As has been speculated on this blog in the past this news item from the Union Tribune is a very interesting read. A mechanics lien is pretty much a sign that that the contractors are not being paid. This is a sure sign of cash flow problems at the project and probably the developer level.
When a loss is taken on a loan like the bank is going to write off the losses and reset prices lower or put the project back into the rental market via a sale to an apartment operator. Either way it likely won't be sitting dormant for long.
I suspect that this will not be the last story of this variety that we'll be reading in 2007.
Also notable is discussion of some other troubled developments.
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3 comments:
This is the tip of the iceberg. The question is how many of these projects get foreclosed upon before Maisel-Presley itself goes BK? I'm curious as to how well insulated MP is from each of its projects - I'm sure they're all separate LLCs, but I'd guess that there are also certain corporate-level and personal guarantees that went into each project such that if a few of these go through foreclosure it wipes out all the equity MP built up during the good times. I'll try to find out the details...
I love the "Limited Units Remaining!" statement on the bankrupt project's website:
http://www.mpcondos.com/property_detail.php?pid=30
There are 280 units in the complex, and less than 40 were sold.
So, you better hurry! This opportunity is not going to last! Experience the pride of home ownership today!
david,
My guess is that this is their worst project/biggest problem and made a practical decision to hand it back to the bank rather than throwing good money after bad. This is very intuitive and predictable human nature.
This is why you will see a lot of short sales and foreclosures on individual properties as well. What sense does it make to pay 2-2.5% what rent would cost on a property that is 20-30% underwater? Give the keys back to the financial institution. This triggers another level of valuation depletion and more pain similar to how margin calls trigger more sell volume that the worst possible time.
Finally my guess is that the first 40 units sold are also a big risk for bankruptcy as well.
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