A Lemming Effect
A report from the Denver Post in Colorado. “Resort-style outdoor pools with cabanas. Yoga studios with on-demand classes. Bicycle repair stations and dog spas. Movie theaters and game rooms. Amenities like these have all but come to be expected when a new apartment building opens in Denver. Some real estate experts warn that developers are creating a glut of luxury properties. ‘The market is overbuilt,’ said Jay Rollins, managing principal of JCR Capital, a Denver-based real estate private equity firm that’s active in the apartment realm. ‘The most important thing to remember in the luxury market is the deals that are coming out of the ground, those were born two years ago,’ he said. ‘It was something of a lemming effect. Denver got really hot nationally very quickly and then everyone jumped in and tried to buy every piece of land and build a luxury apartment property.’”
“Downtown apartment vacancy rates have practically doubled over the past few years, said Cary Bruteig, principal at Apartment Appraisers & Consultants in Denver. In the first quarter, vacancy was about 8 percent, up from 4.34 percent at the end of 2014. ‘We are building them a little faster than we can fill them up,’ Bruteig said.”
From The Oklahoman. “Brookwood Village, Oklahoma’s largest apartment complex, fetched a high price — $60.5 million, or $53,635 per unit — even with rent concessions peppering the Oklahoma City apartment market, signaling weakness. However, any weakness in the metro-area market is limited to pockets of oversupply that are beginning to stabilize, said Tim McKay, who handled the sale. Further, he said, federal incentives supporting workforce housing make it easier for multifamily investors to borrow money, and at easier terms, than for other kinds of investment property.”
“‘Brookwood’s location — and the fact that it is quality, workforce housing — drove investor demand, particularly with the opportunity for its value-add potential and upside in rents,’ McKay said.”
“Construction needs to pause in the especially active areas for the market to return to balance, said broker Mike Buhl of Norman-based Commercial Realty Resources Co., who tracks the south side especially closely. ‘While it comes down to what is being built and where it is being built, speculation remains that developers will keep building product and adding inventory,’ Buhl said. ‘The amount of new construction coming to the market without some kind of slowdown does seem a bit aggressive in my opinion.’”
The Associated Press. “State budget cuts are putting stress on public universities, some of which are resorting to renting out empty dorm rooms to earn cash amid tight financial circumstances. The University of Missouri, one of the biggest football schools in the state, will rent out dorms this fall for visitors who want to stay to see the team play. The starting rate for a ‘furnished two-bedroom suite with four single beds’ is $120 per night plus tax, according to the school’s website. The plea for extra cash at the University of Missouri comes amid declining enrollment and a decrease in finances.”
“Missouri is not the only state where universities are tightening their belts. In Illinois, where Moody’s downgraded the credit ratings of five public universities to junk level amid an ongoing two-year budget impasse, the University of Illinois at Chicago offers guest housing in residences ‘intended for short-term stays by those other than UIC students’ for rates as low as $100 per night for a one bedroom apartment.”
“Other universities in the state, like SIU Carbondale, will seek to capitalize on the solar eclipse weekend in August by making dorm rooms available for rent. SIU Carbondale says it is in a remarkably good location to witness the event.”
The Real Deal on Florida. “Former Miami Heat basketball player Glen Rice sold a downtown Miami condo for less than he paid just weeks before it was scheduled to be sold at a foreclosure auction. Rice sold a two-bedroom, 27th-floor unit at the Neo Vertika condominium that he owned with his ex-wife for $310,000. He purchased the condo in 2006 for $317,000. He had lowered the asking price almost monthly since listing the condo for sale about two years ago for $460,000.”
“GossipExtra reported M&T Bank began to foreclose on a $250,000 mortgage secured by Rice’s condo, claiming that he stopped making payments. In addition, the condo owners association at Neo Vertika claimed Rice stopped paying a monthly association fee of $675.50 more than two years ago. Rice has been in poor financial condition because he has lost a fortune on bad investments and went through a costly divorce from his ex-wife Cristy, a former star on the reality TV show ‘Real Housewives of Miami.’”
From Bloomberg on New York. “Another luxury condo at Manhattan’s One57 is scheduled for a foreclosure auction — the second time in a month that a property seizure is being sought at the Billionaires’ Row tower following a mortgage default. And it might be the biggest in New York City residential history. The owner of the condo, a shell company listed in public records as One57 79 Inc., bought the 6,240-square-foot residence in December 2014 for $50.9 million, according to New York City records.”
“In September 2015, the company took out a $35.3 million mortgage from lender Banque Havilland SA, based in Luxembourg. The full payment of the loan was due one year later, according to court documents filed in connection with the foreclosure. The borrower failed to repay, and now Banque Havilland is forcing a sale to recoup the funds, plus interest.”
“Built by Extell Development Co., One57 has stood as a symbol of Manhattan’s luxury-development boom — and eventual slowdown. The tower, which broke ground in 2009, drew investors willing to pay large sums for lavish residences they rarely live in, and inspired other developers to build similar offerings, creating an effective ‘Billionaires’ Row’ along West 57th Street.”
“Last month, a June 14 auction was scheduled for a 56th-floor apartment at the same tower. The condo was purchased in July 2015 for $21.4 million. Public records have yet to reveal any transfer of ownership for that property. ‘This shows that too much leverage is probably not wise,’ Anna LaPorte, an Extell spokeswoman, said of the most recent default.”
