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Commerical and condo developers are next...

 
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GenXer



Joined: 20 Feb 2009
Posts: 703

PostPosted: Tue May 12, 2009 2:07 pm GMT    Post subject: Commerical and condo developers are next... Reply with quote

http://boston.bizjournals.com/boston/stories/2009/05/11/story8.html?b=1242014400%5E1825514

Quote:
He said the hardest-hit are developers who bought condo projects and are unable to sell units.


For example, Repton Place in Watertown is 70% sold. If they have 300 units, it means that they have 100 empty units, and they are going to build ONE MORE BUILDING right next to the existing one...care to guess how many more units they will sell?

www.reptonplace.com
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balor123



Joined: 08 Mar 2008
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PostPosted: Tue May 12, 2009 10:09 pm GMT    Post subject: Reply with quote

Actually, they are going to build several more (I forget the actual number but I think it was 3 - 5 total). I think they are just at their next phase for the next building.

Those units are pretty nice by the way but way overpriced considering they are located in Watertown, a step down from Waltham IMO, not to mention the pseudo industrial area and lack of access to most transportation. I visited them last March and the first thing they said is: "Let's get this out of the way. The bank won't let us sell you the unit for less than $X so don't bother offering less". By the way, $X wasn't even that low compared to asking price.

They're not selling because they aren't willing to sell for much less than the highly profitable prices that they were originally hoping for. The real issue for them is they can't accept much less than a huge profit. The city probably demanded tens of millions in kickbacks for whatever excuse they could come up with (I'm sure some of it went to infrastructure but not all of it). They also bought the land during bubble times. All of it, even the unbuilt parts. I imagine they figure they should hold out for the price they want because if they don't get it they may as well foreclose.
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GenXer



Joined: 20 Feb 2009
Posts: 703

PostPosted: Tue May 12, 2009 11:21 pm GMT    Post subject: Reply with quote

Great. Think of all the suckers that bought up the units. Seventy percent of them paying 100% of the cost. A couple more buildings will really set them back. It would be fun to watch Repton implode. I just wonder what will happen to the people who bought into the condos. They'll have to keep going somehow. I anticipate a huge firesale several years down the road. With a condo fee of $500 and rising, I don't think any of those units are worth even 1/2 of the price they are asking. It would be unbelievable if Repton manages to sell the other condos to the 70% level.
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balor123



Joined: 08 Mar 2008
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PostPosted: Wed May 13, 2009 4:42 am GMT    Post subject: Reply with quote

The high HOA fee turned me off as well. I didn't understand why it was so high but at the time I looked the association was being run by the investors, not the owners. I don't know if it's legal but I feared they might be extracting some extra money from the management fees. They didn't even have a gym or doorman up yet! Then again, I hear that HOA fees in Manhatten average around $500 - $1k/mo and can get as high as $2k/mo for even nice but not great places.

The quality of units and building is pretty good and actually a little cheaper than similar units in Waltham so at the time it wasn't a terrible deal just not great. The other thing to consider is that if you are looking for that kind of living outside in Boston then there isn't much selection. Personally, though, I'd much rather see the city approve an equivalent number of new construction duplexes but of course that could significantly impact the prices of housing in the area. The place in North Waltham is mostly 55+ and even though it's brand new it feels like a retirement home. Now that they tore down a hospital to build it, they're complaining there aren't enough hospitals in Waltham. There's another place on the Charles going up that looks comparable and is about the same price.

I suspect that they have enough units purchased that if they can gain control of the association then they'll be alright. The individual units not sold would go into foreclosure but the bills would still be paid, though the value of those units would go down once everyone is paying $700/mo instead of $500. If they're lucky, then Russo's will expand next door. If not, then they'll rebuild the frozen fries warehouse that they tore down to build this place. By the way, I think on the other side is a Target distribution center.
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GenXer



Joined: 20 Feb 2009
Posts: 703

PostPosted: Wed May 13, 2009 10:04 am GMT    Post subject: Reply with quote

Let me put it this way: $500 a month is equivalent to an $100,000 30-year loan at 5% interest (and a real potential to come up even higher). So in effect, these apartments are overpriced by quite a lot. The cheapest 2-b is $370k all the way up to $440k. The effective cost is $470k - $550k. The real price of these condos is probably 1/2 of that (and it is still too high!). So in my book, overpriced by 50% is what I'd call this. Lets see how much I'd have to pay in loan payments only: $2523.06 at the minimum. This is a new building, so I'm assuming not many repairs at first. The rent I'm paying now in Newton on a much better street is $1700. I think I'll pass. In my book, this is a luxury condo, which is completely unnecessary. Also, its the worst place for walking with little children - noisy, smelly, lots of cars, etc. Can't fathom why would anybody buy there. I think desperation is the reason.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Wed May 13, 2009 1:28 pm GMT    Post subject: Reply with quote

balor123 wrote:
The high HOA fee turned me off as well. I didn't understand why it was so high but at the time I looked the association was being run by the investors, not the owners. I don't know if it's legal but I feared they might be extracting some extra money from the management fees. They didn't even have a gym or doorman up yet! Then again, I hear that HOA fees in Manhatten average around $500 - $1k/mo and can get as high as $2k/mo for even nice but not great places.

The quality of units and building is pretty good and actually a little cheaper than similar units in Waltham so at the time it wasn't a terrible deal just not great. The other thing to consider is that if you are looking for that kind of living outside in Boston then there isn't much selection. Personally, though, I'd much rather see the city approve an equivalent number of new construction duplexes but of course that could significantly impact the prices of housing in the area. The place in North Waltham is mostly 55+ and even though it's brand new it feels like a retirement home. Now that they tore down a hospital to build it, they're complaining there aren't enough hospitals in Waltham. There's another place on the Charles going up that looks comparable and is about the same price.

I suspect that they have enough units purchased that if they can gain control of the association then they'll be alright. The individual units not sold would go into foreclosure but the bills would still be paid, though the value of those units would go down once everyone is paying $700/mo instead of $500. If they're lucky, then Russo's will expand next door. If not, then they'll rebuild the frozen fries warehouse that they tore down to build this place. By the way, I think on the other side is a Target distribution center.


Investors generally want to keep HOA fees low, because they (a) want to attract new buyers with low fees and (b) have no interest in spending money on long term maintenance. I'd be afraid of the investors for an entirely different reason, quite frankly, i.e., that fees will go up a lot once the investors have sold off the units. Especially if you have lots of amenities, like doorman, pool, gym, etc.

The fees have to go into a trust, that is owned by the association. I don't think there's any (legal) way for investors to confiscate the fees. But if, as you suggest, are paying too much to a management co. operated by their "friends," that could be an issue.

You should always check out the financials, though. Adequate reserve, fees actually covering costs, etc., history of assessments, if you're looking to buy into any place that charges fees.

Looking if you look at condo fees in any reasonable sized building around Boston, you'll see that $500/mo is not outrageous, especially if it's staffed in any way. Smaller (2 or 3 unit) associations have lower fees, but generally don't have staff that you're paying for.
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balor123



Joined: 08 Mar 2008
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PostPosted: Wed May 13, 2009 3:06 pm GMT    Post subject: Reply with quote

Some of us value new construction more than many other factors. When I first moved to Boston, I thought everyone was poor because everyone lives in old houses.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Wed May 13, 2009 3:16 pm GMT    Post subject: Reply with quote

Not questioning anyone's personal preference, but I'm always concerned about resale on brand new homes. Seems like buying a new car to me. When you go to sell, it won't be new anymore.

With condos, I'd further also be concerned about the lack of management track record.
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balor123



Joined: 08 Mar 2008
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PostPosted: Wed May 13, 2009 4:17 pm GMT    Post subject: Reply with quote

It isn't like a new car because, unlike cars, they can't pump out infinite amounts of new construction homes to meet demand. However, in cities with more growth I agree with you. In those cities, it is also much cheaper to get new construction and so the splurge isn't as big of a deal.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Wed May 13, 2009 4:31 pm GMT    Post subject: Reply with quote

balor123 wrote:
It isn't like a new car because, unlike cars, they can't pump out infinite amounts of new construction homes to meet demand. However, in cities with more growth I agree with you. In those cities, it is also much cheaper to get new construction and so the splurge isn't as big of a deal.


OK, the car analogy isn't perfect, but I'd still be concerned that you'd take a bigger hit on resale (or realize a smaller gain) than you would on an "used" home resale, one the new condo shine is gone. Also, I tend to be wary of the construction quality in at least some of these places; some of it is quite bad, and will not age well.

But if new construction is your thing, I understand. My wife's parents are the same way. I've never lived in a new construction home, and it's not something that I seek out.
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balor123



Joined: 08 Mar 2008
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PostPosted: Wed May 13, 2009 8:01 pm GMT    Post subject: Reply with quote

I agree that there are dangers with new construction. I looked at some new townhouses last year and was amazed at how badly they've fared being under 5 years old. However, that does not imply that all new construction poor quality nor that old construction is good quality. Older properties tend to require more maintainance but that doesn't mean that if you buy new you will won't have to do anything (though often that is the case). The new shine does wear off but it is gradual. A 10 year old house is better than a 20 year old house. A 20 year old house is better than a 50 year old house. The difference between 5 and 10 is greater than 50 and 55 years old. The same rules apply to renovations by the way and I don't know that you're taking a bigger hit on a new construction house that you would on renovations to an older house. Frankly, I don't care of the new houses don't age well either as long as I can sell it to some other sucker who'll likely figure in 20 years that because it's old it must be well built. I think that houses today can be better built than a house built 100 years ago that has already aged 100 years. Clearly, not all builders choose to go to that expense. My parents bought their house in Texas in 1980 and haven't had any problems with it, other than the water heater leak recently and a rotting wood fence (which you don't really find in MA anyway). If new construction is your thing, then sadly Boston is about the worst choice in this country as it is generally limited to very expensive homes. You'll find more affordable new construction options in even NYC and CA.
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