Boy 2009 was a chaotic year for urban condos in Phoenix, Tempe and Scottsdale! Here’s a snap shot of what we went through and where we are today.
Century Plaza, Phoenix - M&I Bank, the original construction lender has finally taken the property back from the developer. Work has commenced on 13th floor condos but we don’t know what. Word is that the lobby is about to have a face lift. Why? Heck if I know as I think the lobby and common areas are very nice. However, perhaps the bank believes a face lift is necessary to sell the remaining condos (or whatever the bank has planned to do with them). Nonetheless, we are hoping to see condos back on the market in 2010 at a much reduced price.
44 Monroe, Phoenix - Corus Bank, the original construction lender, was taken over by the Feds this year. The loan was lumped into a pool along with many other notes and ultimately purchased by Starwood. We have not heard yet what Starwood is planning to do with the asset but again we hope to see the condos back on the market for sale at greatly reduced prices.
Centerpoint, Tempe – Mortgages Ltd, the original construction lender AND Avenue Communities, the developer, both filed for bankruptcy earlier this year. At this point the entire project is moth-balled. My guess is that the developer will eventually settle with the lender, regain the high rise project, and put the condos on the market for sale at a greatly reduced price. It would not surprise me if only one of the buildings was offered for sale while the other one remained moth-balled until the market gets much better.
X Wine Lofts – Mortgages Ltd was the original construction lender for this project as well. We don’t expect the developer to save this asset but this is pure speculation. We will hopefully see some sort of resolution to this matter in 2010.
Biltmore Towers by Optima, Phoenix - In late 2009 we saw the developer close its on-site leasing office and stop doing business in the community. We assume that this was because it did not make financial sense to continue. All rentals in the building are now handled by individual real estate agents like us or by the landlord themselves. The Biltmore Tower HOA instituted a rule disallowing real estate agent lockboxes on the property that will eventually hurt property values/owners there. Rents have significantly dropped in the building. The average cost per foot for rents in the first two quarters of 2008 was $1.73 while the average for the last quarter of 2009 was $1.38 or more than 20%. Sales prices dropped as well but activity is up. In the first two quarters of 2008 there were only two sales with an average cost per foot of $407.13. In the last quarter of 2009 (historically the slowest period for Phoenix real estate sales) there were six condos sold at an average cost per foot of $245.65, a 39.5% drop. Is there any good news? Absolutely. the average cost per foot for the sixteen sales from April 1 to September 30, 2009 was much lower ($210.63 per square foot) so prices at Optima Biltmore Towers seem to be going up! We at We Know Urban Realty believe that the worst is behind us at Biltmore Towers. Now if only the HOA would find another solution to the ban on lock boxes…..
Camelview Village by Optima, Scottsdale - Interestingly enough we have seen broadly supported rent stability in Camelview Village although we are seeing downward pressure on prices. Rents today (Q4 2009) are at an average of $1.97 per foot in 40 condos. Rents in the first two quarters of 2008 were $1.95 per foot in 76 condos. Whad’ya know, rent appreciation! Sales prices have been another matter. In the first two quarters of 2008 condos sold for an average of $472 per square foot while in the last quarter of 2009 they sold for $355 per square foot or almost 25% less. With the number of short sales and foreclosures in that community we expect to see downward pressure on sales prices in 2010. However, the developer apparently believes that the Scottsdale condo market will recover and is putting its money where it’s mouth is. Optima has announced plans to built another 500 condos at the corner of 68th Street and Camelback with a projected commencement of construction date of mid 2011.
Edgewater at Hayden Ferry, Tempe - This 40 condo unit high rise seems to be in trouble. There are currently 15 condos for sale which constitutes 37% of the entire building! Eight of the fifteen listings advertise that the property is “pre-foreclosure” or “bank owned.” Additionally, the HOA does not meet the financial requirements necessary for lenders to make mortgages there. So, it will be very difficult for anyone to buy any of the fifteen units for sale. You can see how these two factors, the high number of distressed condos for sale and HOA financial problems, can domino.
Bridgeview at Hayden Ferry, Tempe - A company out of Colorado purchased the remaining unsold condos (60) from the developer of this 100 unit high rise and began selling them several months ago. Sales are rumored to be strong and the HOA appears to be financially sound. If this is all true then it will of course make it that much harder to sell condos at the neighboring building, Edgewater, as buyers will have a superior option at Bridgeview. The one thing that is confusing me is that the main sales guy, Bob Normile, recently quit. Bob is a very sharp guy and had been at the building since the beginning. He stuck to it even when there were zero sales to be had. I don’t understand why a guy would quit if the sales are in fact as good at Bridgeview as I am told. What real estate agent in today’s market quits if he’s getting sales. I don’t get it but I’m sure we’ll learn the truth before long.
4020 Lofts, Scottsdale – An investor bought the entire project and tried for a very short time to sell the lofts. Ultimately, he/she listed every loft for rent and was very successful in quickly filling them.
Third Avenue Lofts, Scottsdale - This was one of the first, if not the first, urban loft community built during the boom. It came to market early, condos resold during the boom at steeply higher prices, and then it crashed…hard. But it also began its recovery sooner than other urban developments. Rents are lower than early 2008, having dropped from $2.04 per square foot in Q’s 1 & 2 2008 to $1.74 in Q4 2009. Sales prices dropped too from $381 per square foot in Q’s 1 & 2 2008 to $281 in Q4 2009. However, Q4 prices are up over Q’s 2 & 3 2009 by almost ten percent. So, we at We Know Urban Realty believe that we have seen the worst at Third Avenue Lofts and that it is now recovering.
Well, there it is, the good, the bad and the ugly of urban living in Phoenix, Tempe and Scottsdale; at least part of it. As a whole we expect lending to be tight in 2010 but in many buildings we expect prices to slowly increase, a very welcome development for most. Also, with upward pressure on interest rates we expect buyers to “get off the fence” and aggressively purchasing properties in early 2010.
If you’re considering buying or renting a hip cool high rise or loft condo give us a call. There are some great deals out there and we know where they are.
