Montage makes the front page

The Montage is hot topic with many readers of this blog, so I thought I’d pass along a link to a story on the front page of this morning’s RGJ.  Fernando Leal, managing partner and chief executive officer of Montage developer L3 Development, was interviewed extensively in the article.

Some points made in the article:

  • 142 of the 377 units are under contract
  • Leal’s hope is to have 40% – 60% of the contracts closed in the next 90 days
  • Residents HOA fees will be about $0.41 per square foot
  • Corus Bank is creating a fund to provide 12 months of HOA fees to cover unsold units
  • Leal said The Montage will not become rental property.
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28 Responses to Montage makes the front page

  1. Avatar DownButNot Out says:

    Too bad we buyers have to find out from the RGJ article what’s happening at the Montage.

  2. Avatar Chuck7464 says:

    What I do know is that the deposit money from the buyers was in Corus Bank and has been moved to US Bank in Neveda by the title company. Legally it should have never left Neveda. I don’t believe anyone will close anytime soon as most are trying to get their money back.

  3. Avatar stjoe56 says:

    Who is going to pay the unsold units’ HOA fees in 12 – 25 months?

    It is my understanding that Corus will subsidize the HOA fees for the first 12 months. What happens then: is there any subsidy? If so for how long? When does the entire cost of maintaining the building fall upon the homeowners?

    Assuming each of the 377 unit pays the same maintenance fee and the building costs $1 million a year. Then each unit will pay $2653 in annual maintenance fees. Now if only half the units (188) sell, the average annual maintenance fee is $5,305. If only 50% of the 140 contracted units sell, the average annual maintenance fee is $14,285.

    Again what happens when the subsidy ends?

    SJ

  4. Avatar Walter says:

    SJ, I think you know quite well what happens when the subsidy ends. It’s all on the existing homeowners, however many of them there may be.

    This “subsidy” is the equivalent of a teaser rate on an option ARM. It’s very nice for a short while, then the whole thing explodes on you.

    This issue is a major, major issue in condo projects all over the country. And no, it’s not different here.

  5. Avatar HarmonB says:

    I love the quote from Fernando Leal that “an apartment play has never been discussed.” Well, Fernando, was a deed in lieu ever part of the plan? Was a building with ZIP retail and commercial occupants part of the plan?

    Maybe the statement ought to be that “an apartment play has never been discussed UP TILL NOW.”

    Is Corus willing to guarantee in writing that it won’t go to apartment rentals? That it won’t go to auction once it comes to grips with the fact that at BEST the Monatge is going to be 20% sold?

    Personally, in these financial times, I wouldn’t trust anybody associated with trying to sell these places as far as I could throw them.

  6. Avatar Grand Wazoo says:

    I agree with HarmonB. With all due respect to Mr Leal (whatever respect is due him these days) he has no control over whether the joint goes rental or not. For him to phrase a statement like that as fact is just pure spin and wishful thinking.

  7. Avatar smarten says:

    Am I the only one who saw the ad in today’s RGJ for units at the Montage? Edge Realty is offering cooperation to “brokers welcome” where you can “learn about our new market-adjusted pricing.” Tours available this weekend on the hour from 10 A.M. to 3 P.M. According to the ad, “discover where you fit in.”

  8. Avatar downtownjunkie says:

    I am not “shilling” anything here but I actually went on the tour and there was 40 people. I guess this is what has been happening. The prices are still too high but this does show that there is still interest in the downtown.

    I bet if Corus just quit the bleeding and marked these down to 150-200/SF, these units would go within 12-18 months. I think I would buy one for 150/SF. An cmon, at least give the people who put a deposit down a better deal than the newbies.

  9. Avatar Dalton says:

    Nothing peaks people’s interest more than a trainwreck.

  10. Avatar Perry says:

    I think there is a lot of interest in living downtown in spite of what our downtown may be lacking. When I toured the building about two months ago I thought it was really nice. I agree that Corus needs to come to their senses sooner than later. Get people in the units and paying the HOA’s and keep what is a nice building nice. Is the price list posted on the Montage Blog the most recent? If so I think another $100k needs to be shed.

    The thing I can’t wrap my head around is how it’s cheaper for me to live in a 3500sq’ house even with utilities and upkeep than it is to live in a 1500sq’ condo. I don’t even live out in the exurbs and it’s cheaper.

    On a related but not quite subject. Does anyone remember when those little townhouses were built near Holcomb and Ryland? They’re two stories with garage under them. Why aren’t there more projects like this near the center of town? They sold for about $130k I thought back in the day. Have construction costs really gone up and staid up that much? I love the Holcomb Place project but do you really have to sell a place like those for close to $500k in order to make a profit? Seems like it they could sell them for about $175k they’d move. Honestly I think even $175k sounds like a premium but still that’s like half off. I saw in the paper that the river town houses out on Dickerson are now starting at $189k albeit with low end finishes. If they can start these at about $130k I think they might start moving. Again, how much does it really cost to build these things when you cram six units it what could accommodate one house?

    How much longer until prices make sense for the local wages?

  11. Avatar BanteringBear says:

    Dalton posted: ”

    Nothing peaks people’s interest more than a trainwreck.”

    Exactly. Lots of looky loos out there, but not a lot of real buyers.

    Perry posted:

    “The thing I can’t wrap my head around is how it’s cheaper for me to live in a 3500sq’ house even with utilities and upkeep than it is to live in a 1500sq’ condo. I don’t even live out in the exurbs and it’s cheaper.”

    That’s always been the problem- the prices. Do you think if they were all for sale for $1 they’d sell out? Of course. Will they sell for today’s fantasy prices? No. What the market will bear is somewhere between those two points.

    Condos should always be cheaper than houses on a PSF basis. You own no land. These developers were simply trying to make a killing off of speculators, and got burned when the market turned. Construction costs, while higher, are not the reason for the outrageous prices. Greed is. The profits they built into these places were insane. Some were even spent away during construction. I’ve read articles where developers spent all of their deposit and draw money and barely broke ground. The whole bubble was the result of fraud.

  12. Avatar Reno Ignoramus says:

    Starting about 2.5 years ago, when the subject of downtown condos first started to arise on this blog, I said that I didn’t think the concept of people living in downtown condos is a flawed concept. I said the concept of people living in vastly overpriced downtown condos is a flawed concept. Even with the Montage price reductions announced 2-3 months ago, they are still overpriced. Perry is correct. As long as people can buy a very decent house that is twice the size as a Montage condo for half the price, the Montage remains a flawed concept, IMHO.

    The median price of a house in Reno has dropped about 40% since the Montage was announced. Even with the recent price drops, it is still way overpriced. In fact, even with the recent price drops, compared to the rest of the market, it is no better deal that it was before the price drops.
    And then, totally aside from the price issue, there are all the other issues about buying into a building that will not likely be more than 20% sold, the possibility of Corus going to an auction, the possibilty of rentals, the uncertain cost of the HOA dues per unit going forward, etc, etc. All of these uncertainties, it seems to me, argues for a further substantial reduction in price to offset the very substantial risk any purchaser will take on by buying at the Montage.

  13. Avatar downtownjunkie says:

    Yes, the people on the tour were mostly there for the free booze. BUT, I still believe in downtown. If Corus doesn’t get their act together and write this down it could get ugly real fast.

  14. Avatar CommercialLender says:

    The best thing that could happen to Montage is to cancel the purchases and turn it into a rental. Corus must fail [looking at watch for exact time] and then this loan will go into receivership. Receiver will sell at a ‘market’ price to the highest or only bidder at a price that makes sense to a heavily-cash-invested buyer for cash-flow, i.e. rental. 5, 6, x years from now, when a condo exit makes sense again, the investor can then sell the units at a profit. If Corus forces buyers to buy, lawsuits will fly, and then they’ll kill all prospects for any further sales beyond the “140” they seem to think can close escrow. Then they’ll end up putting the remaining units into receivership where the price/unit for the remaining bulk will be WORSE than had they just taken the asset rental from day one.

  15. Avatar SouthBay says:

    Based on a 50% close rate for the 142 units under contract – 18.8% of the building will be sold in 90-days and that is there optimistic response.

    I’d hate to see there realistic budget.

  16. Avatar inclinejj says:

    The best thing that could happen to Montage is to cancel the purchases and turn it into a rental. Corus must fail [looking at watch for exact time] and then this loan will go into receivership. Receiver will sell at a ‘market’ price to the highest or only bidder at a price that makes sense to a heavily-cash-invested buyer for cash-flow, i.e. rental. 5, 6, x years from now, when a condo exit makes sense again, the investor can then sell the units at a profit. If Corus forces buyers to buy, lawsuits will fly, and then they’ll kill all prospects for any further sales beyond the “140? they seem to think can close escrow. Then they’ll end up putting the remaining units into receivership where the price/unit for the remaining bulk will be WORSE than had they just taken the asset rental from day one.

    Why in the world would anyone want to pay market price for this non performing asset..

    I would say about 25% of the loan balance..

  17. Avatar Reno Ignoramus says:

    Here’s an interesting site:

    No-Condo.com

    Disclaimer: I have absolutely no knowledge about this site. Just passing along the info.

  18. Avatar CommercialLender says:

    InclineJJ,
    that’s what I’m saying: ‘market’ price must be a firesale such that an investor buyer can make decent cash flow on current operations and also have some possibility of decent return in x years if they sell again as condos when the for-sale market comes back. This is what Montage needs to do, IMHO.

    Corus’ apparent current plan is to force the buyers to buy, which will cause many lawsuits. Then they still won’t sell the remaining units without clearing the suits and severely discounting the remaining units (unless this whole recession/depression magically reverses in the next year which will happen only if the Tooth Fairy is discovered to be living with Elvis and Santa Claus in Montreaux.) This plan of ‘action’ is doomed and will doom this project for what, a decade?

  19. Avatar BanteringBear says:

    What’s going on with Montage/Corus in terms of pricing is no different than what we see in the plethora of fantasy priced listings clogging up the mls. Nobody wants to take their medicine. Greed and denial reign supreme. What’s so entertaining is, in the end, the individuals/corporations end up taking much worse of a beating than if they would’ve gotten religion to begin with.

    Case in point- look at Allen “I’m a great fisherman” Murray. If he would have listened to us two years ago, he could have ‘cut bait’ on that anchor and moved on. Instead, he chose pride, greed, and denial, and for that he’ll pay mightily. You don’t screw around in this sort of market. You take what you can get and go. With prices deteriorating as rapidly as they have been, a mere few months means tens of thousands of dollars in losses.

  20. Avatar downtownjunkie says:

    There would need to be significant investment to turn this into a rental play-especially the 30K+ square feet of penthouse units.

    They need to let the buyers who want out, out. And have REDC or whoever come in and auction them off. The sooner we get REAL people living there the better.

    For the record: I am not a contracted buyer in the Montage.

  21. Avatar downtownjunkie says:

    P.S I am sure Fernando lost his a$$ on this investment so props to him for his vision.

  22. Avatar inclinejj says:

    downtownjunkie said, in March 10th, 2009 at 2:02 pm P.S I am sure Fernando lost his a$$ on this investment so props to him for his vision.

    I doubt he had that much personal cash at all in the project!!!

  23. Avatar Martin says:

    I have no personal knowledge, but why wouldn’t have Mr. Leal done the same thing that every other voodoo money addicted borrower did? Go to Corus Bank, the dispenser of cheap bubble money, and use that money instead of his own. Hell, if hairdressers could borrow $500K of bubble money with nothing down to buy a SFR, why couldn’t Leal be able to borrow $190 million of bubble money with nothing down to build a “Urban Village”? It’s always much more fun to be spending Other People’s Money, isn’t it?

  24. Avatar downtownjunkie says:

    OK there is a possibility you’re right but I thought I remembered L3 having to buy the building or put 10% down.

  25. Avatar Martin says:

    Junkie, as I also said, I have no personal info about Mr. Leal’s financial stake in the Montage and you may be right. My point was more directed at what was one of the major problems in the whole bubble nonsense, that people were driving up the price of houses without any of their own skin at risk. Hell, if you were spending Somebody Else’s Money, what did it matter what you paid?

  26. Avatar billddrummer says:

    To RI,

    Looked at the site (not a Montage buyer), and it’s unclear whether they have local attorneys for projects in Northern NV.

    It’s also not clear how successful they’ve been at breaking contracts.

    Possible as an alternative, perhaps.

  27. Avatar smarten says:

    no-condo.com states, “you may have a case [to obtain return of your deposit on an executory contract for the purchase of a condo] if you have paid a deposit and the developer has done one or more of the following…Made material changes to underlying governing documents for the condominium (i.e. changes to your Declaration, Rules and Restrictions, Purchase Agreement, etc.).”

    Isn’t this what I suggested on several previous occasions [in addition to the fact the entity would be purchasers contracted with no longer has title to the property to convey and as such, can’t itself establish it is not in breach of contract]?

    As the site suggests, “contact No-Condo.com to find out if you have a case…There is no obligation to hire an attorney through No-Condo.com [and] this service is completely free to consumers.”

  28. Avatar Perry says:

    Ferdi put on a great ground breaking party. I remember his comment on how he was going to take his Chicago talent and show Reno how a development is done right. I think his words and his ego have proven out rather well. I’m still left with the image of him walking his dogs in Wingfield Park….picking up the poop. How appropriate of a job for him now.

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