The Friday Updates are something I used to put together for Diane and Guy highlighting the weird and bizarre, odd things that may be trends, blatant speculation on the market, and local gossip. So for those of you who read this blog off the corporate clock, here are a few things to discuss over the weekend:
– Montreux filed for a parcel map to extend Bordeaux Drive. The 68 acre parcel is being divided into 3, presumably for 3 future subdivision phases. 4 or 5 earthquake faults though the properly were identified on the map. For those of us living in the SoMoVe district (Somersett, Mogul, Verdi), welcome to the "magic fingers" club except you don’t need quarters.
– Lennar applied for a one year extension on their development agreement on the next phase of Eagle Canyon, as did St. James Village on their next phase. Lennar pulled the trigger to move forward on 207 lots at Damonte Ranch Phase 4 Villages 1 and 2, and Coleman Toll moved foreword on 116 lots at Village 5A.
– Over 10% of the Palladio is now available on the resale market.
– The Center for Regional Studies usually have their monthly data posted by the 20th. February numbers still haven’t been posted. Conspiracy Theory?
– With one business day left to go this month, NODs are at 456, an all time high. NOSs are at 218, the second highest on record. TDs are at 138, also the second highest ever recorded. That puts us at about 1000 REOs either on the market or about to hit the market.
– 1475 Palisade should get an NOS notice this week. The NOD has not been lifted, and the MLS doesn’t show the property in contract.
– What’s the story on the yo-yo sales and listing history on 1605 Chipshot?
So this is basically a WOT – Weekend Open Topic. Play nice nice, personal perspectives are encouraged – attacks will be whacked. What do you think about these items? What else is on your collective minds? Anything you what DiggerDog to look into next week?
StJoe
Over 10% of the Palladio is now available on the resale market.
————
All right you experts. Is this normal or abnormal for a high rise condo?
SJ
SkrapGuy
I count 19 Palladio units on the MLS, both never sold and resale. That means about 27% of the building is for sale. Now if 27% of the houses on your block were for sale, would you feel good about the prospects for rising values in the near future?
27% for sale does not sound too good to me. But that’s probably better than what’s going to happen at the Montage.
MIke Van H
The Montage is actually a better project than the Palladio IMO. Better pools, better units, wider variety of models, and unlike the Palladio, has it’s retail spaces already signed and not sitting empty with the exception of a Starbucks.
I count about 26 units available total from the Palladio. Not really much of a change from last year or just as people moved in. They are the same less desireable units facing north that were available last year.
I think a condo building being 26% empty is far less impacting than a neighborhood being 26% empty, just my opinion. I have lived in a condo tower before; you rarely know or meet your neighborhors, nor does it have any impact on crime if a secured-access condo building is sitting 20-30% empty as opposed to a neighborhood sitting empty.
The Palladio has actually sold a few units recently, at prices waaaay under previously sold units, like $100,000 less than previously advertised.
Not ALL condo projects are doing bad however. Did you guys see this? http://www.nnbw.biz/ArticleRead.aspx?storyID=10805 wow, condos actively selling for $1300 a square foot? Even in Tahoe, that seems outrageous. Yet people out there have snatched up $20,000,000 worth.
MIke Van H
Whoops sorry somehow I got some pendings in there in my count. I think Skrapguy’s number of 19 is more accurate. That doesn’t seem like many out of the 92 total units the Palladio has?
Regarding the other parts of Mike’s post, why are some builders continuing to move forward despite the real estate numbers? Wouldn’t it be better if they waited a year or so to let the inventory be absorbed a bit more?
DataGuy
Mike,
County files show closings on 65 of the 92 units in the Palladio – 60 closed in 2007 and 5 closed in 2008.
The developer has 27 units for sale that have not yet closed. Average sales price per square foot were $381 for the 65 sales with a minimum of $300/SF and a maximum of $502/SF. The latest closing – dated Mar 24 – was $303/SF.
ALL of plans 1, 2 and 11 have been sold. VERY FEW of 4, 6 and 10 have been sold. Other plans vary in availability.
I don’t know the number or composition of pendings, but with 27 original units still available and quite a few resale listings, there is clearly a substantial inventory available.
With 5 sales so far in 2008 – the good news is that the developer is reducing prices and starting to move some inventory. If you own a unit purchased at a higher price, you might not like the reductions but at least the building will continue filling… slowly.
MIke Van H
Nice Dataguy thanks for the info. You would be surprised how many people I come across, both in Reno and other cities, who would like to live in downtown Reno or just outside, on the southern peremiter, but are waiting for prices to come down to reasonable levels.
MIke Van H
Hahahahaha Mike I am surprised you didn’t put this gem on your weekend discussion. http://www.renoforeclosurebus.com/index.htm
Let’s all take a ride on the bus! Only if they serve white chocolate martinis while we drive around looking at the failed dreams of so many people.
Green NV
Welcome back, DataGuy. I’ve missed your contributions to the discussion. You rock! What’s your angle?
You and I are really close on our numbers. I’m showing 26 of the original 92 units still on the MLS or still in the developers hands. 7 resales on the MLS, with none showing as pending.
There are a couple of REOs at The Riverwalk.
The gorilla in the room is the Montage. I have no clue what percentage of their “sales” will actually close when the project goes hot in a couple months. If I had bought in early (and I tried to on a loft unit), I’d probably be walking right now. Sorry. I really want Montage to sauced, and it is hugely important for downtown that they do, but I think we are going into a Tough Love phase. I think you could forfeit your deposit, and re-buy your unit for a lot less today.
Green NV
Sorry, “sauced” should read “succeed”. Freudian slip?
GrandWazoo
The lender to the Montage project (Corus Bank) just made the WSJ: “Corus stands at a precipice in the condo bust”, 03/26 edition.
The amazing thing is if these projects were priced appropriately for the Reno market, Palladio and Montage would be full. There are plenty of relatively affluent people, my wife and I included, who sincerely desire to live downtown in a high-rise condo if the numbers vs a SFR would work.
So far, they don’t.
For those that say “The Palladio is only 70% occupied, who cares?” The money machine that fronts the HOA cash flow cares, and so do the residents that feed it. The building must be maintained, and a smaller pool of residents to pay for that building maintenance can be a serious problem once the start-up phase (with the developer offseting the HOA cash flow) is past.
Phil
It would be interesting how many of the units when sold, are sold to people who have them as a primary residence.
If the prices in Reno where as high as Tahoe (this has got to be some of the extream cases), some developers where dreaming. Reno is not Tahoe.
I always had a problem with not having a garage.
HOA cash flow is something I see a problem with as well with developments not finishing. I can’t wait till the homowners gain control of my HOA!
One problem the city needs to look at is attracting business to the area. One negivite I had moving here was that my employer is almost the only game in town. What happens when they see rough times and I lose my job? Hotel maids are not buying 400K homes, or where they?
IMO, the real-estate bust is higher here because many people did invest in secondary or vacation homes here. This is a market which is more reflective of how the economy is doing.
The street I live on has so many retiring Californians it is almost scarry.
I wonder how many of our elected officials are working in attracting companies to set up shop here? And I mean more than retail outlets and new hotels. Sure tourism is a major industry here. But does it have to be the only industry? Yes I know distribution centers also exist.
And how about our school UNR? How many students find themselves having to move away? How many would stay if they could? I hate to see our education budget being used to train people for jobs in other states! Perhaps we should ask for a rebate, if a student does not work in Nevada. It gets hard to fund education when the average job does not require much education.
Perry
I agree with GrandWazoo about the downtown condos. I was really excited about Arterra because they were going to offer a really nice 3 bedroom unit. Very rare is the 3 bedroom unit downtown. The ones you do find are priced into the stratosphere. Who are all these millionaires these developers thought were living in Reno?
They should have looked around and figured out that Reno isn’t exactly that affluent. We were without a Mercedes dealer for a while. We’re just now getting an Acura dealer. That brand started in 1986!! We still have no Infinity or Mini dealer. Shoot, Bend Oregon had a Mercedes dealer when we didn’t.
StJoe
I believe my wife and I were LITERALLY the first Renoites to sign a contract for a unit at the Montage. Hence I got the exact unit of my choice at what I still think is a fair price. I am on a high floor looking west. Assuming we still qualify for a straight 15-year mortgage with no points and no prepayment penalty, we plan on moving in.
At the time, we signed the contract a number of units had already been “presold” to people from the SF area. I believe that these people plan on using their unit as a second home.
I have also made an extra payment to customize the unit to my exact requirement. For example I had a wall moved slightly and a door moved.
Is it a good deal? I don’t know. All I know for sure is that my current house is getting a bit too hard for my wife and I to maintain. We plan on staying in the Montage a long time.
As to a developer not covering the HOA fees, I think you are mistaken. Someone is liable for the HOA fees on the finished units. If the developer wants to sell the remaining inventory, the building has to offer the amenities promised. Failure to do so would kill future sales of the remaining inventory. Yes, there will be a time when the developer walks away, but that will not be until most of the units are sold.
Don’t forget that there are still plenty of wealthy people who buy second and third homes.
Have you driven past the Riverwalk of Palladio at night. A vast majority of the units are dark. That fact alone leads me to believe that most of the purchasers bought them as second homes. But then who knows.
SJ
Reno Ignoramus
You are absolutely right that the vast majority of units in the Palladio and Riverwalk are dark at night. The Palladio may be 70% sold but no way is it 70% occupied on any given night. If the vast majority fo people buying these overpriced units are from Somewhere Else, that is going to do nothing to revitalize downtown. The only way downtown is going to thrive is for people to actually live there. Eat there. Shop there. Go to the drugstore there. That is not happening now. And if downtown does not turn it around more than it has so far, who is going to pay $750,000, or more, to live there?
The whole downtown condo thing is a story in the making. We shall just have to wait and see how it ends. I am reluctant to predict it a big success. Most of these condo buildings came on line when the frenzy was in full swing, the Voodoo money was flowing, and people still believed the spin that you can’t ever lose money on real estate in Reno. Man, that was soooo 2005.
Now, the Palladio seems to be going backwards. The builder is dropping prices on its unsold units. Resellers are having to compete with the builder. There are more units for sale today than there ever has been. As inventory, both new and used, increases how can prices not drop?
GreenNV suggests that we will see “presold buyers” cancel on their Montage units. I agree with him. There is no way that L3 is going to be able to hold prices on a building that may be less than 40% sold after the dust clears and people walk from their deposits.
It’s going to be an interesting movie. Anybody selling popcorn?
MIke Van H
Hi Renoignoramous!
First off, there ARE people that live downtown, and have for years, in Arlington Towers, Park Tower, the immediate old Southwest area, and the immediate Southeast area where I live, where I can walk downtown in 5 minutes, all along Riverside Drive along 1st and 2nd Streets. You also have UNR within walking distance. Through the various polls I offer readers on my site, and my comments, I know a substantial amount of people do frequent downtown who don’t live there. So I wouldn’t say necessarily downtown will be a failure if no one buys units in the Palladio and Montage. I also receive a ton of emails from people who want to move downtown, but are waiting for prices to come down, or don’t have a choice and simply can’t afford $350,000 for a 1 bedroom condo.
I would love to see a developer fill this void, and figure out a way to offer up a cool hip urban living project downtown with regular, good ole 3 bedroom condos in the low $200,000s. That project, if done right, could be a huge success.
After all, there’s a 2+ year waiting list to rent from Riverside Artists Lofts. Why not take a building like the Kings Inn and convert it to minimalist giant-open-space artist lofts that rent for $700 a month?
NVMojo
We would love a place downtown but we are regular people with regular jobs who don’t want voodoo loans for voodoo high prices.
GreenNV
Mike Van H, you are exactly in tune with me on what I think the King’s Inn should be. Strip it down to be artist, student, entry level housing. Maybe set up a Community Development Corporation to get it done (god knows there are a lot of locals that would join up just to get this eternal eyesore solved – me included).
Financially feasible? Say Fernando is selling the Montage at $400/SF. That includes a minimum of a 30% profit margin, standard for a developer project to justify the risk. Cost $280/SF. Minimal improvement cost versus deluxe is probably about $50/SF, so rot-gut unit cost is about $230/SF. Based on a 1000 SF unit (3 hotel rooms combined), monthly payments would be in the $1400 range with 10% down, net of association dues.
So starving artists paying to rent a rough shell for the same amount as a Somersett 4/3? Doesn’t pencil.
These are WAY rough back of the envelope numbers, But I can’t even get into the universe where downtown Reno condo investment numbers make any sense, as much as I would truly like them to.
BanteringBear
GreenNV posted:
“So starving artists paying to rent a rough shell for the same amount as a Somersett 4/3? Doesn’t pencil.”
This is precisely the problem with all downtown condo projects. The price points are ridiculous. They need to come way down in order to generate long term interest.
Sadly I cannot envision downtown Reno ever being a highly desirable place to live. Having worked downtown parking cars while attending college, I’ve seen enough to lead me to this conclusion. If they got rid of the casinos, it’d be a totally different story. But that’ll never happen, and therefore the riffraff will always reign supreme.
When I first heard that the old Comstock, Sundowner, and Flamingo Hilton were “going condo”, I about laughed myself into the emergency room. This cannot end well for the developers. Any bankruptcy news?
SkrapGuy
The best thing to do with the Kings Inn is to tear the damn thing down. 31 freaking years it has been sitting there decomposing. It’s not as if the structure has any historical value like the Mapes did. Alan Bergendahl built the place to make a buck, not to enhace the asthetics of downtown Reno. After rotting away for 31 years now, it needs to go. The problem is: who is going to pay for the demolition?
I agree with RI that the end to the downtown condo story has yet to be written. It seems to be the consensus here that the concept of people living in condos downtown is viable, but that current asking prices are unreasonable and unsustainable.
DataGuy, do you have updates on what’s happening at the Belvedere? Green/Mike, do you know if the Belvedere LLC that has over $100K in mechanics liens filed against it is the same Belvedere that used to be the Sundowner selling the closet sized condos?
Tom
A comment above on the Kings Inn reflects that “Alan Bergendahl built the place to make a buck….”
Al was a client of our office, and he was successful with his projects. He was a visionary who could see a need and devise a way to fill it, and actually the Kings Inn was among the smaller of his business ventures. If Al were still living, you can bet that if anyone could see a way to build and sell a condo project with unit selling prices as suggested in this blog topic, Al and his partner Sid would know how to do it. Since there are obviously other businessmen out there equally astute, it must be the case that such a project doesn’t at the present time have enough commercial viability to attract entrepreneurial risk capital. The fact that it could be done, as other comments above indicate, isn’t the whole answer. It must be able to be done more profitably than could other business opportunities be pursued elsewhere, and that is the problem generally with downtown urban redevelopment projects. Without public subsidy assistance, it is hard to make those projects attractive when compared to other investment opportunities–there are too many better ways to deploy capital.
GrandWazoo
BB, regarding downtown, says:
“If they got rid of the casinos, it’d be a totally different story.”
IMHO it is all the 50’s era fleabag motels downtown, not the casinos, that create such a thriving home to the street people. Get rid of those motels and downtown might really begin to thrive again.
Then fix the condo pricing and now we’re talkin’!
SkrapGuy
Get rid of the flea bag hotels? Are you kidding? I have an acquaintance who owns two of those flea bags. He calls them “my ATMs”. They are money making machines for the people who own them. They rent out on a daily/weekly basis to people who can’t afford the first/last/cleaning deposit for a regular apartment. They can’t afford to live in the flea bags either, so many of them go from homeless to flea bag to homeless, etc. If they don’t have the cash, they don’t get a key. This is not a credit card crowd. So these places ooze cash. Most have them have two sets of books. One is for the IRS. Ain’t a cash business great!
Get rid of them? My acquaintence takes a city council person to lunch once a week. Just to stay in touch, ya know.
SkrapGuy
Tom,
I did business with Al Bergendahl at the Kings Inn when I was just a kid starting out. The KI had its problems, but Al was a good guy.
MILLER
Just to throw in an observation. I wouldn’t be taking the Mechanic’s liens into account when considering project viability. Talking with a couple of friends that are in that business, it has become standard practice to file a mechanic’s lien even before any work begins for the past 3 years at least, so I’d be more surprised if you found a development these days that didn’t have any mechanic’s liens in place. Both of my friends companies have legal council on staff just to file, manage and maintain the liens.
Might be a statement of what the industry has come to…
-MILLER-
DataGuy
SkrapGuy,
County files show 68 closed sales at Belvedere.
21 sales were single unit sales to 21 different “last names.”
47 sales were apparently multiple unit sales to 16 different “last names.”
Several of the multi-unit buyers appear to have different members of a larger family buying together. Some of the “apparent” individual sales could be “extended family” (ie – a married daughter with a different last name) as well.
In short, a relatively few absentee “investment” type buyers have bought the first 68 units.
62 sales have California addresses, 1 from Las Vegas, 2 from Carson City and 3 from Reno.
BanteringBear
Grand Wazoo posted:
“IMHO it is all the 50’s era fleabag motels downtown, not the casinos, that create such a thriving home to the street people. Get rid of those motels and downtown might really begin to thrive again.”
I wish it were so easy, but unfortunately, that’s not the case. The fleabag hotel is the symptom, not the disease. Simply treating the symptom does nothing to address, let alone cure, the underlying problem.
Casinos draw the “losers” of society. Ever talk to the homeless people in downtown Reno? I have-a lot. While I was parking cars during college, I bought many of them a meal at “The Little Nugget”. Not sure if it’s still there, but it was a great little dive diner. We’d get the breakfast special, or one of their giant burgers and I’d pick their brain while we ate. I was interested in their plight. These people are not, for the most part, native Nevadans. They’ve come from the far reaches of the US to “strike it rich” with their last $300. We all know what happens from there. Casino towns are great for facilitating this sort of “subculture”.
IMO, downtown Reno is more dangerous than it was the 15 years ago when I worked there. I never once saw crack dealers back then, but I did on a drive through downtown one time last year. That’s not to say that I don’t agree that it’s looking a little better with a few new eateries, etc.-it is. It’s just not a place where I’d ever want my sweetie walking around alone at night.
SkrapGuy
Thanks DataGuy,
Have these 68 closed deals actually taken possession of their units? I ask the question because the Belvedere is just like the Palladio and the Riverwalk in that at night the place appears to be dark. This is an interesting thing……sales are being recorded for these places, but hardly anybody seems to be actually occupying them.
Reno Ignoramus
I suppose the fact that 65 out of the 68 sales are to people with an out of town address might provide some suggestion that the Belvedere is not going to be a place where the owners actually live. These places really are shoeboxes and it’s hard to envision even a couple living in one of them. Fine for a weekend in Reno. Fine maybe to rent to a single person. But I guess that even a single tenant would have the light on at night, right?
DataGuy
RenoIg, I agree. I think that Belvedere has some type of rental program, where the units can be rented for “sxtended stays” for people who need to be in the area for a few weeks or a few months but don’t want to deal with an apartment lease. Or, if someone is moving to the area and wants to stay somewhere temporarily while looking for a permanent residence, they could also rent them.
ScrapGuy, the buyers at Palladio are completely unlike those at Belvedere. They are much larger (and higher priced) units and many of the transactions show the unit number of the unit as the legal mailing address suggesting a much higher proportion of owner occupied units. There are also some rather significant names as owners; folks who have significant business interests in the local community. I’m sure many units have been purchased as second (or third or whatever) homes as well.
Interestingly, all of the penthouses (4) are sold as are most all of the units with the better views and floorplans. The remaining units have – for the most part – either compromised views or compromised floor plans. While many think that there is not an adequate market for high end downtown condos, I am not so sure. But, the product must have good floorplans with very good views.
Riverwalk is somewhere in between. They have some larger units, but many are smaller and were initially sold to at substantially lower prices per square foot.
I see that Montage is now tearing out the sidewalk around the old casino building – apparently getting ready to at least partially pour new sidewalks, gutters, etc. It will be nice to see the “shrink wrap” type covering come off in coming months and for the new exterior to be completed.
Final Note – in November 2007 I computed the buyer mix for all sales of a selected group of condo complexes for the period Jan 2004 thru early Nov 2007. Here are the percentages of total sales that had mailing addresses in the “Reno Metro Area” (defined as Northern NV plus Lake Tahoe and Truckee).
ARLINGTON TOWERS 88%
PALLADIO 82%
PARK TOWERS 70%
BELLA VISTA 69%
RIVERWALK 60%
BELVEDERE 10%
GRAND SIERRA 2%
Palladio ownership is MUCH DIFFERENT than Belvedere ownership.
Real estate has taken a big hit, but there is still a LOT going on downtown and I remain cautiously optimistic for a significant revitalization/rebirth of downtown Reno in the next few years.
Mike
GSR seems totally stalled, even a BK posting on CL this week (sham posting, but begs the question). Zero ink on Nikki Beach lately. No press releases about the country’s biggest water park for at least 6 months. No mention of the big A architect designed condo towers in the media or on the permit sites. Is GSR down for the count?
Reno Ignoramus
GSR hasn’t come within shouting distance of selling enough “condo-hotel” units to qualify for any further bank funding of the proposed expansions. The soto voce whispers around town are that it is wobbly. Still advertising in the SF Bay area papers for $49 a night rooms mid week. Not exactly a high end image.
As I recall, about 4-5 months ago the readers here at the RRB worked over the GSR pretty good. Could it be that once again, the savvy readers here were correct?