It seems like the Montage and downtown issues are what everyone wants to talk about, so I’ll give them their own thread. Rumors certainly have been swirling lately. At least 2 readers of this blog have units reserved at the Montage – maybe they could give us the "facts" as they know them – and many more readers are plugged into the industry. I have absolutely no inside information, but will share what I have found in the public records.
When a project starts going bad financially, the contractors, subcontractors, suppliers and consultants are usually the first to know – they aren’t getting paid and start filing liens. There are NO significant liens on the property, and the industry scuttlebutt is that everyone are happy campers.
The $143,164,000 construction loan for the project (Recorder Document 3478066 21 December 2006) has a maturity date of 15 December 2008. This is probably the source of the "going back to Corus Bank on the 15th" rumor. The recorded deed of trust includes references to unrecorded documents that allow extensions of the loan up to 15 May 2009. Could the rumor be true? Yes, but I highly doubt it.
A buyer can’t close on a unit until it has received a Certificate of Occupancy (CO) from the City. Although there are some out-standing floors still under permit, the majority of the project had received COs by 20 November 2008. The Montage would not have been able to issue their enforceable 30 Day Closure Notifications to buyers until they received the COs, and closings could not begin until 20 December at the earliest. Closings are phased, since everyone can’t move in at once.
$143,164,000 divided by 370 units = $386,930 per unit. The project pro forma would also have included allowances for carrying costs, construction contingencies, sales and marketing costs, and of course profit. If you assume 30% for these costs, it would put the expected average unit sale price at a scooch over $500,000.
I really like the Montage, and "Mikey hates everything". Everything has been built to first class standards, and I admire Fernando Leal’s vision and commitment to downtown Reno. It will be a big blow to all of us if the project is not successful.
On another but related note, DowntownMakeoverDude has a great article on the Reno City Council prioritizing the 73 projects they would like to be part of the (still theoretical) Main Street Stimulus Package. Make sure to check out the list and leave comments, both there and here and with your councilperson.
Waldo
You can buy some pretty darn nice houses, some with just as nice finishing as the Montage, in Reno now for well under $200 sq. ft. Without the $500/mo dues. Even with these new prices, the Montage remains very rich on a per sq. ft. basis.
And there is still absolutely no assurance that when all the dust has cleared in 6 months or so, and only 25% of the units have sold, that Corus won’t conclude that it does not want to be selling condos in Reno for the next many years and go to auction, or implement significantly reduced pricing on the remaining 75% of units so it can get out of Dodge and back to Chicago.
Triplicate
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.
DownButNotOut
Nice points to both of the above posters. I honestly didn’t mean to put the Caughlin Rd location down, only to point out the difference in location that the downtown district offers. But thanks for keeping it in perspective.
Trip, I’m actually impressed you know so much of downtown as disgusting as it is. If it hadn’t been for the many new interesting people I met while I was out, I would never have known this. I will make sure I consider moving to your area before buying downtown, as you seem like a good neighbor. Do they have CCR’s there?
DowntownMakeoverDude
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.
Robin
The beauty of Reno is you can have both; a quiet suburban home w/garage, backyard & BBQ but yet be downtown w/a 5 minute drive & free pkg at the casinos. So no need to pay the premium prices for the condo’s unless you want the condo lifestyle, views &/or the amenities. Even with the convenience of the downtown activities one would likely still be driving to get groceries, etc so I doubt saving on auto expenses is a valid reason to live downtown. San Francisco, Yes, but not Reno!
DownButNotOut
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.
Triplicate
Down, Cr has stringent CCRs and a board that can sometimes be stringent in enforcement. That is probably why there are no plyboarded up former liquor stores like there is right across the street from the Montage, no burnt out decomposing former casinos like there is adjacent to the Montage, and nothing at all like the view of the Kings Inn in CR. However, it is getting more and more difficult to pay more than $292 a sq. ft. for a house in CR. It is possible, but you’d have to settle for something in the neighborhood of 4000 sq ft or more on a large lot. I would say it would be virtually impossible to find something about 700 sq. ft. at $250 per ft. But then, those views of the Kings Inn are special, I understand.
Robin
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.
DowntownMakeoverDude
Robin I have to disagree with you on redevelopment being set back 10 years. All projects virtually stopping? $50,000,000 baseball stadium being built, ReTRAC Cover Phase 1 just finished, Phase 2 going out to bid soon, baseball stadium retail district soon to follow, the whitewater park is going to be extended late this year (already has funding source), they just opened West Street Market, and phase III of its contstruction starts soon (already funded), a huge endeavor, the 10 North Virginia developer, John Pappas, just finished redesigning his building and plans to move forward with a popular Tahoe restaurant in tow, the city is working with the County to do redevelop the property just south of the Courthouse that is currently a parking lot, the State Street Center is actively under construction, the large 5-block Tessera project in northeast downtown is moving forward, the Hyatt Sommerfield across from the ballpark is in final permit process, contrary to popular opinion the Fitz WILL be remodelled and opened, I happen to know a lot about the finalized plans. The Post Office was purchased by the City recently for redevelopment once the post office completes its relocation, and a river plaza which already has funding reserved will be constructed this year once the parking lot is relocated, and a laundry list of other proposed downtown projects were submitted to Congress for Obama’s upcoming theoretical Main Street Stimulus package and if even a few of those projects are approved (they all meet the criteria) it will have a profound impact on Reno and downtown.
But all the redevelopment projects I just mentioend won’t do any good if we can’t fix the larger picture as well.
We need to step back from this quabbling over what parts of Reno are better or worse, and realize that as a whole, this city is in big big trouble. It’s in the middle of a huge identity crisis, it doesn’t know how to market itself to tourists anymore (America’s Adventure Place ain’t workin’), gaming was on the decline long before the economy tanked, it’s University is about to get a 30% funding cut, setting it back 30 years, we aren’t doing anything as a city to keep UNR students in town once they graduate, RTC is cutting bus service left and right when ridership is at all-time high, etc etc etc.
It won’t matter how many redevelopment projects are going on, if this city can’t right itself, find an identity to market itself, and follow a new path, it won’t matter if you are in precious and heavenly Caughlin Ranch or ‘scummy’ downtown. RSCVA and EDawn need complete overhauls in how they lure businesses and tourists here. A downtown can only be as healthy as the city it resides in, and I’m very worried about the larger picture. All the cheerleading in the world can’t fix the larger picture 🙁
BanteringBear
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.
Grand Wazoo
I have to agree with BB.
Phil
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.
Corina
DMDude is not really a person. He is a robocall. As soon as anybody says anything that even so much as suggests that downtown Reno is not on track to have the most fabulous downtown core in all of the western United States, he just goes into his ritualistic incantation about downtown redevelopment.
DownButNotOut
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.
DowntownMakeoverDude
Oh come on people enough with insulting me. I have always admitted downtown’s weaknesses and drawbacks. ALWAYS. But I also point out the positives which is all I did above.
BB, I completely understand the connection between the current credit squeeze and developments all over the country failing. You don’t read my site much, because you missed the very popular post I did about the lack of logic in developers seeking STAR Bonds and TIFs in a market like the one we’re in, or my post on the credit market halting most of the private redeveopment projects downtown, or my post about affordable housing downtown being a necessaity for it to work. I am not stupid or ignorant.
How many times do I have to say the reason I do what I do is because downtown Reno seriously needs improvement? If downtown was perfect then why would I have a blog about redeveloping and improving downtown? Give me a break. None of you even commented on what I said about Reno being in big big trouble as a city…conveniently skipped over that to focus on my comments on downtown. Whatever.
The economy, the credit market, and housing mess won’t stay like this forever. Maybe I happen to see past the next 5 years because I plan on living in Reno a verrry long time. Everything runs in cycles, including downtown districts.
I’ve never insulted anyone on this blog, ever. Not even Derrick. or Bantering Bear, or Corina, even when she deserves it for calling me a robocall. You guys are messed up for taking it to that level. So cut the insults because guess what, I am not goin’ anywhere.
BanteringBear
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.
DownButNotOut
BB wrote about DMD:
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. -and-
Quite apparently, he doesn’t understand the connection between the current credit squeeze, and stalled or failed development.
Then he wrote;
I’ve said it before, that I admire what you’re doing, and that Reno needs more individuals like yourself
Taken out of context, certainly. Trying to figure out what you really mean…priceless.
DowntownMakeoverDude
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.
BanteringBear
I don’t think I could be any more clear, DownButNotOut. If you are wondering what I meant when I said I “admire” what Mike’s doing, it was regarding his commitment and dedication to the revitalization of downtown Reno.
If that was already clear to you, and you’re merely trying to incite a flame war with me, let me know. It’s been a while, but I think I could open up a can of hot air on your weak @ss.
DownButNotOut
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.
CorusFollower
I was at that meeting as well DowntownMakeoverDude, is it a safe assumption you were the one with the laptop? I think I recogized you from your dog walk pictures.
When you say “you are going to flip”, you mean how it was explained at the meeting that Corus Bank as the new owner of Montage, will be one of the recipients of a STAR Bond applied to the Montage, Fitzgeralds and the ReTRAC Retail phase to the tune of $246,000,000 if the STAR Bond passes? I think I detected a look of disgust on your face as all this went down? You are not a fan of STAR Bonds. I read your piece on what it did to Kansas City. Did you notice that L3 Development was no where to be seen, didn’t even attend the meeting even though the other STAR Bond applicant was there to describe his project. That’s right folks, L3 Development is applying for up to $246,000,000 in STAR Bonds to finish the Montage’s retail sections, to renovate the Fitzgeralds, and for the retail on the new cover over the tracks. It was all laid out in gory detail at this afternoon’s meeting.
Reno Ignoramus
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.
DowntownMakeoverDude
To Corus Follower, yes, that was me. Yes, I was extremely frustrated with the entire conversation. Here we had the Redevelopment Agency asking the CAC to ‘conceptually’ approve two major STAR Bond projects and yet only half the CAC even knew what a STAR Bond is. And to learn these STAR Bond proposals go to City Finance Committee on Jan 20? So soon and rushed…These bonds are SO experimental….only ONE OTHER STATE in this country has instituted them, for a poor choice in redevelopment projects (A NASCAR track that can only be used part time for official NASCAR events).
They are so new (‘invented’ in 2005) no one has had a chance to see how the bonds will affect schools by redirecting sales tax money normally slated for schools to go toward paying back the bonds. Proponents say that a STAR Bond creates tax revenue that wasn’t there previously so how could it possibly take tax money away from schools, but I am suspicious nonetheless.
Thanks for the kind words Reno Ig.
TheColdReality
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.
Tom
R.I., I have some of those old memories…as a teenager, I remember the crowds filling Virginia Street, trying to sneak in see to the Louis Prima and Keely Smith show at Harrah’s Club, having dinner with my parents at the Mapes Sky Room, that big mural with waterfall and wagon train on the side of Harold’s Club. I would like to see downtown thrive again, but probably it needs some new economic energy; I don’t think that gaming will bring it back, there are just too many other choices now for the gambling visitors.
renotopdog
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 Harrington
How do I get my deposit back legally, any ideas?
Renotopdog
Jeff–stay toned to this blog and the wordpress blog and I will be sharing my thoughts on how.
Chuck7464
A friend of mine has a deposit on a Montage unit and she received a call from them on Jan. 30, 2009 that the 30 day notices to close were being mailed. She requested the newest revisions to the CCR’s and the HOA but nothing has been sent. I’m wondering about a class action? Anyone with an idea? Chuck7464
smarten
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
The Montage seller, 255 North Sierra Street LLC, assigned it’s security interest as Declarant to Corus Bank in 5/06 and 12/06. Corus Bank in 12/08 assigned its security interest to Montage Marketing Corporation. The seller provided Montage Marketing with a Deed in Lieu of Foreclosure on 12/30/08.
This is the basis for Montage Marketing Corporation stating they are the owner and have all the previous rights of the original seller.
DownButNotOut
Renotopdog – I understood there was no language to assign. Where are you getting his information?
Renotopdog
DownButNotOut–See section 13 of your purchase contract.
ljk
A copy of the merged CC&Rs (a redlined version) can now be downloaded at:
http://www.softtax.com/Montage.pdf
enjoy
LJK
Renotopdog
It has surfaced that not all Montage purchase contracts may be the same. Differences between when you signed may determine what your Montage contract contains.
Raymond
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?
Renotopdog
FCIC Towers–has an interesting ring to it. I vote yes.
Martin
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”.
Renotopdog
What Corus Bank insiders really did.
Monday, February 2, 2009
Net Inside Selling
Today I sold CORS at 80 cents.
What went wrong? There are a couple of lessons I learned here. I could write an entire post about leverage. In this post I’ll say ‘only companies with leverage go bankrupt.’ and I’ll leave the leverage lesson for another post. (Perhaps, when I talk about my purchase of Canwest)
When I was looking at regional banks for investments, I screened for companies with compelling valution, decent tier 1 capital, and inside ownership with recent buying. One of the banks I found and invested in was Corus Bankshares, Inc. You can see from my other posts that it had a cheap valuation and I thought that it had a margin of safety with the underlying assets of its loans. (Which has yet to be determined)
In July of 2007, prior to when I got involved with this bank, they issued a special dividend of $1 per share. In general, I view a special dividend as a positive event, returning capital to investors when there is no better use for it. Of course, now they are being criticized for that when they could use that capital to help weather the storm.
The icing on the cake for me was that the Glickman family owned 50% of the bank and had just picked up over $1 million of shares. They had already cut the dividend, so I didn’t have to worry about that upcoming event.
Fast forward to post Q4 2008 and the bank is having catastrophic failures with much of its loan portfolio and FDIC, I’m sure, is closely monitoring. (I personally take it as a bad sign that the word ‘FDIC’ is in a bank’s quarterly statements) They may make it. If they do it will be with some dilution and only by the skin of their teeth. But at this point, it looks grim.
How could this happen? How could a bank with lots of inside ownership and, more importantly, recent inside pucrchases fail like this. Were the Glickmans really blindsided? If I were in their position and I saw a hint of this coming, I might have sold a few shares and create a cushsion.
Actually, thats exactly what they did. They did it without anyone noticing.
With 20/20 it wasn’t particularly prudent to return capital to shareholders on the eve of the storm. Especially when you are leveraged 11 times to 1 and your provisions are arguably lower than regular bank standards. However, at the time I saw it as a positive sign that the Bank thought that it was adequately capitalized.
But it was a fantastic way for the Glickmans to ‘sell’ some of their equity and go unnoticed by my (and anyone else’s) inside selling screens.
The special dividend only equated to 5.5% of the market capital at the time. If they had sold the equivalent amount of stock, the market would not have reacted favorably and driven down the price . The special dividend netted the familiy $25 million. A year later they purchased shares for $1 million.
By my counting, that is net inside selling.
Castillo
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?
DownButNotOut
It’s amazing to me the lack of communication the Montage is putting forward with all these rumors, which many may very well be true. I would think if this project was on the up and up, statements would be made publicly (or at least to the buyers) putting forth some type of assurance that this project is actually solvent at this point. My guess is they want to draw a line in the sand, in this case March 1st, so they can say those that don’t feel comfortable closing (everyone?) are in default and can begin cashing in the deposits, which must total in the $7,000,000 range. Chump change for Corus, but it’ll buy them a few more days of solvency I guess.
The whole thing may be legal, but it’s ain’t right.
Mikey
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
Scully
Any people who signed a contract with the Montage who now are seeking a return of their deposit might be well advised to deliver a letter to the title/escrow company, return receipt requested, advising the company that the appropriate disposition of the funds is in dispute, and advising the compnay to retain the funds in escrow until further receipt of a letter from the buyer or a court order.
I am not a Montage buyer, and I am not a lawyer, and my suggestion is just that: a suggestion. I in no way purport to be giving legal advice.
Perry
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.
Chuck7464
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Doubletree.Hilton.com
on November 1, 2007.
With the purchase and transfer of the property at 12:01 a.m. Thursday, Robert A. Cashell, Jr., the sole principal of RAC II LLC, will be the new general manager, overseeing the operations of the 351-room hotel and casino. Cashell, who was born and raised in Reno, is also a partner in Cashell Enterprises and runs several other gaming properties in northern Nevada.
L3 Development, whose principals are Fernando Leal and Donald R. Wilson Jr., is converting the former Golden Phoenix Hotel and Casino neighboring Fitzgeralds into The Montage Residences, a 380-unit luxury condominium and commercial development.
“This team has exhibited a tremendous commitment to downtown Reno and to the community as a whole,” Cashell said. “There is incredible excitement surrounding downtown and its future, and we're planning to position Fitzgeralds as one of the leaders in the renaissance of downtown Reno.”
The new ownership team plans about $3 million worth of immediate improvements to the property, including the installation of new elevators, upgrading plumbing systems and refurbishing the 850-space parking garage. While these changes occur, customers can continue to expect premier customer service, exciting gaming and wonderful dining.
With an eye to the future, the new owners are in the process of developing a master plan for the property that will add Fitzgeralds to the growing list of reasons for residents and tourists to visit downtown Reno.
“There is nothing more important for the future of Reno than the rejuvenation of downtown,” said Leal, whose investment in the Montage totals more than $160 million. “There is no limit to how great downtown Reno can be, and Fitzgeralds is a downtown fixture that will play a critical role in how the city's urban core changes in the coming years.”
jeff
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.
Renotopdog
Jeff–i am working with other Montage buyers (like myself) who do not want to close either. Send me an email at renotopdog@gmail.com with you contact details and I will email you back with mine and put you into our group for our initial meeting–time to be determined.
Any other Montage buyers who are not interested in closing can also contact me.
TOW
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.
CommercialLender
RenoTopDog,
Can you legally induce others to break a contract? You might want to be careful.
TOW,
I’ve heard similar things. It’ll be interesting to see actually how many buyers show up at the closing table with mortgages (or at all).
CommercialLender
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.