The End of High End or Opportunity to Steal?

Will high rise failures damper the high end part of the Texas coastal market for the foreseeable future?

Paradise Lost: Palisades Palms Galveston

Palisade Palms, a resort-style development with views of the Gulf of Mexico, will soon offer its lifestyle at a fraction of the price, a Kennedy Wilson company representative says.
On June 6 at the Omni Houston Galleria, the international real estate investment and Services Company will hold an inventory reduction auction of 27 beachfront condominiums at Palisade Palms. While the auction is billed as an inventory reduction sale by the developer it is in fact a disaster for owners and investors who signed on the dotted line pre-sale at pre-construction prices. Word on the street is Palisades Palms sales included large numbers of investors who had visions of flipping the units after the building sold out. Well it didn’t sell out, some never closed and many are seeking a way out. The amount of bloodletting that is about to occur is enough to give your real estate writer a migraine.

How will the sale influence the Galveston Condominium market?
How will the sale influence Galveston Real estate market?

The answer is nobody knows and any opinions on the matter will be just that “opinions”. Let the spin masters speculate, I prefer to stick with the facts and the facts are not good for High End developments or High-rises on the Texas Coast. You can stick a fork in these high end projects because they are done as originally priced:

Emerald by the Sea. Currently bank owned after foreclose.
Harbor Walk. In bankruptcy fighting for survival after losing bank financing. No wonder the banks got nervous.
Avocet. On the Bolivar Peninsula. Currently bank owned after foreclosure. This is bare land with roads. How they spent a rumored 16 million dollars to produce nothing is another matter for speculation.

Let’s not leave out South Padre Island which has seen its share of misery:

Ocean Tower. At least the buyers didn’t lose money on this project because it was torn down after it began to list like the Leaning Tower of Pisa. Making it the butt of endless jokes far and wide.
Laguna Bay. Sold at auction after the project failed to attract buyers at stated prices.

Port Aransas has its own turkey:

Newport Beach and Golf North. Even an Arnold Palmer Signature Golf Course couldn’t sell this property and to the auction block it goes.

This chart shows overall interest in beach and vacation homes has been on a decline since 2005

Any good news?
The one thing the above projects have or should I say had in common is a high percentage of bank financing that may have led to their inability to wait out the downturn.

There are also projects and companies that are doing well, despite the recession. For example these high end projects on the Texas Coast are currently outperforming the market:

The Texas Coast Real Estate Market has followed the National Market much more so than our strong metro markets. Many experts predict a "double dip" recovery in real estate, the following video talks about that:

Comments

By Realtor.org @ Monday, May 17, 2010 11:23 PM

Will Housing Feel a 'Saw-Tooth' Effect?

Some housing experts are predicting what one calls a “saw-tooth bottom” to the housing market driven by a shadow inventory that may include up to 4.5 million properties.

This issue isn’t just bank-owned homes that aren’t yet on the market, but sellers who would like to sell but fear they can’t. "These sidelined sellers closely watch the market for signs of a possible turnaround and rush in if there's a hint of good news," says Leslie Appleton-Young, chief economist for the California Association of REALTORS®.

This rush to sell drives prices back down — hence, the "saw-tooth" description.

Stan Humphries, chief economist for Zillow.com, describes the potential problem this way: "Prices go up; inventory rises, which sends prices down again. That plays out for three to five years of no appreciation. ... Without price appreciation, it leaves more home owners in negative equity. That's toxic. Any setback, like a job loss, they go into foreclosure."

Source: CNNMoney.com, Les Christie (05/17/2010)

By NED HIBBERD @ Tuesday, May 25, 2010 8:59 PM

Much has been made of all those homeowners who are "underwater." For people who would prefer to be a homeowner on the water, there are at least 27 opportunities.

That is how many beachfront condominiums at the Palisade Palms high-rise building are on the auction block.

The 27 units are almost 10 percent of the total occupancy in the two towers on Galveston's East Beach.

This 'fire sale' comes courtesy of two perfect storms

"The majority of the homes were sold prior to Hurricane Ike," said Deanna Sybrant, a project manager with auction firm Kennedy Wilson.

"And then we had another hurricane that hit us, and that was the financial market."

The Palisade Palms auction goes to gavel on June 6. It is a way for the developer to sell off its excess inventory in a single day, including units originally priced at up to $1.3 million.

"The starting bid prices range from $125,000 to $380,000," said Sybrant.

REDC Group auctions homes in default across the U.S. And these days, business is good. Very good. Weinberg says the company has already dropped the gavel on $1 billion worth of property so far in 2010.

"2010 is the year of the foreclosure," said Weinberg. "Three to seven million will be hitting the market this year, according to our research."

By Laura Elder Galveston County Daily News @ Sunday, May 30, 2010 10:29 PM

GALVESTON — State District Court Judge John Ellisor is expected Tuesday to confirm, amend or overturn an arbitrator’s decision forcing buyers at an East End condominium tower to complete purchases and pay hundreds of thousands of dollars in damages for breach of contract.

Attorneys for Emerald Tower Ltd., developer of 113-unit Emerald by the Sea, 500 Seawall Blvd., went before the 122nd District Court on March 4 asking Ellisor to confirm Houston arbitrator Elaine Block’s award.

The buyers, some of whom have picketed at Emerald, said developers didn’t deliver what they had advertised as “the finest high-rise condominium built on the coast,” according to court documents.

But attorneys for the developer said the buyers were just trying to avoid their contractual obligations.

“The record before the Galveston district court is clear,” Christopher M. Raney, an attorney for Emerald Tower Ltd., said in a prepared statement. “This case involves seven purchasers trying to avoid their contractual obligations.”

If Ellisor confirms the arbitration award, Robin Rush, J. L. Marullo, William Runge, Darryl Hymel, Robert Dutton, David Wagester, Marty Moore and Wayne Shouppe together must pay Emerald $212,475 for interest accrued as of Oct. 23 on the developers’ loan, taxes and insurance.

The buyers also would have to pay pro rata shares of those expenses until they closed on their units, or until the units are sold at public auction, according to the arbitration award.

The buyers would have to pay the difference between the agreed sales price and what the units brought at auction.

When $77,000 in attorneys fees are calculated, along with the price of the units, total damages amount to about $3 million.

Less than promised

But Carlos Garza, an attorney for the buyers, argued March 4 before Ellisor that Block exceeded her authority because Emerald had asked only that buyers close on their purchases and pay attorneys fees. The company sought no damages beyond that, he said.

Block said rules governing arbitrators prevented her from commenting.

Contracts required disputes be resolved through binding arbitration. Both sides approved the selection of Block, according to court documents.

Garza also argued that after arbitration, as his clients were attempting to get financing, inspectors found the square footage of units was anywhere from 17 percent to 27 percent less than promised in contracts. The buyers have lodged a complaint about unit sizes with the Consumer Protection Division of the Texas Attorney General’s Office.

In a Feb. 8 letter to Namir Faidi, a principal in Emerald Tower Ltd., Assistant Attorney General Rosemarie Donnelly sought a response to the allegations, including supporting documents.

By Robert Stanton @ Friday, June 04, 2010 2:09 AM

Prime beachfront housing is in short supply everywhere,” according to Rhett Winchell, president of Kennedy Wilson’s Auction Group, “and as the old expression goes, ‘they aren’t making any more beaches’.” Winchell said that “Palisade Palms offers homeowners an unbeatable combination of luxurious accommodations and magnificent quality of life. Best of all, Kennedy Wilson’s proven auction format means resort style living has never been so affordable.”

Kennedy Wilson, which leads the nation’s auction industry, conducts hundreds of real estate auctions across the U.S. and Canada. The June 6 auction at Palisade Palms offers auction winners a great opportunity to realize maximum savings and for the developer, an ideal way to sell standing inventory. “By selling 27-condos on auction day, everyone is a winner,” Winchell added.
Successful bidders at the June 6 auction can choose from a range of excellent financing programs through Alterra Capital Mortgage. Buyers can boost their savings even more via a special initiative available only to auction day purchasers who arrange financing from Alterra Capital Mortgage. Under the terms of this incentive, the seller will credit $5,000 toward non-recurring closing costs at the close of escrow to buyers who close escrow within thirty calendar days of the auction.

Kennedy Wilson is inviting registered bidders to a “How to Buy at Auction” informational seminar at Hotel Galvez, 2024 Seawall Blvd. in Galveston., beginning at 1 p.m. on Sunday, May 30. This free seminar gives potential bidders an excellent opportunity to familiarize themselves with the auction process, review the auction’s terms and conditions, have their questions answered and walk through the registration procedures.

The seminar will close with an exciting live practice auction hosted by an actual Kennedy Wilson auctioneer. Additional information on the “How to Buy” seminar and on the auction itself is available at the Palisade Palms Auction Information Office, open daily from 11 a.m. to 6 p.m. at 801 East Beach Drive in Galveston. Brokers are welcome.

Kennedy Wilson has also set up a specially designed auction Web portal for registered bidders who may be unable to attend the auction in person but still want to participate. To learn more about the online auction portal and to access more information on the auction, please visit the Palisade Palms Auction website at www.PalisadePalmsAuction.com.

By BillyBob @ Monday, June 07, 2010 6:39 AM

HOUSTON – An auction for a high rise condominium development in Galveston drew more than 600 people Sunday to the Omni Houston Hotel.

The developers of the Palisade Palms chose to auction 27 units and allow the buyers – not the sellers – to determine market value. Some units originally priced at $1.3 million were sold for less than $800,000.

The starting bids ranged from $125,000 to $375,000.

The condos are on Galveston’s East Beach, the same beach ravaged by Hurricane Ike and hammered by rising insurance costs.

"The market's slowed quite a bit,” said Rhett Winchell, the president of Kennedy Wilson Auction Group. “What the auction will do is focus the attention on your product. In this case, Palisade Palms."

The winning bidders considered their purchase an investment in the area’s rebirth.

"We think that it's a good buy, it's a beautiful property and Galveston is going to turn around,” said buyer Franklin Roth. He and his wife bought a higher-story condo for roughly $100,000 less than the original list price.

"We've been married 48 years, so it's very emotional," said Evelyn Roth, adding that they planned to share the second home with family.

By Inman News @ Wednesday, June 16, 2010 7:54 PM

Senate OKs new tax credit closing deadline
The Senate has amended a bill to give homebuyers who were under contract on a home purchase by April 30 an additional three months to close the deal and claim the federal homebuyer tax credit.

Extending the deadline for closing from June 30 to Sept. 30 would allow lenders more time to clear a backlog of 180,000 homebuyers nationwide, said amendment sponsor Sen. Harry Reid, D-Nev

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