3rd Ward Midrise Projects

[PwC Keith]

Any heard any updates on Catalyst's refinancing? The 60 day extension is up in 30 days, but I believe they'll use their second 60 day extension.

[atlrvr]

It's not outstanding, but as I mentioned before, the Art Deco louvered metal work and lighting fixtures do pretty well. They finally have almost all of it up.

[JonesQC]

Any heard any updates on Catalyst's refinancing? The 60 day extension is up in 30 days, but I believe they'll use their second 60 day extension.

Nothing official on the refinancing end but we do know the bonds for the park on the MLK side did not pass and are tabled for at least 60 days at the Charlotte Meck County Comissioners offices. I doubt in this economy that kind of money is going to be dished out for a park in uptown anytime soon when the city is more pinched to pay its own bills this year.

This is a pretty big blow to the appeal of Catalyst. Speaking for me personally, the price of the units on MLK side are at a premium for the city view and the proposed park. I know the park was speculation but I bet anyone who put a contract down on that side was thinking the same thing and valued the park into their purchase ans unit selection.

Edited February 2, 2009 by JonesQC

[CLTMichael]

Any heard any updates on Catalyst's refinancing? The 60 day extension is up in 30 days, but I believe they'll use their second 60 day extension.

I have heard they are going to make them apartments. Look for something official soon.

[JonesQC]

I heard they were trying to separate the building: half into rentals, half into owner occupied but this was a few weeks ago before the bond package for the park was tabled.

[Charlotte_native]

I heard they were trying to separate the building: half into rentals, half into owner occupied but this was a few weeks ago before the bond package for the park was tabled.

Buyers would have quite a bit of trouble in a normal market finding financing to buy a unit in a building with just 20% rentals, much less half and in a bad market where lenders are tighter than ever. This plan, IMO, isn't realistic. Rental or sale.

[tiblerbrit]

If thats their plan they might as well just do 1/2 Twelve 1/2 Condos.

[JonesQC]

Buyers would have quite a bit of trouble in a normal market finding financing to buy a unit in a building with just 20% rentals, much less half and in a bad market where lenders are tighter than ever. This plan, IMO, isn't realistic. Rental or sale.

Agreed, just sharing what I heard around town. Let's say they do move into 1/2 and 1/2 and do not move forward with Twelve ... this would allow for more permanent parking spaces for Catalyst residents and might get people in there quicker?

[28202]

unless you have 50% presales to owner occupants, my guess is you won't be able to close any loans in the building.

[JonesQC]

unless you have 50% presales to owner occupants, my guess is you won't be able to close any loans in the building.

Just for sake of argument, what if they split the building. Novare currently has 70-80 contracts down. 462 units in the entire building split in 2 is 231. This puts Catalyst at 30-35% presold. I think we know this is unlikely though, especially considering the park and AAA Knights in stagnant waters.

[CLTMichael]

Would any of you want to BUY in a building where there are renters?

[atlrvr]

Because renters don't have lepracy

I would assume for the same reasons you would buy in the building if you assumed 20% of the building could be rented....location, amenities, whatever.

I agree that for a variety of financing reasons, it would be a difficult task to split the building, however I don't think it would severly affect the marketability. Several apartment to condo coversions in Charlotte began while many units were still renter occupied. I would also assume if Novare does go the rental route, they will plan to sell the units at some point in the future.

[Charlotte_native]

The point is the buyers would not be able to get conventional or FNMA backed financing. They could theoretically choose to split the building, but they wouldn't get buyers to the closing table. It isn't whether buyers are willing, but if they are able to finance. For every pending loan for a condo purchase a 'condo questionnaire' is filled out for the lender. There are two pertinant questions that apply to this: whether any single owner owns more than 10% of the building (not counting a new project where the developer still holds units not yet sold), and whether more than 20% of the building is rental. If either of those is a 'yes' the loan will be denied. The exception would be to go to a bank or lender that isn't going to sell the loan or doesn't sell federally backed loans. Neither of these would be the type of loan any typical buyer would obtain.

They will either choose to make this building a rental/apartment building or keep it is 'for sale' condos.

[monsoon]

^But Myrtle Beach is a city full of condo towers that were built for the purpose of owners buying a condo to rent. There are also owner occupied units in these buildings. I would say that you would find almost any combination ranging from mostly owner occupied to all sorts of investors owing partial units, timeshares, blocks of units etc. In addition, the developers themselves get into the action by renting some of the units. So that would be proof these schemes can be financed.

In the case of the Encore, sure there is a difficulty in financing. But that difficulty is in the lack of people that are now willing to sign up for such loans, especially in a market that is in steep decline now. It would be my guess however that if you had the required income, down payment, and desire, you could finance any unit in this building without much trouble.

[Charlotte_native]

^But Myrtle Beach is a city full of condo towers that were built for the purpose of owners buying a condo to rent. There are also owner occupied units in these buildings. I would say that you would find almost any combination ranging from mostly owner occupied to all sorts of investors owing partial units, timeshares, blocks of units etc. In addition, the developers themselves get into the action by renting some of the units. So that would be proof these schemes can be financed.

It would be my guess however that if you had the required income, down payment, and desire, you could finance any unit in this building without much trouble.

I didn't say it was impossible to find a person or institution to lend money on this, but it won't be conventional or gov't backed which account for the vast majority of loans obtained by the public. I work in this industry and can tell you that an average person won't be able to finance this conceptual mixed building. You can get all types of loans -- I know individuals in town with loads of cash that will loan you purchase money on anything as long as you are willing to pay 5 points at closing, 10% down, and 9% interest, but that isn't what any sane person would want. Small local banks also make loans for non-conforming properties, but they aren't in the business of mass lending and most that I know of are more geared towards, again, investment loans.

The owners buying a condo to rent in Myrtle Beach are investors and get investor loans. You could do the same with this building, but doubtful that a homeowner/buyer is going to want to pay the higher interest rate and most won't have the 20% to put down (though I hear lately that investment loans are actually requiring 30% down in many cases). You won't get a FNMA, FHA, or conventional loan that will be sold in the secondary market in a building with more than 20% rentals. Those guidelines have been in place for years and, though there was a time when exceptions were more typical, lenders are FAR stricter now than ever before. If you want proof of the 20% rule ask any lender who makes FNMA, FHA, or secondary market loans -- also check with the guidelines at Avenue, Novares other project. They manage the HOA and are extremely strict about not letting investors rent out more than 20% of the units for this reason -- there is a waiting list to rent units if you wish to rent yours and they are already at 20%, too bad, wait in line.

Whittling down the already low pool of potential buyers for this project by making the financing nearly impossible just isn't something that makes any sense at all.

It would be my guess however that if you had the required income, down payment, and desire, you could finance any unit in this building without much trouble.

I've seen many people over the past year who had all of the above, but couldn't get a loan closed for a 'normal' simple transaction much less something out of the ordinary. We are in extraordinary times for lending, nothing is typical right now, the guidelines change all the time, and trying to finance investment property or even your own home is difficult for most.

[WestCoastNC]

One other practical question besides the financing issue, I assume they've pre-sold units all over the building. If they split it, say bottom half rental, top half condo what happens if pre-sold units are on the wrong side? Also, since this would materially change the product being delivered would this put Novare in default of the pre-sale contracts and force them to return deposits if requested?

[WestCoastNC]

Here are some pictures taken tonight of Catalyst. They are coming along on the lobby and they've started work on the canopy/walkway from the parking garage:

Link to Gallery/

Edited February 4, 2009 by WestCoastNC

[Charlotte_native]

I noticed the trees going in the other day when driving by. I really like how wide the sidewalks are around the project.

[CLTMichael]

The sales office is currently being moved inside the building as well.

[JonesQC]

Confirmed - top half is being sold, bottom half is being leased.

[UrbanFuture]

Confirmed - top half is being sold, bottom half is being leased.

Just saw that. Interesting move.

From the sales center... "rents ranging from $1200-$2400 per month, these homes will be positioned at the high end of Charlotte's rental market."

hmmm, you and everyone else who is new to the apartment market Catalyst. I hope this turns out well and they get some solid occupancy numbers in that building. I personally think it turned out to be a great building, I like it better than Avenue from the street perspective. I have a suspicion that I like Avenue's amenity level better than Catalyst's though.

[2hearts]

Confirmed - top half is being sold, bottom half is being leased.

Interesting. Given the material change in plans I assume that everyone with an existing contract will be permitted to walk if they're not comfortable buying in to a building that is 50% rental rather than 20 or 25% as the Novare projects usually are. Maybe Novare is planning to offer sizable discounts to counter this.

For a buyer that chooses to move forward, how will they possibly get a conforming mortgage with less than half the building presold and 50% or more of the units not being owner occupied ? I realize Novare and the lender might offer something competitive through an affiliated lender group to move the units today but how does a buyer's buyer get a conforming loan in a few years ? If anyone is up on current mortgage underwriting standards I'd appreciate your input.

[atlrvr]

I don't know the ins and outs of residential mortgages, but could they not essentially create 2 separate entities, just as they would with the Twelve product? Essentially condo the building up so that one condo is 13 floors of apartment owned by "Catalyst Apartments LLC" or whatver, and the remaining building is individual condo units.

[JonesQC]

I don't know the ins and outs of residential mortgages, but could they not essentially create 2 separate entities

This is what they are doing. Novare will own up to floor 14. Condo sales are floor 15-24.

[New Name]

What happens if someone wanted to own, but did not want to pay the premium for a high floor. Will their contract price be honored, or will they have to make up the difference? Kind of like when an airline bumps you to business class because they over sold coach.