The Vue

[sleightofhand]

It's all about the cash flow.

So can we assume a 180 million dollar construction loan has run dry??? I don't get it.

I just walked down to the Harris Teeter and talked to some of the construction workers. They were under the impression that everything was just on hold. They confirmed that the large crane was staying put. I asked if they had a time frame the delay and they both responded they had no idea as they had never experienced anything like this.

[cltbwimob]

Me thinks Donald Trump could buy this (soon to be foreclosed) building for a steal. He did say it is "cheaper to buy than build". He probably saw this coming with the Vue and simply waited for the storm to arrive.

I was hoping to see Trump complete 210 Trade. Hopefully this is just a minor hiccup and the construction can resume, however if it does go into foreclosure, I think a major developer will come in and grab this tower (i.e. Donald Trump or someone like him). I think it will be completed by someone even if it is destined to be "Trump Charlotte."

[atlrvr]

So can we assume a 180 million dollar construction loan has run dry??? I don't get it.

They don't get all $180 million at once. They get monthly draws from the bank, and the bank has the power to stop funding for a variety of reasons. Even if they didn't have a good reason, that could find some sort of technicality to stop in an effort to squeeze the developer and/or contractor.

That said, stopping funding at this point IS very serious, though I wouldn't term it fatal yet. Assuming $180MM is the number, and they are $150MM in, there has to be a very compelling reason to pay hardball. The term is "feed or flush", which is the analysis a bank does to determine whether it would be less painful to continue to fund a bad investment or simply walk away. Obviously the bank has reached a point where walking away from $150MM might make sense.

In better economic times, I would be cynical and think the bank wants to force the developer out so they can take over the project (equity position) which is what has happened with the Augustalee project in Cornelius, but I can't imagine there is much of an upside to a 400 unit condo tower in this market.

So much for my hope that the profit margins were so fat here that the developers would re-consider the spires

[krazeeboi]

RJ Griffin & Co. is saying they haven't been paid for the past two months, which is why work has temporarily stopped. Nice shot of the Vue in the article from the O:

[urban980]

They don't get all $180 million at once. They get monthly draws from the bank, and the bank has the power to stop funding for a variety of reasons. Even if they didn't have a good reason, that could find some sort of technicality to stop in an effort to squeeze the developer and/or contractor.

That said, stopping funding at this point IS very serious, though I wouldn't term it fatal yet. Assuming $180MM is the number, and they are $150MM in, there has to be a very compelling reason to pay hardball. The term is "feed or flush", which is the analysis a bank does to determine whether it would be less painful to continue to fund a bad investment or simply walk away. Obviously the bank has reached a point where walking away from $150MM might make sense.

In better economic times, I would be cynical and think the bank wants to force the developer out so they can take over the project (equity position) which is what has happened with the Augustalee project in Cornelius, but I can't imagine there is much of an upside to a 400 unit condo tower in this market.

So much for my hope that the profit margins were so fat here that the developers would re-consider the spires

Or the project could have exceeded the $180 million mark 2 months ago and the bank said "you're done, no more money honey". The fact that the developer did away with those million dollar spires was probably an effort to get this project back within the budget. I think the developer knew all along that this project will (or did) go over budget. They "hoped" that high condo sells would help them secure more money from the bank, but the condo sells have been flat for quite awhile I've heard. Edited September 2, 2009 by urban980

[atlrvr]

I have no knowledge of the financing terms, but my guess at this point would be that deposits from pre-sells would be contributing to the developer equity in the building. If the developer doesn't have the cash to put in the deal, then the bank will stop funding. My feeling is the developer is saying "Keep funding, we'll sell more units once the building is finished" and the bank is saying "Find more investors to raise enough equity to make up the difference"

Also, the loan terms could stipulate that x% of units had to be sold by some milestone, and if they didn't, they could be in technical default. If this is the case, the bank has an out (they could foreclose), but honestly, as I mentioned before, I don't see a strong case to foreclose. BofA only needs to look at The Park to realize that they would get far less than 50 cents on the dollar. I'm guessing the BofA is holding them hostage to raise more money somehow to limit their risk. I obvously don't know about the MCL's inner workings, but possibly they could offer some other project as additional collateral to the bank to get the money flowing again, though this obviously wouldn't be ideal, as the bank would require collateral at a substantial premium to whatever additional amount they would lend.....but if you're the developer, what are you going to do? Probably not walk away from $80MM of personal and investor money, if you can help it.

[mad_park]

Does anyone know roughly what amount a buyer had to put down as a deposit? Would have to think that some of the "flippers" have decided that they are better off just walking away.

Also, I assume buyers didn't have to lock in financing when they put down a deposit. There are likely some who want to close but can't because they can't get a loan for various reasons. (Not enough downpayment, now out of a job, etc, etc.)

My point in all this is that there is a percentage of the "sold" units where the deal will end up falling thru.

Edited September 2, 2009 by mad_park

[Charlotte_native]

Does anyone know roughly what amount a buyer had to put down as a deposit? Would have to think that some of the "flippers" have decided that they are better off just walking away.

I'm pretty sure it was 10% -- I recall it was pretty heafty at the time but it was long ago. It was at least 5% but I do think it was the 10 mark.

[jandea]

I would be curious to know how the contract reads for the presales on the Vue. Somewhere around 2000, I'm forgotten the exact date, I put 5% down to reserve a unit in the now notorious Pink Building (Arlington). The purchase agreement gave the buyer an out if the building was not completed within three years and, because of problems similar to what is happening with the Vue, the Arlington was not completed on time. The developer resisted giving back the deposits but finally did cough up the money. I got back my down payment but it was still an expensive lesson. The developer had my money for over three years. I wonder if there is a similar provision in the contracts for presales on the Vue. Jan

[Munson79]

Since this was an "economic" issue story, WBTV marched out that UNCC professor who is expert in such things. I don't know his name, but he drives me crazy every time he speaks because he constantly whistles his "S" sounds. Just wanted to see if anyone else knows of whom I speak.

[uptownliving]

LOL You are talking about Tony Plath...we used to see him about everyday back during the Banking Crisis.

[urban980]

Is it just me, or would the Vue make one kicka$$ hotel?

[sleightofhand]

I would be curious to know how the contract reads for the presales on the Vue. Somewhere around 2000, I'm forgotten the exact date, I put 5% down to reserve a unit in the now notorious Pink Building (Arlington). The purchase agreement gave the buyer an out if the building was not completed within three years and, because of problems similar to what is happening with the Vue, the Arlington was not completed on time. The developer resisted giving back the deposits but finally did cough up the money. I got back my down payment but it was still an expensive lesson. The developer had my money for over three years. I wonder if there is a similar provision in the contracts for presales on the Vue. Jan

The contracts at the Vue did have such a clause that allowed buyers to walk once construction had reached a certain date. At the time the Vue was a little over 60% sold but lost around 35 contracts due to said contract clause. This was about two years ago and the Vue has had to fight their way back to the 60% mark. Now for those that did sign the contract all over again may have another "out" at some point but I just can't remember how the new contract read.

Or the project could have exceeded the $180 million mark 2 months ago and the bank said "you're done, no more money honey". The fact that the developer did away with those million dollar spires was probably an effort to get this project back within the budget. I think the developer knew all along that this project will (or did) go over budget. They "hoped" that high condo sells would help them secure more money from the bank, but the condo sells have been flat for quite awhile I've heard.

The article in the CO confirms that the construction loan obtained by MCL was $195 million.

[kennethlin]

My biggest concern of the VUE is not whether the building will get finished. I truly believe it will be in due time, and I think the developer will obtain the necessary financing to get this done. My biggest concern with the VUE though is the current contracts held. Someone mentioned 60% has been sold. My question is, how many of those 60% will actually be able to close and how many will have to just walk?

I went to the presentation showroom back in 2005 and it was unbelievable. Then again, the developers wanted $550/sq. ft. for each of their units. Who in their right minds is going to close and go through with their current contract at $550/sq. ft. when most high-end units in Uptown can be had for around $250-300/sq. ft. max! The VUE was supposed to be all about quality, the finest things in life. Well, I can tell you now that the renderings have been changed so many times and cost cutting has been going on since the project broke ground. Remember that $10k deep soaking tub from Kohler? Well, that's been totally axed! Let's not talk about all of the other high-end finishes this building was supposed to have with its hefty price tag.

With that said, even if a buyer wanted to proceed with his/her contract, they will NEVER be able to obtain financing with a $550/sq. ft. price tag. There is NO WAY any appraiser will be able to assess a unit at that price point. Therefore, the ONLY way to buy would be to pay cash, and I seriously doubt any of those 60% contract buyers would want to sink any more money than they've already had.

By the way, the minimum deposit to secure your unit at the VUE is 10%, and 15% for investors. With an avg. $500k price tag, that's a HEFTY amount of cash. However you spin it, this does not look good for anyone. I hope the building will get finished as soon as possible, but I just can't see it being a condo anymore, given that there are so many condos that can be had for a fraction of the price of a VUE unit with similar quality and finishes. At this point, they should convert it into an office/retail space. I think that would be better utilized, creating stability in the Uptown real estate market but also bringing in new retail/corporate tenants that will create more jobs and ultimately rising real estate prices in Charlotte. At the very least, that's what I see happening at the Park.

[nyxmike]

Isn't it too late to turn this into an office building? I'm pretty sure there are different standards for an office building compared to a residential building (such as floor heights, different floor plans, etc). I could see them turning The Vue and The Park into apartments though (or at least half condos/half apartments), with the possibility of converting to condos when the market gets better.

[jms54]

Isn't it too late to turn this into an office building? I'm pretty sure there are different standards for an office building compared to a residential building (such as floor heights, different floor plans, etc). I could see them turning The Vue and The Park into apartments though (or at least half condos/half apartments), with the possibility of converting to condos when the market gets better.

I would think that anyone who bought a unit at the Vue would have legal recourse to cancel their contract and get a refund if they were 1/2 apartments. I can't imagine someone paying $450-$550/sqft and having 1/2 the building rentals

Edited September 7, 2009 by jms54

[peaceloveunderstanding]

Shouldn't there be a tag on UP for SPECULATION posts?

Some of these ideas are ridiculous; condos -> office space... come on.

Edited September 7, 2009 by moonshield

[Guest]

Some of these ideas are ridiculous; condos -> office space... come on.

Floorplates are too small, and there is too few elevators. Just two things wrong with the previous idea. Plus a very expensive redesign and the process to get the new plans submitted, and the financing for a whole new project secured.

[nyxmike]

I would think that anyone who bought a unit at the Vue would have legal recourse to cancel their contract and get a refund if they were 1/2 apartments. I can't imagine someone paying $450-$550/sqft and having 1/2 the building rentals

True, but The Vue was overpriced to begin with and a lot of the luxury amenities in each condo have been eliminated to cut costs. The finished product is worth less than what they were asking for. They are going to have to lower the price if they want to sell more units and the people who already signed contracts, I'm not sure how they are going to deal with that.

[Eastman]

The cranes appear to be active, does anyone know if the money issues got resolved?

[QC-NC]

Shouldn't there be a tag on UP for SPECULATION posts?

Some of these ideas are ridiculous; condos -> office space... come on.

Thank you... I completely agree.

I mean can some one be play (realisitic) devil's advocate here and just give me the worst prognosis? I dont know, maybe Vue stalls for a yr or 2 in its current condition (or at least enclosed) and is re-sold - similar to the Park - for a huge lost to developers and some investors, but re-opens at a much more attractive pricepoint with "similar" but more realistic (key word in this post) designs?

?

Edited September 8, 2009 by QC-NC

[jms54]

Thank you... I completely agree.

I mean can some one be play (realisitic) devil's advocate here and just give me the worst prognosis? I dont know, maybe Vue stalls for a yr or 2 in its current condition (or at least enclosed) and is re-sold - similar to the Park - for a huge lost to developers and some investors, but re-opens at a much more attractive pricepoint with "similar" but more realistic (key word in this post) designs?

?

In making realistic guesses to the outcome of the Vue we would need to know what exactly the financing problem is? Is it a lender with poor liquidity. Is it a building that hasn't sold well enough that the lenders are going to cut their losses? There are a number of luxury condos that have sold at close to the Vue's pricing and the Vue has more amenities than these properties. Look at the Radcliff as an example. The different scenarios as far as which is worse also depends on who you are. If you are the developer, the worst that can happen is the project is bankrupt and taken over by the bank. If you are a buyer, the worst that can happen is that they finish the project but it doesn't sell and the developer pulls out. You are left in a building that doesn't have the HOA fees to support the building so it deteriorates and the prices get dropped significantly after you have paid current prices for your unit. If you are the bank the worst that can happen is that you don't get your loan money back.

The building is very far along right now. It has topped out and has windows up to about floor 42. The units are ALL finished up to the mid 20s floor wise. Electrical and plumbing and sheet rock are done up to the mid 30s or so. This building will get finished. I see three possibilities and have no idea which is more likely:

1. MCL gets financing and finishes the building with a few months delay. (They are about 4 months ahead of schedule, so this is not a big deal)

2. MCL does not get financing and the bank takes over the project. They finish the building, probably reduce the prices as they are not really looking to make a profit, but just get their money back. Again I would expect no more than a 4-6 month delay here.

3. MCL does not get financing and the bank takes over the project and another developer "buys" the building and finishes this. This would have a delay as well.

MCL didn't pay Griffin in August so they have known about their finance issue since at least that time, but probably longer. There has been no resolution yet but we don't know what the issues are so we don't know how close a "decision" is to being made. My guess is prices will be dropped slightly for all buyers. Ones who are under contract and ones who are going to purchase--only if the real estate market in Charlotte does not improve. It will all depend on appraisals when the building is finished. I do think current contract holders will be protected as they are the ones still most likely to purchase these units and if there is a new owner of the building, they will want to keep these customers as customers. There is a limited marked of buyers to purchase these condos and you don't want to alienate the ones you have.

I do find it unfortunate that MCL has not told their current buyers what the financing issue is, and that makes me think it is not a lender issue but a sales issue or MCL issue. I also expect sales to now stop until the building is totally finished.

FWIW

[tozmervo]

The cranes appear to be active, does anyone know if the money issues got resolved?

I am told that work has definitely stopped. Any activity you see is probably subcontractors removing equipment, etc from the site.

[dubone]

I heard a rumor today while on the Uptown Living Showcase from someone who plausibly could know. He confidently expressed that a new investor was found for the Vue that would allow them to work out their issues with the construction loan.

I sure hope that proves true. I must say, though, that I am surprised that the Vue pulled out yesterday from participating. To me, their non-participation is a possible sign that that rumor is not true, unless they figured they'd spare themselves the need to explain their on hold status until they were prepared to make an announcement.

Time will tell, but I was very heartened to hear that, and the source spoke with convincing confidence.

[jfuptown]

They are removing the shorter of the two tower crane