A report from The Real Deal on New York. “It was one of many signs last year that a growing number of New York City condo developers are on borrowed time. Bank OZK had committed $108 million to finance a 92-unit condo building at 615 10th Avenue back in 2015. But last April, with the project stalled, the construction lender dialed that back by $20 million, forcing the developer to grab a lifeline from mezzanine lender Mack Real Estate Credit Strategies.”
“The troubles brewing at that Hell’s Kitchen project are playing out across Manhattan as condo developers run out of extensions on their construction loans. With billions of dollars in debt coming due over the next few years, and sales in the doldrums for the foreseeable future, developers are under increasing pressure from lenders to slash prices or convert to rentals to generate cash. ‘Lenders are becoming more impatient because they want their loans paid back,’ said Andy Singer, CEO of the Singer & Bassuk Organization, which arranges financing for developers. ‘There’s lots of tension.’”
“Developers are resisting steep discounts for fear of setting off a downward spiral, according to a lender who asked to remain anonymous because he originates loans to many condo developers. ‘What we are hearing is that developers are trying to hold the line at 10 percent to 12 percent off their current ask,’ the lender said. ‘Everybody is trying to avoid the impression of desperation and a fire sale.’”
“Aby Rosen’s RFR Realty and Chinese firm Vanke, developers of the 96-unit, 63-story condo at 100 East 53rd Street, appear to have resorted to slashing prices as they labor under a mountain of debt — including $360 million secured from the Industrial and Commercial Bank of China before Chinese firms began pulling back investment.”
“For example, unit 45A, a two-bedroom, was listed this winter at $4.95 million, down from $8 million in 2016 — a 38 percent discount. As of Dec. 13, just 23 of the property’s units had closed, according to public filings, and 12 of those were recently listed as rentals on StreetEasy.com. Such quick-turnaround rentals can be a sign that investors are snapping up units in bulk, according to lawyers and lenders, suggesting deep price cuts.”
The Democrat and Chronicle in New York. “One of downtown’s more prolific developers has allegedly defaulted on more than $20 million in loans, potentially affecting key properties in the city. DHD Ventures’ Thomas Masaschi and his partners, including family members, are named in more than a dozen notices and complaints filed in recent days by U.S. Income Partners and its subsidiaries.”
“The Henrietta-based lender is calling in loans made over the past several years, at least two backed by properties now subject to foreclosure. Masaschi’s other downtown properties include Hilton Garden Inn, 88 Elm, 50 Chestnut, Rochester Club Center, the Gannett Building, Terminal Building and more. Two of those — 50 Chestnut St. and Rochester Club Center — are headed toward tax foreclosure. Masaschi declined comment.”
“The legal claims are the latest blow for a city seeking a resurgence but seeing its prominent development firms consumed by internal legal squabbles or, in the case of developer Robert Morgan, a federal fraud investigation. What the future holds for DHD is unclear, but the company already had begun pulling back after losing a massive foreclosure action on a student housing development in Buffalo.”
The Dickenson Press in North Dakota. “Quarterly studies show relatively fewer people are renting apartments in downtown Grand Forks. The vacancy rate in 600 to 700 apartments rose from 8.87% in the first quarter of 2019 to 9.23% in the fourth quarter, according to a survey of landlords that is regularly administered by the Greater Grand Forks Apartment Association.”
“Dakota Commercial, which rents 1,094 units in 32 buildings citywide, has a 6% to 7% vacancy rate downtown, Kevin Ritterman, the company’s president, estimated – slightly higher than a more typical 5% mark. Dan Sampson, who rents a bevy of properties, said his vacancy rate downtown hasn’t really budged. He said he dropped rent by about 10% on units in further-flung parts of the city to fill them.”
“‘It has gotten saturated with all the new construction around town, so we’ve had to drop our rents just to maintain occupancy,’ Sampson said.”
The Davis Enterprise in California. “Months after going into hiding while indebted to several Davis apartments and about 100 UC Davis student renters, WeHousing founder Alan Gao quietly went to work for a new company. According to a recent update on his LinkedIn profile, Gao has been director of operations at Palo Alto-based small loans company American Credit since July 2019.”
“In April 2019, WeHousing, which leased apartments mainly to UC Davis students from China, collected rent from students but did not forward the money to the apartments. ‘(Gao) is demanding the residents continue to pay him while he doesn’t intend to pay us,’ Kevin Schultz, the onsite manager at the Drake Apartments, said in May. ‘I think anything he collects, he’s just going to run with.’”
“Gao told The Enterprise his company went into debt after failing to fill about a third of its units for the 2018-19 year. WeHousing leased apartments in several college towns across the country, totaling about 400 tenants in all. ‘For April and May, we used most of the rents collected to pay off loans,’ Gao said.”
“In the meantime, Gao stopped answering calls and went into hiding. One apartment representative went to Gao’s home in Pleasanton and delivered an eviction notice in person, only for Gao to reportedly ‘pretend not to be who he is’ to evade the notice. Another property manager hired a law firm, which sent eviction process servers to Gao’s home every day for two weeks. They found no trace of him. ‘The man just disappeared,’ said Jingying Lu, a UC Davis student who graduated in June.”
The Union Tribune in California. “This 7,625 square foot home was built in 1980 and is the largest Del Mar home to sell among the 10 biggest sales. The property was first listed for sale in March for $27.9 million and later sold for $5.9 million less. Razor House (9826 La Jolla Farms Road), La Jolla — $20.8 million: The Razor House in La Jolla was purchased by singer Alicia Keys, said the Los Angeles Times, at a steep discount for what it was originally listed. The celebrated architectural home was listed for $30 million last summer.”
“”This 3,500-square-foot home was built in 2004 and took 54 days to sell. It is one of the smaller homes in this year’s biggest sales but still has four bedrooms and four bathrooms. The property has a storied history, for a time being one of the biggest sales in San Diego County history when it sold for $18 million in 2016. It later went back on sale for $17.9 million in January, later selling for a steep discount. $16 million.”
The Wall Street Journal. “Home sales are slowing in wildfire-prone areas of California as insurers retreat from high-risk regions, say real-estate agents and homeowners. Real-estate agents say potential buyers are having difficulty obtaining insurance and are backing out of purchases or lowering their offers after realizing how much insurance would cost, which can be thousands of dollars a year or more in wildfire-prone areas.”
“Lauralee Green, co-owner of Z Group Real Estate in Pollock Pines, Calif., now requires prospective buyers to submit an insurance quote before making an offer. ‘I’ve had so many deals fall through,’ she said. Ms. Green said she sold about $4.7 million in real estate last year, down from $8.8 million in 2018. ‘We’re just going to get a bunch of houses sitting on the market that won’t sell,’ she said.”
The Bay Area Newsgroup in California. “Housing economists and real estate professionals are pessimistic about the Bay Area in 2020 — but don’t expect a crash to bring saner prices or slower sales. ‘Pessimism is one way to put it,’ said Zillow senior economist Cheryl Young, noting that local home prices have been flat or dropping for about 18 months. The nearly decade-long, record-breaking escalation in prices, she said, ‘really wasn’t sustainable any more.’”
“In fact, the housing economists are sour on the state, with low expectations for the Sacramento, Los Angeles, Riverside and San Diego metro areas. Steam has been leaking out of the Bay Area housing engine during the last 12 months. Year-over-year prices in the Bay Area grew about 8 percent in October 2018, while they dropped nearly one percent in October 2019, according to CoreLogic. ‘That’s a big swing,’ said Frank Nothaft, chief economist at CoreLogic.”
“Sales data show Santa Clara County has been especially hard hit in the last year. After home sales in the county raced up more than 10 percent, year-over-year, through much of 2017 and 2018, buyers have become more cautious, and median sale prices have dropped steadily. In November, the county’s median prices fell nearly 2 percent from the previous year, the 11th straight month of year-over-year declines, according to Zillow.”