By John Schaffner
The purchase early in October by Starwood Capital Group of the assets of the failed Chicago-based Corus Bank is resetting condo values throughout Atlanta.
That includes some Buckhead developments, possibly including some with high profiles and high price tags.
Some condo projects are changing direction and going to rentals, several are cutting unit prices to stay competitive in the market, others are seeing previously committed buyers of expensive units pulling out and leaving their deposits behind.
The largest-ever proposed condominium project for Buckhead—the proposed six condo towers of CityPlace development of Miami-based The Related Group, with a total of about 3,800 units on 16 acres at Roxboro and East Paces Ferry Roads¬—has been shut down for a year. Recently, the developer reached an agreement with lender Wachovia Corp. to foreclose on a $50-million land acquisition loan Oct. 6.
It was expected that the Corus situation could trigger foreclosures on some properties and potentially force other banks with loans on troubled condo projects to cut their losses and take steep write-downs.
Of the 1,919 condo units in Atlanta that were backed by Corus, 1,539, about 80 percent, were unsold as of the end of September, according to Ackerman-Trinity Advisors.
In July it was announced that Novare Group Holdings LLC, one of Atlanta’s largest condominium developers, was in default on a substantial amount of its debt and was working with its lenders to restructure at least $100 million in loans for projects across the Southeast. Corus was one of Novare’s lenders, including holding a $164- million loan on Novare’s The Atlantic, a 401-unit condo tower at Atlantic Station, for which the company had no sales through September, according to Ackerman-Trinity.
Novare’s condo projects in Buckhead—Eclipse, Realm and Gallery—have been declared in no danger, because they essentially are debt-free. And, Novare is also a partner in the The Ritz-Carlton Residences at 3630 Peachtree. The Gallery, which is a partnership between Novare and Coro Realty Advisors, opened in December of 2007, just as the residential real estate market—including condos—began taking a nosedive in the economic downturn. Today, the 203 units are essentially 60 percent sold.
Coro’s President John Lundeen, who recently replaced Novare’s sales and marketing staff at Gallery with Caldwell-Banker’s Preview team, said prices at Gallery were lowered somewhat at the same time “because we have to be competitive in the market.” He said every project is lowering prices to create sales opportunities, including The Brookwood and Terminus in Buckhead.
The Gallery strategy may be paying off. The Caldwell-Banker team reportedly closed three condo deals in one week in mid-October and report a lot of prospective buyer traffic, a possible good market indicator.
The Brookwood, on Peachtree near Piedmont Hospital, also was backed by Corus money and began discounting its units almost immediately upon opening earlier this year. At Terminus, at the corner of Peachtree and Piedmont, developer Cousins has discounted prices as part of an introductory offer and vowed to buy back the units at market price after three years if buyers are not happy.