Bearcat

The Vue obviously won't be demolished and it certainly won't be converted to a hotel or some other use. The only problem with the Vue is that it was priced during a time when condo values were generally 25-35% above where they are today. The foreclosure process (slow and inefficient as it is) ultimately remedies this and prices come down to meet demand. Regardless of whether it is the developer or the bank, at some point the weight of enormouns carrying expenses and the futility of continuing to hold out for unrealistic premiums will become obvious to one or both parties and they will react accordingly. The AJ almendingers of the world (rich inexperienced buyers that want what they want right now regardless of the pricing risk) have become a very endangered species and this is a good thing. As long as those types show up and pay the old prices (or prices adjusted down but not enough to be sustainable) the developers/lenders will sit tight and wait for the well of stupidity to run dry. Again, judging from the inactivty at the register of deeds AJ appears to be an outlier so I think another month or two of "crickets" in the sales office will bring about change (by someone). Existing Vue residents and those in other projects throughout downtown understandably want to see condo closing prices increasing again month to month. Unfortunately, normal price appreciation will not be sustainable until the Vue (and other similar projects) take the right down necessary to get supply and demand back in balance again. For example, if Vue is priced 30% above the intersection of those lines on a graph then (assuming 3% appreciation is historically sustainable) then (assuming normal economic times) it will take about 10 years for the Vue to seem like a good deal again to educated buyers. This is a somewhat academic explantation but I think it might help explain why so many developers/lenders eventually capitulate to market forces once the benefit of some time helps them see where they are. Here is a link to a gorgeous project in Bellevue, WA (just outside of Seattle) that experienced a similar fate of terrible timing: http://www.stroupecondoblog.com/2011/02/bellevue-towers-%E2%80%93-smooth-sailing-in-a-new-direction/ This broker's webpage tells the story of how the project went from the developer to the lender and how the pricing changed (30% cuts) to increase demand again (albeit at a very slow pace) for the towers. Both the Vue and Bellevue are luxury projects but having toured both there is no question that Bellevue is at a different level of quality. If the Vue is class A I'd say Bellevue is either AA or AAA. Keep that in mind as you consider how the adjusted pricing there compares with that of the Vue.

None. I could literally show you hundreds of examples all over the country where this exact situation has played itself out...a small group or even as much as a 30-40% of old contracts close and then when the bank and developer are mostly certain that their efforts to cajole or in some cases threaten (with specific performance litigation if contract provides for it) early buyers will no longer bear fruit, they capitulate to the market (what else can they do ?) and prices collapse. All the early buyers can do is hope that 5-10 years down the road they can recover their original investment. Also, it appear that this lawsuit may have settled the issue of forcing buyers to close, but I have never seen a lender try to enforce those kinds of provisions once the developer is forced out and the lender assumes control of the project. Too much bad pubilicity I guess for too little chance of recovering much anyway. By the time they foreclose they generally have written things down sufficiently to just unload it to a bulk buyer (like Vue Orlando) or in some cases they'll simply hire a firm to retail the units on their behalf but at discounts steep enough to ensure that they start generating significant enough sales velocity to get it liquidated in 9-15 months.

I doubt this to be the case. Typically, the developer doesn't pay HOA fees on unsold units until the project has been turned over to the Association, which usually occurs after about 75% of the units have closed or a period of a few years passes. Until then, new buyers pay HOA fees and the developer funds the difference out of his project budget. So, if the building continues to be staffed, utilitites are functioning and the property seems reasonably well maintained, the developer's budget is still funding this. I'm sure the bank loan included a line item to cover these costs for some reasonable period of time. Interest rates being so much lower than what the bank probably required them to assume has probably created a cushion that, in effect has probably bought more time to get the project turned over. But even when there isn't any $'s remaining in the loan the developer will have to fund this cost (invest new equity) or risk being pushed out immediately by the bank. And even then, the bank will almost certainly fund that cost to protect the value of it's collateral and ensure the units can be sold. There's no question though that at some point several hundred thousand $'s of carry each month for HOA and taxes will pressure the developer, the bank or both to capitulate to the pricing demands of the market. Big game of chicken going on right now. That court decision had to sting.

That's very helpful. Thank you, atlrvr. After a quick look at the dec and a handful of the deeds here's what I see: The developer borrowed $195M or about $360/sf. Most of the deeds I saw were at pricing of just below $500/sf. So we can probably assume that the develop expected to make about $50M in profit assuming a sellout averaging $475/sf. They appear to need an average of $375/sf to make no profit, lose all their equity, but get the bank paid off. Fascinating stuff we're observing if you think about it. It's like a game of multimillion $ chicken going on right now between this developer/lender and the Charlotte condo buying public. In 5 years I suspect the market will have rendered its verdict as to what this project at this location is "worth" to prospective owners. In the short run though, I think a combination of circumstances (bad economy, too many units delievered too soon (probably) and other factors) will probably force this project through a period of significant discounting in order to accellerate the absorbtion of the project to a point where the debt is either paid off or reduced to a level that the lenders deem gets them "out of the woods" so to speak on a risk basis. If the Vue follows the typical pattern of others that have been similarly situated it will close some modest percentage of its presales prior to unveiling a program that gets aggressive about pricing to jumpstart sales again. It's obviously impossible, or at least impractical, to do these things simultaneously. And there is more incentive for MCL to hold off if the contracts allow for the developer to sue for performance even though there may or may not be good ILSA defenses buyers could avail themselves too. Developers are also generally an optimistic bunch and this one may or may not have yet accepted that discounting will be necessary. All of this is to say that it remains to be seen whether +/-$475/sf will be sustainable for this project. I hope for the sake of those who have elected to close that it does. But as you can see from above, every closing that the developer can generate above that $375/sf mark reduces his debt basis in a way that allows him more breathing room with his lender and increases the likelihood that he can recover some invested equity and perhaps still make some of the original profit that was forecast, even if an auction or heavy discounting are required to get there. As a prospective buyer sitting on the sidelines, unencumbered by being a party to a presale contract, it sure seems to me that the best deals to be had in this project will reveal themselves in another quarter or two.

There may indeed be 12 people living in the building but that doesn't mean that 12 people have closed on units. Regardless of whether someone pays cash or gets financing, a deed gets conveyed from the seller to the buyer. The ROD's website is currently showing its activity current through 1/28/11. So it's possible that all 12 of those folks all closed on their units after 1/28, in which case we should start seeing those hit the website next week. I don't wish the project any ill will but I do think that buyers ought to understand the difference between rumors and facts. I've seen too many early buyers take the brunt of the hits that the market correction has been imposing on these projects. The Vue seems like a terrific project, one of the nicer developments in the southeast I think, but buyers should be very carefull about making early buys in projects that appear destined for a major correction. I don't know how anyone could characterize this otherwise. Caveat Emptor Here's the website again: http://meckrod.manat...asp?cabinet=opr The grantor you need to enter is Vue Charlotte.

Where did you hear that ? I hope that is true but unless those 12 closings happened with the last 4-5 days we should be seeing this activity on the register of deeds website. I'm wondering whether the "news" is really just the hopeful intent of the developer and/or broker. After all, with so many months having passed it's gotta be really tough to get the first few folks to take the plunge so I can understand why they'd be saying that. Unfortunately for the developer the ROD's does their job a little too efficiently so it doesn't allow for much lag (less than a week usually) for the developer to puff the numbers. Also, does anyone know what the general pricing of the presales were ? I'm thinking they generally ranged from $350/sf to $450/sf but would appreciate hearing from anyone with more specifics.

A recent article in the Observer seemed to suggest that closings had been occurring though at a slow pace but I can't find any evidence of that. Here is the link to the register of deeds and when you enter vue charlotte there is only a few recorded documents other than the Declaration and none of them are deeds. Does anyone know of ANY closings that have occurred ? http://meckrod.manat...asp?cabinet=opr