SKYE Condominiums and Hyatt Place Hotel

[atlrvr]

I typed out a long reply several days ago, but my computer didn't like me.

In short, I "guessed" $18M, because I think that is the correct number to financially finish this as a condo tower with the same general floorplans. I assume they will value engineer it a bit. I also think they will honor existing contracts, though they can't legally bind people to the project. That figure also allows for a large contingency and risk premium that I think would be appropriate.

[Charlotte_native]

While speaking only from personal experience, I believe it's rather common for developers to exchange your deposit into a working capital or "progress payment" account after the contract cancelation period ends. Novare used it in my Ave presale contract. I was aware of it when signing, but agree that many people don't read what they are signing.

I didn't realize that Novare did this. I don't know of other local developers that do but that doesn't mean they don't. I know with the condos I've purchased (from Spectrum) that this was not the case nor was it the case for developers that I've done work for in the past.

I can't say I'd ever be comfortable with a builder or developer spending my money before giving me what I'm buying. Of course this isn't the case for custom upgrades, but a deposit, IMO, should always remain in a trust account for the very reason of what has happened at The Park.

[cyrusuncc]

Hiring an attorney to try to retrieve their deposits is going to be extremely difficult, especially given that the property has already been foreclosed, the city owns it, and all the new winning bidder has to do is to pay his/her bid offer and any liens associated with the property. Plus, even if the attorneys do get a case, they will charge SO MUCH to win this case that most of the money will go to them anyways. It's truly tragic.

I haven't done any personal research on this particular foreclosure, but typically all junior liens are wiped out during the foreclosure proceedings, and since the deposits were given to the builder (not a senior lien on the property), the people don't have any recourse on this.

If the property is "purchased" at auction, they will get clear title to the deed (the land and all improvements is my guess) used to secure the construction loan. If there are any senior liens (possibly a lien against the land that predates the construction loan), they will have to pay that one off.

[Andyc545]

Any bidding for this purchase has now been ended as of 5 today. Looks like Summitt Shores, the company that put that bid in after the banks bid on the foreclosure date has the title at a little less than $18 million. Guess we will see what happens with its fate now...

[rooster8]

It'll be interesting to find out who or what Summitt Shores is, especially considering the only mention of them/it on Google is this project.

[atlrvr]

Interesting...its seems this Watts fellow is middle-man of some sort...or has at least assumed that role in multiple transactions in the past.....no telling who is behind this, but my guess is either Verna (with new financing) or another local developer.

I just want to know who is providing the commentary on the website, since the agenda of its "releases" seems to change tune on a regular basis.

[palmetto75]

That indeed might be how they skin the cat. I seem to remember that there were several over entities on the Deed of Trust other than just 222 S. Caldwell, LLC. I figured Verna had long since bankrupted these entities in order to move out any assets they had and protect them from The Park downfall, but maybe not. Maybe it is easier to get to Verna personally through a BK filing.

[Charlotte_native]

According to the article i read, that is exactly what they are doing. I was surprised this seemed to be happening so quickly and easily as it was.

[MZT]

NC statutes give a winning bidder 30 days to pay up. But in practice, the trustee commonly demands payment within 10 days or voids the sale in order to start over.

There is some informality to trustee sales - if the trustee has experience with the bidder he may allow some leeway when he knows the buyer is reputable enough to close, or if the lien holder really, really doesn't want posession and it is willing to allow for more time.

Even this late in the game, if the original investment group has some means to cure the default, they could offer it to the lien holder - who in turn could choose to ask the trustee to void the sale. Not that either of these situations are too likely... I'm assuming the developer is wrung out, and the lender in Wisconsin also wants to end the turmoil and get this saga over with. (I've seen this happen in residential sales - NC statutes don't permit it explicitly though... so perhaps in a commerical sale like this, a third party bidder's stake is stronger and can't be reversed without his consent.)

Personally I still think there are high odds this sale will come undone. There is too much intrigue behind the mystery bidder and this project has had so many twists and turns.

[RiverwoodCLT]

This is a big mess, and I do not see an end to this for a few years. I am glad I have no money down for a unit in the Park.

[Conformity]

According to the article i read, that is exactly what they are doing. I was surprised this seemed to be happening so quickly and easily as it was.

If the creditors succeed in forcing the bankruptcy issue, the judge can issue a "stay of foreclosure". The lending syndicate will immediately pursue relief from the stay, filing a motion with the bankruptcy judge requesting same. It's been some time since I've chased foreclosures, but I seem to recall most lenders succeeding in their efforts to get relief from a "stay". Of course, this is a very large foreclosure and my experience was with smaller properties many years ago, so my thinking may not apply.

[MZT]

I had forgotten about that - When an entity on title files bankruptcy, it can force a stay of the sale. The trustee will usually be conservative and postpone the sale until a judge decides whether the bankruptcy filing is pertinant, and relief should be granted to the lien holder (which usually does happen). But you can expect 3 months or more to be added to the entire process as the courts move at their languid pace. Then a new sale has to be properly advertised, with statutory lead time, then another auction, wait for upset bids to clear, etc.

I thought the BK filing needed to be before the conclusion of the auction phase... but, I could imagine a nervous trustee handling a multimillion dollar (and highly public) sale, being very careful not is issue a trustees deed or disperse funds while there's any doubt.

[Charlotte_native]

As much as there is intrigue about whether Verna is trying to get this property back -- what lender IN THEIR RIGHT MIND would trust that he would or could complete this project. It doesn't take an underwriting genious to see the enormous risk in lending anything else to this group. In today's lending environment...probably not even in the free-wheelin' days just a couple years ago.

[cyrusuncc]

Why would someone bid more than necessary on a foreclosure auction, unless they were worried about being upset (again)?

[Charlotte_native]

In many auctions it is the lender that makes the first and only bid and it is for what they are owed. Was the $27mil what the 1st lienholder was owed or what all of them were owed together? The first position lienholder isn't going to bid more than they are owed and they would actually HOPE someone will come along and outbid them -- that gets them paid then begins to get other lienholders some money since they are behind the first.

Quite doubtful that the lender actually wants this property, but they have to take it to protect themselves.

[cyrusuncc]

Ah. My understanding is that the lender is only allowed to "bid" what they are owed (balance on loan, plus late fees, attorney fees, etc..). The fact that they bid $18M tells me that the loan did not have a balance of $25M. Maybe it was a line of credit with a max balance of $25M, maybe it was an installment loan, but was paid down...

[atlrvr]

Perhaps they wanted to entice other bidders to take the property for a value conducive to completing the project, which is how I estimated the $18M ahead of auction. The fact that they were upset and didn't bid higher, seems to confirm this. They probably didn't want the hassle of taking the property back and then reauctioning it or marketing it because of the additional time and fees involved. In fact, it wouldn't surprise me if the lender knew the upset bid was waiting in the wings, and the pricing was previously agreed upon....any additional upset bids would only have helped the lender.

[Charlotte_native]

Any attorney's reading this? It is my understanding that there is a minimum bid which is what the first lienholder automatically "bids". If this is the case then whatever the first / minimum bid was is what the lender was actually owed (at least for the first DOT). From what I understand there were a littany of lienholders who lent on this project -- i think that is what the $27mil number was, but can't say for certain.

[Charlotte_native]

Regardless the first lien holder isn't 'paying' anyone for the property -- they are taking title for the amount they are owed. They 'bring' no money to the table. If, after taking title, they want to sell for less, there is no reason they can't so there really isn't a reason to bid low to get low bids. Once it is theirs they can give it away if they wish and the foreclosure sale (once completed) wipes out junior lienholders if there is no money left over -- they get paid nothing. This is the reason for the forced bancruptsy -- some lien holders aren't too happy about the potential to be pushed out.

Actually it wouldn't be in their best interest to bid low as they would lose control of what they might be paid in an upset bid process. There are specific rules the court follows. If they take title they get to choose how much they sell it for once they have it.

[Charlotte_native]

OK, in reading back through this, the BB Syndication was reported to be owed $27 million -- that was for more than one lien/loan. It was the total owed. It appears that the first lien was $17.9mil. I was told by a Wachovia interbanking person that there were quite a few liens, loans, mezzanine lending, etc on this property -- Verna didn't just have a 1st mortgage and an equity line.

[cyrusuncc]

OK, in reading back through this, the BB Syndication was reported to be owed $27 million -- that was for more than one lien/loan. It was the total owed. It appears that the first lien was $17.9mil. I was told by a Wachovia interbanking person that there were quite a few liens, loans, mezzanine lending, etc on this property -- Verna didn't just have a 1st mortgage and an equity line.

The first lien (which is what went under foreclosure) was a construction loan with a maximum aggregate principal amount of $30,695,000.00.

[Charlotte_native]

The first lien (which is what went under foreclosure) was a construction loan with a maximum aggregate principal amount of $30,695,000.00.

Interesting -- this could be a great study case for the intricacies of foreclosure process. Wonder why the amount was so low comparitively speaking.

[palmetto75]

Regardless the first lien holder isn't 'paying' anyone for the property -- they are taking title for the amount they are owed. They 'bring' no money to the table. If, after taking title, they want to sell for less, there is no reason they can't so there really isn't a reason to bid low to get low bids. Once it is theirs they can give it away if they wish and the foreclosure sale (once completed) wipes out junior lienholders if there is no money left over -- they get paid nothing. This is the reason for the forced bancruptsy -- some lien holders aren't too happy about the potential to be pushed out.

Actually it wouldn't be in their best interest to bid low as they would lose control of what they might be paid in an upset bid process. There are specific rules the court follows. If they take title they get to choose how much they sell it for once they have it.

Sure there is reason to bid lower. Lenders are doing it all the time now with foreclosures. It is done for the same reason private auctions are now becoming more popular. At a lower price you are reasonably assured someone will outbid you the Lender. After about 30 days you get yr $18 mill.. done deal. Alternativley you bid the full amount and most likley take it back. Now the lender is is the real estate business. Even worse in this case the lender is in the development, contractor & distressed real estate business. Then when the property fianally doess get under contract to the brave soul that dares to take it, the contract would most likely be riddled with contigencies due to the status of the project and the contract period could be measured in years instead of days.

Simply put banks are above all are in the risk vs. reward business. And it comes down to the certainty of taking my loss and and getting $18 mill in 30 days, or maybe getting more 1-2 yrs from now and having to endure the loss of the cash flow in the interim. Not to mention the liability of holding a half built high rise condo tower.

[Charlotte_native]

^thanks for the info -- makes sense. I guess we are in different scenarios than in times past

[dxartist]

Not only is The Park forecloser sale being haggled over, the building is also decaying according to the CO. Not surprising, since no work has been done for eons it seems. A lot of materials have to be replaced (if construction ever continues).

http://www.charlotteobserver.com/100/story/155950.html