Back in April, Ticor Title, who holds the Montage escrow accounts, filed an "Interpleader" lawsuit against Montage Marketing Corporation (Corus Bank). Deposit holders wanted their money back, Montage didn’t want to give it back, so Ticor was stuck in the middle. The Docket Report is pretty lengthy. and includes a $1.2M trust disbersment on 29 July.2009 that looks interesting. Can any of you legal types make sense of what is happening witht the case?
Then on Friday, Lee Hotchkins, Esq., who represents most of the deposit holders who have sued for their deposits back, filed this Notice of Lis Pendens (lawsuit pending). For the first time. some of the allegations against the Montage are spelled out. Some seem pretty meaty, , some expected by anyone who follows the building, and others seems like throwing pasta against the wall to see what sticks, but I’m certainly no attorney and can’t judge the claims.
Any of you legal eagles or interested parties care to comment and enlighten the blog about what is going on under the radar here? Everything downtown is in suspended animation until the New Montage shows their hand and starts talking price.
DownButNotOut
Sorry John N. you got dragged into this. I thought your insight was informative.
Carney
This is a real estate blog, isn’t it? Enough with the lawyer stuff, please? What does the difference between the American system of justice and the English system have to do with real estate? The difference between small claims court and justice court is related to real estate…..how?
Time for a new thread Mike? Guy? JoAnn? (I guess JoAnn is no longer connected to the blog.)
Noze4thenwz
I’d like to hear Mike and Guy’s take on the Toxic House article in the Reno News and Review…
Reno Ignoramus
Ok, I’ll try to get the topic back to real estate. As many here know, I’ve been keeping an informal watch on the Smithridge condos since the very first piece of real estate I ever bought when I was a kid was a Smithridge condo in 1977. I paid $42,500 in 1977.
Today a Smithridge condo hit the MLS at $39,000. Yep, that’s $3,500 less than I paid 32 years ago. That’s a 8% decline in value in nominal dollars over 32 years. After inflation, who knows how big the decline is.
Pretty amazing. How low will they go?
Sully
You probably don’t want to know the number with inflation, but here goes:
42500 – 1977 is about
151463 in 2009
Put another way the current asking price of 39K would have been 10943 in 1977.
Jennifer
Sully, that’s very interesting. So after 32 years, a Smithridge condo bought in 1977 for $42.5K should be worth about $152K today?
That means the $39K asking price represents about a 75% decline in inflation-adjusted value?
So if a person had put $42.5K in a bank account that earned exactly the rate of inflation, that account would be worth $152K today?
I guess not all real estate keep pace with inflation, huh?
Reno Ignoramus
Thanks Sully for the calculation. Very insightful.
Noze, I believe that article on the Toxic house was discussed on the This Week @ the Courthouse thread below. I think Mike offered a comment about it, along with some other people.
tired of waiting
kids tend to make foolish mistakes when it comes to buying big ticket items, especially housing.
so it’s not really all that surprising that those smithridge dumpholes are selling for less than they were 32 years ago. They weren’t desirable 32 years ago, and they aren’t today..
Location location.
Walter
It is not surprising that properties are selling for less today than they did 32 years ago?
That might be one of the most foolish things ever said on this blog.
The fact that ANYTHING is selling for less today than it did 32 years ago, in nominal dollars, is extraordinary. In fact, what else is selling today for less than it did 32 years ago? Automobiles? Groceries? Health care? Running shoes?
Anything?
Dale
In 1977:
Average annual income……$15,000
Average monthly rent……..$240.00
Gallon of gas……………65 cents
BMW320i…………………%7,990
The fact that a Smithridge condo can be bought today for less than in 1977 is absolutley extraordinary. It is evidence of the huge overcorrection of the bubble bursting at the bottom end of the market.
BanteringBear
Derrick is only half correct in his assessment of the Smithridge Condo’s. It’s true, they are in a very undesirable location (gangbanger central), but in his attempt to insult RI he foolishly assumed the area was always just as poor. The fact is, he wasn’t even born when RI purchased the condo, and he knows nothing about Reno real estate (he’s a braindead kid from upstate NY who was screaming the median would “NEVER” fall below $250k, and when it did he changed his name). Those condos weren’t always a terrible place to live. Times change, and they are no longer desirable to the same demographic. Their value will never again reach it’s peak in inflation adjusted dollars.
Reno Ignoramus
That’s true, BB, Smithridge was not a bad place to live at all in 1977. Within a few doors of my unit there were a couple of young lawyers starting out, a couple of UNR professors, and a very kind minister who did not reside at his church.
Things do indeed change. Back then, there was an open field to the immediate south of the condos, and I used to take my dog walking there. It wasn’t a bad place at all.
Old Parnell
After having lived in the Smithridge condo’s previous and now having a few rental units of my own, I would move back in a heartbeat if the situation presented itself. Sure, the demographic is mostly lower income – both caucasian and hispanic, but I’m just as comfortable hanging with Joe the custodian as Jose the auto mechanic. The elementary school (Smithridge) is overflowing with federal dollars, so my children will be attending it for a few years and getting an excellent education. The middle and high school(Pine,Galena) is in the same zone as it is for my friends, the Arrowcreekers up the hill. There are a few shootings and some tagging, as there would be in say, Sparks or Downtown Reno. And I would also kill to have the Smithridge landscaping for my house.
So, looking through the MLS, if I have an extra 40K to spend on a 2-bed condo, I would still choose Smithridge over anything else available. At $40 a square or $800/month in rent, I feel like I would be getting a decent deal. If anyone can come up with a better deal for $40K, please throw out a property.
Old Parnell
FarmerJohn
I tend to agree with you OP. Once I get used to the idea that I can buy a condo for less than a luxury automobile, I would say Smithridge sort of stands out in that price range now that prices there have so overcorrected. Yes, it is not the same population as when RI was there 32 years ago, but if we are going to talk about safety, then I’ll take Smithridge over the area within a couple blocks radius of the Montage.
Also, I think the appearance of Smithridge is darn near as good today as it was 32 years ago. They do a fine job with the exterior and grounds there.
tired of waiting
any idea what the HOA fees are at smithridge?
tired of waiting
“he’s a braindead kid from upstate NY”
considering I’m not even 30 years old yet,and I have a decent sized portfolio, contribute monthly to an IRA. I purchased a NEW car last year (cash)… own 2 properties BOTH paid off (2002,2009)
Not too bad for a brain dead, most would agree I’m sure.
Old Parnell
TOW,
Depending on the association (there are 4), they range from $150-200/month. The $150/mth actually has the best kept units and grounds. The HOA bordering Neil Rd, recently raised the fees $50/month to build some pretty effective gates and spleen piercing steel fencing. IMO, the best $50 money could buy, the change has been dramatic.
Of all the HOA condo’s outhere, $150/month is probably the minimum you could expect to pay. Some of the condo prices look tempting on the surface, but after further review, the HOA fees can very quickly eat into your investment.
Does anyone know what monthly commitment the GSR charges you? I see some of those units are hitting the sub $30K level. A wise commentator on here once calculated that even if the GSR condo’s were given away, it would still be impossible to cash flow.
BTW, coming from an old man, let’s not get caught up in personal attacks against each other and who owns more than who. My tenants in SR who struggle from paycheck to paycheck are just as happy as my neighbors in Galena with their toys and money. I might even suggest they are even happier at times. (More money, more shrink bills has been my observation).
Old Parnell
Old Parnell
Out of curiosity, What were the GSR units going for at the height of the market?? I see one listed this morning for $25K.
Sully
I did a search a couple of years ago, it seems to me they were going for 150 – 300K depending on room size. I can’t remember where I found the info and am not able to find it again.
Reno Ignoramus
“More money more shrink bills has been my observation.”
Another entry onto the RRB list of classic comments.
Old Parnell, I hope you stick around and share some of your wisdom with us from time to time.
smarten
Well Derrick, you state you “own 2 properties BOTH paid off (2002,2009).”
Weren’t you the one who chastised me for making my purchase four months ago? Didn’t you predict I would be down 30% by now?
Well now you reveal you purchased an investment property this year notwithstanding your predictions about the market [at least insofar as others are concerned].
I’d like you to share your reasoning/details and why you were the shrewd one while the rest of us were not. How about it Derrick?
FutureRenoHomebuyer
Old Parnell,
Regarding Smithridge, my search indicates that the high school for the area is Wooster, not Galena. Notwithstanding Wooster’s storied history of state football championships, I understand Galena has a much better academic reputation. Perhaps not a big issue for someone looking for an investment property, but something to consider nonetheless.
I’m with RI, looking forward to more of your sage postings.
Unimportant
When you finally grow up, Derrick, you’ll realize that those who brag the most and the loudest about how rich they are, aren’t.
tired of waiting
unimportant, I hear tissues are on sale at costco! Maybe you should buy a few cases?
$150/month seems a bit high for smithridge IMO. The grounds do seem to be taken care of fairly well. I wonder what the property taxes are on an average unit?
Old Parnell
FRHB,
Good point – All listings for Smithridge do suggest the schools are zoned Smithridge, Pine & Galena.
The WCSD School Zoning Search tool also supports this.
http://www.washoe.k12.nv.us/schools/school-zoning-search
Type in your street name and away you go.
FYI, A lot of kids zoned for Galena do get a variance to attend Wooster’s IB program, as for football not so strong nowadays.
TOW,
Relative to other complexes, I believe it to be fair, remember HOA dues also cover high ticket items like roofs, siding, driveways etc. Tearing up and/or resurfacing an internal driveway/road can easily run into six figures. Unlike a government entity, HOA’s are extremely limited when borrowing for capital improvments, so you usually want to build up some serious reserves in your HOA account.
Property taxes run about $550-750 per year.
Old Parnell
billddrummer
to OP,
Have to agree with you about HOA dues. The biggest problem is when you have a slow-selling project (say Montage) and a big ticket expense comes along to wipe out your reserves (like water damage from heavy rains). Then you have just a few owners becoming responsible for the entire bill–if the developer doesn’t step in.
Hypothetical, of course.
DownButNotOut
Since it’s slow – OP, what are the places renting for that sell for 40K? And any projection as to what direction they’re going?
Old Parnell
DBNO,
In this very depressed rental market, you’ll be lucky to get $750/month for a clean updated unit. Anything over $800 will sit for several months, so do the math and eat the $50. The 40K units will usually need a minimum of 7-10K in materials and 50 hours of your own sweat equity to bring them up to rentable condition.
If your question is, what would a beaten up $40K unit rent for with zero time and materials invested, I honestly do not know as I have no experience nor desire to play in that market.
I do not see how the rental market could get any more depressed at this stage. Ironically, for $50K the renters would be better off buying right now, but I would estimate in this (normal) lending environment, 75% of renters are disqualified on at least one criteria when applying for a loan. Give Reno at least a year to stabilize overall, then we’ll see some incremental growth, but nothing to get too excited about.
Old Parnell
MikeZ
RE: “In fact, what else is selling today for less than it did 32 years ago? Anything?”
Computers, calculators, radios, color televisions.
skeptical
For the Montage followers out there, I saw a short interview on Bloomberg yesterday with Starwood CEO Barry Sternlicht. Most followers of this blog know that Starwood partnered with the FDIC to take a controlling interest in Corus Bank in Oct. An article on the interview is available here:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=at.7ZU35NO4A
When asked what he intends to do with Corus assets, Sternlicht stated that Starwood can afford to wait up to 4 years if necessary until rents and prices come back in the real estate market. He happily noted the consortium that now owns Corus assets has a 0% loan from the FDIC for a few billion, so the cost of holding the properties is minimal. So, all you vultures out there just waiting to pounce upon that $150k penthouse Montage apartment shouldn’t hold your breath.
I think this is a negative for Reno, as it seems to ensure that the Montage will stay nearly empty for the foreseeable future, awaiting that mythical day when downtown Reno apartment prices will skyrocket back. I wonder if I’ll still be around to see that happen…
From the article:
“In October, Starwood led a group of investors that bought the assets of Corus Bankshares Inc., the Chicago lender seized by the FDIC after its portfolio of construction loans soured. Starwood’s $554 million offer beat out seven other bidders.
The Corus portfolio is worth $4.5 billion and the government is the major shareholder, Sternlicht said. He estimated that it will take four years for taxpayers to see returns on their share of the investment.
“You’ll do really well,” the CEO said. ”
OBTW, is this a microcosm of what is happening with the much discussed shadow inventory of distressed properties out there? Big banks sitting on real estate until the market comes back, due to historically low holding costs? Wouldn’t bet against it.
Irv
Now the mavins in Washington want to take the unused bail-out funds and instead of restoring money to the Treasury, or paying-down debt, they want to give it away in yet another new stimulus plan. Also, they want now to give over a billion dollars to native Americans as compensation for past money management errors regarding native Americans’ funds.
Can the printing presses run any faster, to print all the money needed for these brilliant ideas?
Do you think these proposals reflect just desperation, throwing money at the economy? Or is someone trying to buy-up a voting block? Either way, it doesn’t say much to me for the wisdom of our Washington leadership.
The whole national economic situation
is becoming worse and worse. I don’t see any true housing value recovery forthcoming, only future inflation, which will cause housing prices to increase in terms of the number of devalued dollars it will take to buy anything.
CommercialLender
Skeptical,
Yes, this is a reason for the ‘missing’ foreclosures. Banks are holding off for a variety of reasons, but mostly in my book kicking the can down the road to see what happens next year. This explains allowing NOD’d borrowers to stay in place, foreclosed but vacant and unlisted homes in the ‘hoods, and TARP money going unused (shoring up their balance sheets.)
TOW,
With continued stories of the Fed and FDIC propping up the market like this, do you still believe this to be ‘stable’?