Response to Century Plaza (CP) Truth

6 Comments so far (Add 1 more)

1. CP Truth: Corrrection… you’ve had TEMPORARY Co’s since June, not permanent/final Co’s, which is the whole point. We received responses from the City stating that temporaries are not meant to be for occupancy; you need a final sign-off by all required inspectors (and a Final CO) before occupancy should occur. None of this had occurred when Century Plaza went on a spree of sending rude and demanding letters for close of escrow within 48 hours (are you kidding??) followed by cancellations of our contracts while claiming the dubious right to keep our deposits months ago. If some buyers were uniformed and closed anyway with only a temporary CO, then that’s their problem (not many did this, only 14 out of 145 units closed). Of course, we have already gone over all this, so what’s the point?

   Here’s another view of what happened: 1. Seller sends buyer assigned walkthrough and closing date for unit 2. Buyer determines there is no final CO on the unit, inspections haven’t been completed/finalized, the unit is not ready and is missing paid-for upgrades, elevators aren’t working, open window walls, who knows what else; that’s what final Co’s are for 3. Buyer doesn’t close within days of the walkthrough, which is when seller demanded closing regardless of what problems were identified in the walkthrough 4. 48 hours later, seller sends buyer certified letter cancelling their contract, along with claims of the right to now keep their deposits. Turns out they never bothered to put the deposits in an account anyway, they were so certain they would NEVER return anyone’s deposit for any reason.

   1. bystander on January 4th, 2009 at 8:06 pm

2. Will: I’ll do my best to answer some of your questions… the topics are pretty complex (and, in some cases, legal or proprietary), so I hope you understand a certain brevity in my answers.

   CERTIFICATES OF OCCUPANCY (C of O’s): We have them and we’ve had them since June! Definitive evidence is clear: buyers actually closed and moved into the building starting in early July. The City wouldn’t allow this to happen without a C of O. PhxBabe attempts to split hairs with the notion of a Temporary C of O (TC of O) vs. a final C of O. Mo Glancy, Deputy Director of Phoenix Development Services, however, answered this question in an email I posted on this site stating unequivocally residents could move in under a T C of O (moreover, again, residents actually did so). Now that the building no longer has a T C of O the hair splitting is moot but, really, considering people were closing and moving in I’m mystified why it ever gained traction to begin with. (I’ll email you the C of O).

   THE STATE OF THE MARKET: It sucks. But people are still buying. The last five closings in Century Plaza (all contracts written since August) had an average price/sf of $401.43. Is this price sustainable in the future? I have no idea. And neither does anyone else. I do believe Century Plaza competes well against similar communities. I also know that the entry barrier for this type of product is HUGE (i.e. the cost of construction is about $250/sf alone, not to mention land, architectural, engineering, other soft costs and, hopefully profit for all the effort) so the pricing is justified if only from a replacement cost standpoint. That said, I also recognize this market is volatile and there are a lot of good deals out there. The developer is continuing to assess market conditions and determine the best pricing strategy for Century Plaza but I still believe Century Plaza represents a good value given the finishes and amenities offered.

   M & I BANK LOAN: To the best of my knowledge (which is, admittedly, limited as a function of my role) the developer is not in monetary default but, rather, technical default. This is why there has been no foreclosure proceeding (not to say that can’t happen, it just isn’t imminent). To say the developer simply didn’t pay their loan and thus they are in default is very misleading (and the statements to that effect on this site were by posters who know far less than me and are false speculation). The bank put the receiver in place to give them ‘feet on the ground’ to for their continued funding of the project (their funding has been inconsistent at best over the last few months creating extreme difficulty for the developer to function). M & I’s main goal is to reduce their real estate exposure in Arizona which means they want out of this loan. In a different credit environment the developer would merely extend this loan and the bank would forebear the minor technical breach. Unfortunately in this environment this just won’t happen. The most likely outcome is a repositioning of the lending facility or refinance. The least likely, foreclosure. Either way funds will be available for the continued operation of the property (including funding the HOA) in order to protect this valuable asset. Not doing so would be illogical and simply won’t happen.

   CURRENT CONTRACT HOLDERS: By this I believe you mean the 28 who had contracts and didn’t close and are now suing the developer to get their earnest deposits back. These contracts were all terminated for non-performance. Here is a summary of what happened: 1. Seller asked these buyers to close, 2. These buyers asked for a 20% to 30% discount, 3. The seller declined (couldn’t do it, actually… $350k x 30% x 28 = a $3 million check the seller would have to write to close them because the bank would not reduce their release price… couldn’t be done), 4. The buyers refused to close, 5. The seller terminated their contracts for non-performance, 6. The buyers sued to get their earnest deposits back.

   HOA OPERATION: As stated above, no one will allow the HOA to collapse because to do so would compromise the value of the entire asset. The Bank won’t let it happen, the developer won’t let it happen, and neither will any new lender or new buyer/developer of the community (if it comes to that). All projections and pro formas I’ve seen (and created) include, by necessity, payment of the HOA shortfall (the difference between dues collected and the costs of operations). It will be included in any new loan funding equation. Is it a big number? Yes but in the global perspective it is also just a minor component of the overall community’s development. Financial problems with HOA’s (collapse) have usually occurred when many individual units in a community were sold to investors who never made HOA payments and then defaulted on their loans (thereby foreclosing out their dues owing). This just isn’t the case with Century Plaza. Bottom line, the HOA is not at risk.

   2. CP Truth on December 28th, 2008 at 1:50 pm

3. Mitch (and Will): I don’t have a problem with this blog. My frustration stems from anonymous posters who use it for their negative agenda by making false claims about Century Plaza. Unfortunately people are listening to them. Facts ARE important and those who deliberately misstate them (or simply ignore them) are, at best, not contributing positively to an understanding of what is real or, at worst, are propagating lies. I have a lot of respect for Will and I believe he has a heart to do the right thing. My “pandering” statement relates to a conversation we had where he indicated he would seek the truth and assist in an effort to promote it. Unfortunately he never called me to discuss the ‘lawsuit’ or our perspective on the matter before writing about it. Nothing more. And the notion that Will might have helped avoid it by bringing buyers and seller together is probably not very realistic and, in my opinion, only lends credibility to their false statements.

   In truth these buyers wanted just one thing: a 20% to 30% price discount. That’s it! All of their rhetoric about C of O’s, finished units, etc. would have quickly melted away had the developer given them such a price discount. With that understanding, doesn’t all of their wailing and gnashing of teeth seem a bit disingenuous? It does to me… I think it is shameful and I guess am willing to say so.

   I’m not sure why you would consider my attempts to set the record straight “highly unethical”. Don’t I have a right to let my voice be heard too? If my tone was overly harsh or if you feel I was too hard on some posters then for that I apologize. I am not a spiteful or vitriolic person by nature and I feel badly if I gave that impression. Readers here, such as yourself and “Potential Buyer” are viewing posts by “PhoenixBabe” and “bystander” and, to at least some degree, are believing them as factual. I think it is critical to hear the perspective of the developer to have a robust discussion. And I think it is important to let the truth be heard.

   3. CP Truth on December 28th, 2008 at 1:40 pm

4. “Potential Buyer”, all of the questions and scenarios you presented are possible, even the $150 psf (although hopefully not likely). Unfortunately, no one can predict what the future holds. That being said, I think it’s safe to say that you would be taking a huge gamble to purchase anything now at 2005-2006 prices; especially in Phoenix, and especially when the builder is already in default on their construction loan and has been forced into receivership. But if you love the building (it does have awesome views) and feel like risking it, then go for it.

   4. bystander on December 28th, 2008 at 11:26 am

5. I have no “horse in this race’, but as a potential buyer (without an agent) who has looked at Century Plaza this month (Dec 2008) and thought the building is impressive in many ways, I’m very concerned after reading this blog — and the ‘point-counterpoint’ between CP Truth and Will (neither of whom I’ve ever met, spoken to, or know). In particular, I’m very concerned about all of the mentioned problems, and especially about the potential viability of the entire project and the HOA, and the pricing for the current buyers. It makes one wonder: despite the apparent quality of the product, is it heading for a crash so that any normal buyer would be crazy to buy?

   Will the lender/receiver take over and conduct a ‘fire sale’? Will so many units fail to sell so that it becomes more of a rental building that a building where most buyers live there? Will the HOA be able to function without special assessments and added costs to unit owners? Will the unfinished units ever be finished in the near future?

   I am not saying that any of this will happen, and I really don’t know because I’m just an average potential buyer. But the uncertainties raised in the blog are enough to make anyone like me ask myself: Am I crazy to buy in this building?

   One last point about one of the prior comments: someone mentioned in another part of this blog that $150 psf is a “more reasonable price” for a condo in Midtown Phoenix — whereas Century Plaza is probably closer to $325-$350 psf even in Dec 2008. If anyone knows where one can get a good quality product for $150 psf in Midtown Phoenix, please post it here! If you look at other actual sales that are really happening at other new mid-town condos (from mid-rise like Tapestry to high rise) in the past 4-6 months, you’ll see that prices are in the range of at least $250 psf — and that is lower than pre-construction prices that the developers of these other new condo buildings were able to get a year or two ago. So for prices at Century Plaza to drop lower than $250 psf (or let’s say lower than $225 psf) would probably mean something like the Great Depression is truly going to happen. It’s bad, but not that bad, and unliikely to get that bad — and I can’t imagine Century Plaza or any similar nice quality building in Midtown Phoenix selling for anywhere near as low as $150 psf, or even below $225-250 psf.

   If anyone has insights– BASED ON FACTS — on any of this, especially on ‘the future’ of Century Plaza, please share your insights here. And if CP Truth has specific FACTS to answer the posts in this blog, it will help him from losing potential buyers like me. Thank you.

   5. Potential Buyer on December 27th, 2008 at 8:20 pm

6. Aside from the facts and alleged “pandering”, CP Truth needs to understand this is a blog and it is meant for this exact purpose, to let people know what is going on with market, projects, etc.. His position is obvious, working for Equus and it is unfortunate that he has poorly represented the project/developer on this blog. I really like Century Plaza and would love to live there, but this completely discourages me from even making an attempt to go into that building again. I have toured it and know it is nice, pretty close to the fluff CP Truth described. However, as a representative of the developer, this is highly unethical behavior. As frustrated as CP was, backlashing at some of the buyers and especially you Will who has brought hundreds of people to that building on tours is just wrong.

   6. Mitch on December 25th, 2008 at 7:59 pm