I have been speaking to a lot of investors lately who are considering buying some of the large notes and assets hitting the market in Phoenix, Tempe and Scottsdale (e.g. Century Plaza, Safari Drive, Portland Place and many more). At first blush it can be a bit depressing witnessing all the carnage of unfinished and/or unsold high rise and loft condominiums. But here are some good points:
The fact that sophisticated and experienced investors are finally seeing the "value" in the distressed assets and notes means that we actually might be near "the bottom." Of course the reason the prices are making sense to the investors is becuase the holders of the notes (i.e. the construction lenders) are finally getting real and slashing the "market value" of their assets so they can get them off their books and move on. Regardless of how we get there, when prices make sense to the "pros" then maybe we are truly nearing a bottom.
New investors know to address what has been a major concern for potential buyers in the failing high rise buildings; that being the financial instability of the Home Owner Associations of those buildings. You see, even with low prices, buyers have been hesitant to be one of the first people to buy in a building that might be failing. After all, if you are one of only fifteen owners in a building and the developer goes bankrupt, who pays the electric bill, the water bill, maintains the elevators, etc? The answer is most likely the lender will pay the bills. But what if the lender goes under. Then I guess the answer is that whoever takes over the asset will pay the bills. But do you really want to have to worry about all that? I know I don't. So, again, the good news is that the investors who will by up these assets will come in with enough capital to bring the HOA's into the black.
Some of the investors will rent the condos out while others will seek to slash prices and sell out quickly. In either case it will mean lower prices for consumers. Lower prices will result in purchases.
Over the last several months we at WeKnowUrban have seen a major uptick in buyer inquiries. This, plus the coming lower prices and assurance of solvent HOA, leads us to think that we're are about to see improving sales numbers in the high rise and loft condo market. So, hang tight as you read "doom and gloom" stories about entire high rise buildings going under. Because now you know the good that will rise from these events.
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