What I Was Being Secretive About…

A week ago or so I wrote a blog post telling prospective high rise condo buyers to hold off until further notice because I had big news forthcoming.  Well the news was that M & I Bank, the construction lender for Century Plaza, is selling the note.  Basically, M&I took the $70 some-odd million dollar loan and wrote it down to $40 some-odd million because Equus, the developer, couldn’t perform (or so I hear).  Then it turns out that Equus couldn’t perform even on the reduced loan amount so M&I decided to sell the now $40 million note to the highest bidder.  We suspect that the highest bidder will be in the $20 million-ish range.

So what right?

Well in our opinions this could potentially affect the value of high rise condos across the Valley.  Here’s why.  The investor who buys the discounted note will have a number of options available to him/her (OK let’s go with the feminine from here on out for the sake of convenience).  She could sit on all the condos and wait for the market to rise but that is unlikely.  She could sell the note for a profit, but that is also unlikely.  She could rent all the units out, which would probably put downward pressure on rents of other high rise condos etc…  She could sell the units at half of what they used to sell for which would put downward pressure on prices of other high rise condos.  Or she could come up with some other brilliant solution but in all cases because she bought at such a discount it is very likely that she will undercut the competition PERIOD.

Now, also know that the lender at Summit at Copper Square just sold “in bulk” and at a steep discount the remaining 54 high rise condos it had.  The asking price had been about $20M but they only got $7M.  So here we go again, 54 units that can be sold or rented at steep discounts.

Now what happens to 44 Monroe?  IF it doesn’t go under in some way, it will have to compete with 130 units at Century Plaza offered at steep discounts and 54 units at Summit at Copper Square offered at steep discounts.  Well, 44 Monroe is already in big trouble having closed only 15 condos (rumored but not substantiated by us) out of the 202 units in that building.  So, IF sales have been slow there is there any reason to believe that the events at Century Plaza and Summit at Copper Square won’t make matters even worse?

Obviously we have to see what the new owners of the note at Century Plaza do and what the new owner of the condos at Summit at Copper Square will do.  So everything I have said so far is just congecture.  But, if I was smart enough to have the  $20M to buy the note at Century Plaza I think I would discount the heck out of the condos and rent them or sell them ASAP.

Anyway, it was for these reasons that I encouraged potential buyer to pause.  Having said that, I still think that if you are looking to buy foreclosure properties you MIGHT be OK.  I say “might” because the answer really depends on your specific needs and objectives and where you are looking.  In some cases we do NOT recommend buying and in other cases we do recommend buying.  Call us if you want help.

And yes, I expect to get some negative comments on everything I just wrote, from the blog haters of the world.  But gang, if you are going to blast me, at least support it with numbers and not just emotional venom.  I really appreciate others’ opinions if they are thought out and reasonable.

About the author

Will Daly Will Daly has specialized in selling and leasing high rise condos and other urban property since 1997... before urban was "in" in Phoenix. His company, We Know Urban Realty has helped more urban buyers, sellers, renters and landlords than any other real estate office in Phoenix. Connect with . If you are ready to talk to an agent about the Urban Lifestyle Click Here

4 thoughts on “What I Was Being Secretive About…
ADT

You presented the facts of this situation very clearly. It is obvious that you have your finger on the high rise market. I am sure you clients are well advised.

Saungweb

Good Info.. and successful for you

Will Daly
Will Daly

Michael,

I wouldn’t expect the new Century Plaza team be up and running for several months. The auctione of the asset (Century Plaza High Rise) isn’t scheduled until late April. Only after that will time, money and energy will be invested in bringing the condominiums to market. I don’t think any of us will know when we “hit bottom” until after the fact. However, I think we will see urban condo prices along the light rail to drop to the sub-$200/sq ft range. Contact me directly if you have further questions or want our help.

Michael

Hi Will,

I’m interested in buying a property from the Tapestry on Central, but after reading your comments and talking with a friend who is a broker, I am really hesistant on pulling the trigger at the moment. How long do you think the wait will be until we see these developments dropping the prices to close to “rock bottom?”

Thanks,

Michael

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