Ice show at the Eldorado, another dinner at Wild River Grill (great) and didn’t have time to get to Amendment 21 (or any of 20 other fabulous places). Try that from Caughlin Rd. Might be a problem.

That’s what I’m paying for. To me it’s worth it. It doesn’t need to be worth it for everyone, although I hope the place sells out obviously.

It’s true that in Caughlin Ranch there are no boarded up former bars and liquor stores within easy walking distance. There are also no sleazy pawn shops, cheapo depot tee shirt shops, and no shuttered up plyboard covered former casinos adjacent to the walking trails. Also, in Caughlin Ranch, it is rare to see anybody peeing in an alley (since there are no alleys), and even more rare to encounter street people hustling you up for coins. It’s also rare to encounter anybody dumpster diving for free drink coupons.

So yes, the downtown experience is no doubt quite different from the Caughlin experience.

It’s about lifestyle choice. I’m a single 30-something business executive with no kids, and I like being able to walk to theaters, movie theaters, restaurants, art museums, bars, lounges, concerts, and all the special events downtown.

Sleazy pawn shops don’t bother me, since I never step foot in them; I don’t make it a point to walk through alleyways and ‘most’ urban residents (including those living in larger cities like L.A. and NYC) don’t make it a point to stroll through alleys at night to see what’s going on. And giving an occasional homeless person some change is a small price to pay for being able to drive less than 10 miles a week.
All the things people complain about downtown Reno are present in any downtown environment, even Portland (I saw a homeless person peeing on an open street in downtown Portland in broad daylight. Even Portland has abandoned buildings etc) Yet thousands of people endure those environments to sustain a lifestyle they enjoy.

There are pros and cons to urban living just like there are pros and cons to suburban living in Caughlin Ranch.

For me, I like being within walking distance of culture and art museums and shows and concerts and bars and special events, and whitewater kayaking, watching live sports, and in general like being surrounded by people. I would live in the Montage in a heartbeat if I didn’t already own a home within a 2-minute walk of downtown. There will always be people who, no matter how nice downtown becomes, will never relate to living in the heart of a city, and that’s fine, it’s not for everyone.

What I wanted to say; DMD wrote his positive views yet qualified it with it’s not for everybody. A gracious olive branch. Why is it so hard for other writers to get this. They seem to have a propensity of trying to defend their location.

No one I’ve read has put any other location down but the downtown district.

What I will say instead; I agree with R above, why live downtown when you don’ want to.

I,too, am a Montage buyer…but tired of waiting and needing a place now just closed last week on a new, former model home, w/golf course frontage, 2600sf SFD in Somersett paying $140/SF…less than half the $/SF price for the Condo, even after the price reduction. Montage’s day will come…it’s just too bad that downtown Reno’s redevelopment got derailed by the economy, falling RE prices, banking fiasco, etc virtually stopping all future projects and setting Reno’s redevelopment efforts back 10 years! Never-the- less I still plan to go ahead on the condo, as I believe in downtown’s future, and think Montage buyers will be well positioned to take advantage of it…although it may be our heirs who reap the benefits.

It’s pointless to argue with DowntownMakeoverDude about anything related to downtown. He is blind to bare facts as was evidenced by his absolute bewilderment when the Montage went back to the lender. He makes statement based on hope, not facts. Here’s one from his latest shill piece:

“…contrary to popular opinion the Fitz WILL be remodelled [sic] and opened…”.

Quite apparently, he doesn’t understand the connection between the current credit squeeze, and stalled or failed development. All of these projects are dependent upon borrowed funds, for which the availability has all but disappeared. While I admire his passion for downtown and it’s rehabilitation, I am underwhelmed by his lack of instinct and financial acumen.

I never understood why you pay more for a condo than a detatched home. Location is nice sure, but when I know I am going to an event downtown, I get a room.

I am old enough and married. I no longer desire to stagger home for the local watering hole. I also am not lucky enough nor do I desire to gamble on a regular basis.

There are two things new downtown that would make it more desirable. The new baseball stadium, and the minor league basketball league. These itmes should not be overlooked. Perhaps when I retire….

I just had to add something, to this thread.

It amazes me many of the above comment’s tear down others yet contribute nothing. Especially since the source your tearing down actually researches and reports information. But then it doesn’t take much these days to comment anonymously, and in that statement I have to include myself.

Maybe there’s another reason Reno has an identity problem, why people don’t want to congregate downtown. People from out of town read sites like these and might conclude few want to contribute positively, and therefore realize little has changed with the ‘Reno’ perception.

Almost 20 years ago I went to Oregon to buy property. On my trip I realized the area I visited was gorgeous, but the people I interacted with weren’t on the same page, as I was coming from the North Bay Area. Not in a bad way, I just couldn’t connect.

From reading here and other blogs, it seems to be more of the same. I would get the impression many of you have all the answers, and others should wise up.

Well be careful what you project - and wish for - you might get it.Oh wait- you are.

My intention wasn’t to insult you, Downtown, but rather point out your Pollyanna tendencies. I’ve said it before, that I admire what you’re doing, and that Reno needs more individuals like yourself. But I do believe that you can be somewhat impressionable. You’ve even admitted it yourself. Let’s be honest, you are very passionate about the revitalization of downtown, and it’s in your own interests to paint the best picture possible.

I think what he means is he admires my passion for being involved in local government and supporting local businesses etc, but that I tend to believe whatever is told to me by developers etc…I.e. developers use me as a way to win over the public and I eat up the koolaid. And yes, I used to be much worse with that (i.e. Kings Inn, Waterfront, Wingfield Towers, etc). But I am learning as I get more involved with government.
Wait until you guys here about the CAC meeting I just attended this afternoon. You are going to flip.

Bluster will win over every time. ‘Open up a can of hot air on my weak @ss’? Classic! Soon you’ll have to incite the ‘Derrick’ rule.

Allow me, here in comment # 172, to speak up for Makeover Dude. I applaud his enthusiasm also. I applaud his commitment. Is he sometimes a bit over the edge in his enthusiasm for downtown? I think even acknowledges as much. There are worse things than for a man to be enthusiastic about his passion.

I have certainly expressed my frustration with downtown on this blog. I’m old enough to remember when downtown Reno was a thriving and exciting place (ok so I was a child then, but I still remember). My frustration has been, mostly, with the snail’s pace of the renovation. I fear I shall be old before downtown really turns around. After all, I am old enough to remember the original Woolworths, the one with the wood floors.

But, as Dude says on his website, things are better downtown today than they were a few years ago. You deserve some of the credit for that Dude, so hang in there.

THE FOLLOWING IS MY OPINION ONLY; AND I DO NOT HOLD IT OUT TO BE A STATEMENT OF FACTS OR OTHERWISE RELIABLE.

Everyone here misses the main point. Corus Bank has numerous other projects like this (See CORS). It is widely considered one of the worst banks in the United States and a posterchild of insane lending decisions and lax regulation. Their public disclosures have been less than illuminating (at best, and actionable at most).

It is extremely likely buyers will ultimately be dealing directly with the FDIC (as corus’s own liquidity comes into question). As such, that is a meterial risk that bears disclosure. Therefore, without some sort of guarantee from a solvent guarantor (not corus) as to the sharing of future HOA fees among sold and unsold units and standards for buyers and uses of as yet unsold units, these units have more negative/contingent liability attached to them than remotely possible positive value.

I can imagine the government turing this into some sort of public housing, health care, homeless hotel, or other public use over the next few years.

Did you know Fernando Leal (L3 Development) was one of the RGJ 2008 Entrepreneur of the Year winners. Did you know that Commercial & West LLC, a Fernando Leal owned company, guaranteed the Corus Bank loan to 255 Sierra Street LLC by signing a Limited Guaranty of Payment and Performance. Did you know that Commercial & West LLC secured their guaranty to Corus Bank through a Deed of Trust on properties they owned with the Montage condo development. Did you know that Commercial & West LLC was a party to a Deed in Lieu of Foreclosure Agreement dated 12.15.2008 along with 255 Sierra Street LLC and Montage Marketing Corporation [Corus Bank]. Did you know that Commercial & West LLC also provided Montage Marketing Corporation with a Deed in Lieu of Foreclosure on 12.30.2008. Did you know that Commercial & West LLC was dissolved on 12.31.2008. Did you know that 255 North Sierra Street LLC was dissolved on 12.31.2008. Did you know that Fernando Leal was the manager of 255 North Sierra Street LLC. Did you know that Fernando Leal filed a Nevada Declaration of Homestead on 10.15.2007. Did you know there may have been other guarantors to the 255 North Sierra Street LLC loan to Corus Bank. Did you know the loan to 255 North Sierra Street LLC had a maturity date of 12.15.2008 and could have been extended to 5.15.2009. Did you know that Fernando Leal is President of The Montage Owners Association. Did you know Fernando Leal’s money partner in L3 Development is Donald Wilson, a Chicago options trader and sailboat racer. Options traders make money from nothing—no valuable goods or services are produced. See http://www.L3Devco.com for more L3 Development news. Did you know L3 Development was not the owner of the Montage. Why do you think that Leal and Wilson decided to deed the Montage project over to Corus Bank or Montage Marketing Corporation? Was it with “heavy heart” or financial self preservation. Could it have been due to personal liability? Food for thought! Did you know that Corus Bank in 10.2008 foreclosed on the $146 million Laketown Wharf project in Panama City Beach, Florida. Did you know that Corus Bank’s affiliate took ownership of the Tao Sawgrass Condo project in Sunrise, Florida with loans outstanding of $150+ million. Did you know the strategy employed on these two bad loans is the same as the Montage. If you want to know what will happen with the Montage follow Corus Bank’s Florida problem loans. More to come.

Jeff–stay toned to this blog and the wordpress blog and I will be sharing my thoughts on how.

Jeff and Chuck7464, this is a subject we’ve discussed here several times before.

You entered into a contract with an entity to purchase a unit in Montage. The unit was to be a part of an overall project which was represented to be marketed and occupied in a particular manner by a particular class of persons, subject to particular CC&Rs and HOA bylaws then in existence, and with particular amenities to thereafter be supplied.

Now it turns out the entity you entered into a contract with no longer has title to convey. Further, the CC&Rs and HOA bylaws you relied upon at the time of contracting have been unilaterally modified without your consent. Because of the change of ownership, the integrity of the amenities represented can no longer be guaranteed. And if they’re not delivered, you have no remedy against whomever it is that wants you to complete your purchase. Finally, the type of fellow property owner which was represented would be your neighbor, is about to change which changes the nature of the entire project [as well as your particular prospects for appreciation].

So you explain to me; who exactly is it who has standing to compel you to purchase one of these units and if don’t, to unilaterally take your deposit? Stated differently, one of the elements of contract enforcement is that you yourself are not in default. It seems to me that since the entity you contracted with to purchase your unit cannot affirmatively assert it is free from default, it’s going to be pretty difficult to prove that you’ve breached the contract.

Renotopdog - I understood there was no language to assign. Where are you getting his information?

A copy of the merged CC&Rs (a redlined version) can now be downloaded at:

http://www.softtax.com/Montage.pdf

enjoy

LJK

The price of a share of Corus Bank closed today at 59 cents. Yes, as in $0.59.
The market is saying that it believes that Corus Bank will fail.
Back on December 13, I posted on this thread that Corus is wobbling, and it would take little for it to fall.
I suggest the market is saying that it does not believe that Corus is going to be around long enough for it to finance its way to salvation in the “urban village”.
Either the FDIC will find another bank to take over Corus, which may be difficult, or an FDIC receivership may be in the offing.
You want to call it the FDIC Towers?
You all think an FDIC receiver ever heard of an auction?

Hell, 59 cents isn’t all that bad. You can buy a share of Citi for $3.
But then, at $3 Citi may be overpriced. But Citi, unlike Corus, as we all know, is “too big to fail”.

There is also evidence that at one of the belly-up condo projects in Florida that Corus financed and has taken over, that some top insiders of the bank recently “purchased” several condo units for cash. The speculation is that this was a move to create a false sense of interest in the building and to artificially drive up comps.
Beware of out of towners from Chicago suddenly demonstrating an interest in living in downtown Reno. Just who are these alleged cash buyers chomping at the bit to close at the Montage?

As I understand it, the monies are held in escrow by a title company. No title company worth its salt will just release the money because the seller says a buyer is in default. Consider the risk the title company has it it releases the money on Monday and the very next day is told, no the seller was in default.

Mikey

In today’s WSJ Corus is considering selling itself. Further, it was rejected TARP money. What will become of the Montage when Corus is no more? With the delay’s this will cause those condos should loose another $150k in value per unit.

I actually have had a reservation since 2006 a unit on the 19th floor 2 bed with den 1500+ sq/ft. I went in as an investor and as a vacation home owner, even though I cant rent it out for less than a 6 month lease term.

My contract was for 660,000 and I found out today they dropped it 200,000 to $460,000 and we had 10% in escrow earning interest for 3 years now.
the only good side to this is if corus offers some kind of special financing or buyers can obtain FHA or other low down payment loans you can close with 3-5% down and get the rest of the deposit back at the close which could supplement the monthly payments or the loss of income from being upside down on the rents if leased.
on the other hand I tried to get out of the contract with lawyers, letters to the title co. everything. it is pretty ironclad and air tight. The only thing I can see on how to get out would be not to approve the new terms of the contract, the new HOA terms and any other items that were not part of the origional contract. They also have, at least in our contract no sales of the unit for 1 year (no flip policy) so I kind of believe this building is going to be one big apartment complex, which could be either really nice or go terribly bad.

Jeff, just a clarification: Is it Corus Bank that is offering a loan with just 3 to 5% down? Or is it some other entity offering you FHA loans. It is my understanding that no other lender can offer loans on this project due to low percentage of sales. What I have been told is that Fannie Mae and Freddie Mac will not buy loans from brokers/banks if the building has fewer that 50% units sold. Also I have been told that new guidelines require 25% down for condo loans.

Well, congratuations to all the posters at RenoRealtyBlog!!! 200 posts on a single topic. This has been a very informative thread to say the least, and has added value to many. Keep up the good work Diane, Guy, Mike, et.al.

Commerciallender–thanks for the advice. In no way do I want any Montage buyer to breach their contract with the seller and I would not assist in such action. That would be Tortuous Interference. Likewise I am not an attorney and never give legal advice. That’s what we pay the lawyers for. What I want is the opportunity to exercise my free speech and the blogs provide a forum for this.

Hey Renotopdog, I think there’s a whistle blower’s provision in the IRS and if you’re the result of the IRS securing delinquent income tax revenue, you get a bounty!

So my suggestion would be to wait until after April 15, 2009 and then send a letter with all the little details to the IRS making request for your share of the tax the IRS ultimately secures, if any, as a result of this episode.

Good luck.

The Downside for Condos in a Downturn

By TERI KARUSH ROGERS
Published: February 6, 2009

For the full article go to
http://www.nytimes.com/2009/02/08/realestate/08COV.html?pagewanted=all

FOR WHAT IT IS WORTH.

. . .
Mr. Kuperberg sketched out a second chain of events, this one pertaining to new buildings with many unsold units. It unfolds like this: Unable to sell half the units in a building, a struggling developer stops paying common charges and defaults on obligations to the lender. Foreclosure by the lender may take years, while individual unit owners effectively wind up paying double their normal common charges. This pushes some owners, themselves struggling, into default. Meanwhile, they are trapped — unable to sell, even at a steep loss, because most mortgage lenders won’t lend to potential buyers in a building where half the units are in default.

“That is a death spiral that could push a building into bankruptcy,” Mr. Kuperberg said. “You basically have a building unable to meet its operating expenses.”

Once the lender succeeds in foreclosing on the developer, there may not be enough money to cover the lender costs and unpaid common charges, forcing the unit owners to permanently swallow the loss. And while the lender must pay carrying costs going forward, it may decide not to throw good money after bad and instead dump the units at auction. The investors who buy them may act against the building’s best interests — renting them out cheaply (introducing a transient population that, among other things, inflicts more wear and tear) andelecting boards who defer maintenance and refuse to make improvements.

“We work with a building that’s about 50 percent sold and the developer is gone — they lost all their money and they weren’t able to sell,” said one managing agent who asked to remain anonymous out of concern for the impact on property values in the building. “The lender took over and pays the common charges but doesn’t talk to us and won’t return our calls. If you’re running a building and 50 percent of the ownership doesn’t give you direction, that’s a problem. But I’m really nervous about what happens if the lender sells into the vulture market.”

Even condo boards in fully sold buildings have begun to contemplate the once unthinkable: slashing the very amenities that defined the recent boom.

“The boards are starting to talk about cutting things that might be considered a little excessive,” said Leslie Bogen Winkler, the vice president and director of management at Penmark Realty, a property management firm that has opened 50 condo buildings in the last three and a half years. “They may reduce health-club hours and maybe scale back breakfast. The biggest amenities that are costly are the health club with a swimming pool. It can run up to $200,000 to $400,000, depending on the size, hours open and operator.”

Is there a way to verify the number of cash buyers that have closed so far?

Downtown Reno condos hit a foreclosure high. It seems as if just about every condo unit in the Belvedere Condo building, 450 N. Arlington Ave. is either in foreclosure or heading in that direction. Guess the lawsuit by Metcalf Builders, Inc. case no. CV08-02058 and its Notice of Lis Pendens has sent the owners running for the front door.

Not much better at the Riverwalk Condo building, 200 W. 2nd St. Foreclosure are growing at this downtown disaster as well. This is the typical story for most of the downtown condo projects.

All of this within a short walk of the Montage. Could this be–”Back to the Future”.

Maybe Leal, or some of his buddies or even Corus Bank executives will buy in the Montage to improve the sales level and appraisal values. No–they are not that crazy.

Just heard that there is an informational meeting Friday at noon for contract holders. You must bring documentation that you are a certified contract holder. Call ahead to see what’s up.

Lawyer’s info is:

Ken Lyon and Jon Whitehead

Law Offices of Kenneth Lyon
6121 Lakeside Drive, Suite 200, Reno, Nevada 89511
http://www.kennethlyon.com Telephone: 775-823-7700

These downtown condos are a mismatch for the Reno demographics. Reno gambling was built on the backs of the little guys–the retirees who blow $20/day on the slots and another $12 for a buffet meal and $1 tip. Now $33 doesn’t sound like a lot until you start multiplying: $33 * 365 * 10000 = $120 million/year.

What should have been done is to simply make a few cosmetic changes to the exterior of the old casino buildings, put in new carpets in each unit, put some better soundproofing on the walls between units, add a microwave and mini-refrigerator to each unit, and maybe a few other minor changes, but that’s it. Then turn the buildings into coops, with strict prohibitions against renting, and sell them for $60,000 unit cash, with monthly coops fees (including utilities and property taxes) of maybe $400/month.

Let’s run these numbers on the Belvedere, which had something like 500 units when it was the Sundowner hotel. If we assume the $400/mo fee includes $50/mo for property tax, thats leave $350/mo x 500 units x 12 = $2.1 million for management and maintenance, which should be sufficient. The true market value of the Sundowner building and land (exclusive of the gambling license, which I know nothing about) should have been $20K per unit max, for a total of $10 million for the building. Now add another $20K per unit for renovations and selling costs, then sell for $60K per unit, and you’re talking about $10 million profit on an investment of $20 million over the space of maybe 2 years. Not bad. It would have been a piece of cake to sell these units for $60K each back in 2006. No need for outside real estate agents. Just hire some guy to stand on Virginia street and hand out flyers offering some sort of freebie to people who walked two blocks over the Sundowner to listen to a sales spiel.

At $60K/unit, the buyers are getting a pretty good deal as well. Figure that $60K has an opportunity cost of 3% above inflation, or $150/mo. Add $400/mo coop fee and you’re talking $550/mo total effective housing/utility costs, other than cable and phone service. Not bad.

For a couple, a single unit might have been tight quarters. Very well, buy both his and hers units for $120K up-front plus $800/month continuing costs. Again, not a bad deal.

I know there are people who will jump on me about some of what I am saying above:
1) Banks won’t loan against coops so you can’t resell them! Go read that NYTimes article above about the problems with condos and foreclosures. The solution is low prices. That way, buyers pay cash and the loan problem disappears. If the buyers can’t come up with $60K cash, then maybe those aren’t the types of buyers you want in the building.
2) You can’t sell a condo without a full kitchen, and probably not without granite countertops and stainless steel appliances, etc! Now granted, just like you have people who can’t imagine life without a full garage full of powertools and a big space to overhaul their cars and a yard for their 3 dogs, likewise there are people who can’t imagine not having a place to fry up a mess of bacon and onion rings and thereby stink up their whole house with cooking smells. The thing is, those people live in suburbia. Condos are for people who want a carefree existence. When downtown condo dwellers have a sudden lust for fried bacon and onion rings, they trot on down to a nearby restaurant.
3) What about the amenities like a pool and gym? Only a small minority of people use these and they raise monthly costs for everyone else. Swim in the river. Join a public gym. Better yet, lease some of that old casino space at the bottom of these buildings to someone who wants to run a public gym.
4) $60K upfront plus $400/mo continuing costs sounds low-rent. Won’t low costs attract the wrong element? First, the true low-rent element seldom has $60K of available cash. Second, the coop boards can be selective about who it allows in.

As gambling declines, the Sands will probably be the next joint to close. I hope they have the sense to follow the rearview mirror advice I am giving here about what the Sundowners/Belvedere should have done.

Looking forward in regards to ultimate pricing for the luxury condos, I start with the old 100 times gross monthly rent multiple rule for multi-family housing as a sanity check. That is, if a multi-family dwelling has units which rents for $1000/month, then each unit should sell for $100K. Maybe you can boost the multiple to 150x for owner occupants, since these don’t have all the costs of a landlord (vacancy, higher insurance, management, profit margin). Then again, the 100x rule is primarily for buildings without HOA’s. So 150x is definitely a max. (Detached owner-occupant housing has traditionally sold for multiples of 180 to 200, but hi-rise condos seem much more similar to multi-family rental buildings than detached houses.) Anyway, Craigslist shows 1BR at the Riverwalk for $1000/mo, 1BR at Palladio for $1350/mo, $650 for a studio in the Park Towers, $1450/mo for a 2BR in the Arlington Towers. Readers can do the 100x convesion in their head. The 150x conversion results in $150K for Riverwalk 1BR, $202.5K for Palladio 1BR, $97.5K for the Park Towers studio, $217.5Kk for the Arlington Towers 2BR. Personally, I think the 100x multiple will prevail in the long run, which suggests there is still plenty of blood to be spilt. Prices are going to collapse in real terms and nominal terms as well unless we have some really bad inflation in the years ahead.

Now return to my proposal for $60K units in the Sundowner converted to a coop. At the 100x multiple, this translates to $600/mo for a studio with full bath, great view, microwave/mini-refrigerate rather than a full kitchen, which is about right.

In the long run, I think the future of Reno downtown involves making it a mecca for the early retiree crowd of moderate means. The people whose aim in life is to retire at 55 and spent the rest of their life RV’ing during the warm months and returning to home base (downtown Reno) in the cold months. Reno is perfect for this crowd, especially if they like gambling. It is really too bad all these luxury condos were built, because they are overkill for this crowd and now all these business failures are going to poison the waters for the next decade.

Tom: there is an old adage in business. “Sell to the classes, eat with the masses. Sell to the masses, eat with the classes.” Walmart is a fine example of putting this adage into practice. The elderly with tiny social security pensions are certainly a burden on the country as a whole (”useless eaters”) but they are a boon to those who know how to milk them properly.

First, given my scenario of $400/month cash outflow for housing. Throw in another $100/month for cable TV, clothing and laundry, and total expenses are $500/month. If the social security pension is $1000/month, that means we can allocate $500/month to the slot machines. My own experience is that none of the downtown casinos is too proud to turn away steady customers wanting to give them dribs and drabs of money like this.

Second, where on earth do you get this idea that Medicare is a burden to the state and local government? Maybe in California it is, but that can easily be changed. Just don’t pay for preventative care, so that the patients don’t visit the hospital until things are really bad. At that point, Medicare kicks in and you have a potential gold mine on your hands if you know to manage things properly. “Make ‘em die slowly…” A tragedy for the family no doubt (to speak nothing of the patient) but hardly a financial tragedy for the service providers, as long as they don’t provide any services not authorized by the Federal government.

Third, not everyone wants Sun City. Some people like Reno, for various reasons. For example, I was listening to a cashier in her 50’s (I would guess) the other day talking to a customer how Reno winters were too warm and she couldn’t wait to move to someplace like Alaska or Maine. Takes all types to make the world go round. Myself, I’d move back to San Francisco before Sun City.

Fourth, many people (yours truly included) got rich largely by being cheapskates. Why rent an office when you can run a business from a corner of an apartment? Why pays for print advertising when you can sell over the internet? Just because you offer coops for $60K/unit upfront plus $400/month continuing costs doesn’t mean you ONLY attract poor folk. From what I hear, Warren Buffett eats at the local same diner he’s been patronizing for the past 50 years, and lives the same modest sized house he’s lived in during that same time period.

Fifth, these $500K condos are hardly helping Reno. On the contrary, they are part of this bubble that will bring financial disaster upon this city for the next decade or so. Slow but steady growth is a lot healthier than cycles of boom and bust.

Finally, (I could go on and on, but I don’t want to waste too much bandwidth) I repeat what I said in my first post. Reno gambling, and thus the propersity of the city itself, was built largely on squeezing nickles and dimes out of the low-rollers. The high-rollers never did come to Reno and they never will. At best, you’ll get people like me. Refugees from California, who made their fortune in the tech industry and now want to live someplace with all the conveniences of a big city, but with a very slow pace of life. “Biggest little city in the world” sort of place. Down to earth types who wouldn’t think of spending $500K for a condo, regardless of their means.

RenoRetiree:

Two of the best posts E V E R.

You nailed downtown and exactly what it could be, and I think your financial logic flies pretty well.

Apparently the goons who built the Palladio and the Montage thought downtown Reno was just one zip code over from Beverly Hills.

Ok, you all want a laugh?

This goes right on the heels of Reno Retirees’s comment.

Look at MLS # 80016558. This is a 549 sq. ft. condo in the ……Belvedere!

Asking price $310,000.

Step right up, ladies and gentlemen. Here is your chance, at only $564 a sq. ft., to buy into Foreclosure Haven, a new and exciting “urban village” in the heart of downtown Reno.

(Oops, I think one of the other downtown condo busts has already coined the phrase “urban village, no?)

To Tom,

Well thought out posts, and I appreciate your candor.

As I posted before, the yuppie crowd would be the only ones interested in $500K condos. And they don’t live (nor do they want to live) in downtown Reno.

And to Corina,

You’re right. There are some dandy homes available now for much less than $310K, and they don’t have HOAs or stupid parking lots. And some of them are less than 5 minutes from downtown.

I’m not a realtor, so I can speak freely.

The apartment complex I live in is less than 5 minutes from downtown, is located along Virginia Lake, and rents 1200 s.f. 2 br/1.5 ba two story units for $1000/month. The same development was attempting to sell ‘renovated’ units for $200,000. Now, this development has been zoned for condos, but the rental side is being assessed as apartments. The owners thought that they had a gold mine when prices spiked in 2006–move out all the low rent people and replace them with owners–that way, they would give up having to maintain these apartments (30 years old) and charge HOA fees as well.

But just down the street, you can buy a brand new 1250 s.f. townhouse for $199,000, or a 1650 s.f. townhouse for $255,000.

Well, now they’ve listed the model home with a Re/Max agent. So I guess the great plan didn’t work.

Fun action on the Montage today. Montage Marketing Corporation filed a First Amendment to the Revised CCRs. It looks like the penthouses, rowhouses, lofts, and terrace townhomes are not being included in the official Montage project at this time.

“Downtown loses key patrol service” is the front page RGJ article in today’s Sunday newspaper and it is an eye opener about the future of downtown Reno. At the end of February the City of Reno as part of budget cutbacks eliminated the Reno Police Department reserve officers downtown police patrol. The reserve officers were retired police officers who worked part-time patrolling downtown Reno, keeping police coverage on the streets and managing the homeless and street criminals problems.
This is what the laid-off reserves said about the City of Reno’s move:

?we “are worried downtown Reno will return to a haven for the homeless and street criminals because no one is on foot patrol”

?”transients are already back to their old bad habits”

?”Soon, you’re not going to be able to walk downtown without seeing panhandlers and drunks”

?”It’s going to make it worse for our economy”

?”Now it will go back to the way it was: dirty”

?”When the weather turns warmer, the problems will increase, the ex-reserves said”

?”The ultimate losers are the downtown area and businesses. The unintended consequences will be the city will now have to play catch-up cleaning up the problems”

?the reserves “made customers and tourists feel safe. Reno depends on them”

?”Martini said transients have begun to urinate on the walls of his business and panhandle in the nearby alley, making customers and tourists uncomfortable”

?Michael Ford, executive director of Catholic Community Services of Northern Nevada said, “The presence of the uniforms does indeed provide deterrence to unacceptable behavior” “It was a valuable public relations and security”

As the Montage web site quotes “Reno offers a quality of life unmatched by any other Western U.S. city. Reach urban conveniences with a few steps”. But beware, when you step outside of your new Montage condo, as you may be greeted by the new downtown Reno quality of life—the homeless, panhandlers, vagrants and criminals that await your arrival.

This is positively the WORST time to be cutting back on policemen and patrol in any city. I cannot fathom how shortsighted and ignorant one must be to arrive at such a decision. Crime is sure to skyrocket as job losses continue to mount. The criminals are going to have a heyday.

As of 3/17/09 there are two new proud buyers/owners of Montage units.

1. Peggy Prescott Hall, Manager of the Prescott Famyle LLC, a Nevada LLC, purchased unit #1511. Peggy is from Carson City and it appears may be going to live in the Montage.

2. Louis John Marsella and Alicia Rose Marsella purchased unit #2218. Marsella’s are from Reno (4521 Glenshyre Ct., Reno)

Not sure what the purchase prices were. Will have to check how the recording fees translate into purchase price.

Peggy, John and Alicia, welcome to your new home in beautiful downtown Reno.

Hello!!! I have had a reservation since 2006 a studio unit on the 20th floor. In the middle of March this year, I’ve told Mr. Fernando Leal that my earned income has reduced down to 60% due to the hours reduction at work. In the same time, I also provided him the loan denial letter from Corus Bank. I was advised by Mr. Leal that the letter has been forwarded to Corus bank attorney, Rob Winkel for review.

Recently, I received the short notice from Montage to close the escrow. I then followed up with Rob and explained my situation. He told me the only options that I have are either to close the escrow or cancel the contract, which I will loose the entire 10% deposit. However, he’ll try to refund me interest earned for the past 3 years.

Could anyone please let me know if they were able to cancel the contract and get back their deposit or any recommendations would be very much appreciated.

Thank you so much for the reply Kzen. I really appreciate it. I am just in contacting with Lee Hotchkin.

Good Luck to you as well!

Pay your money and get represented. Without a lawyer,it will be very difficult to get anything done.