The news that the owner of the high-profile Landmark condominium tower, which sports units priced from about $500,000 to $2 million is in bankruptcy, is not only a harsh reality that owners, prospective buyers and the developer must deal with, but its impact could give the entire Denver-area real estate market a black eye.
“We do not need any more fear in the market, and this will put fear in the market,” said Tom Cryer, a broker with the Kentwood Co. “That will probably be the biggest impact of this. Thinking through this out loud, we do not need any more fear in the market and that just adds to it.”
The fear, of course, will be especially acute for many of the people who have already bought $95 million worth of condos in the upscale community at Interstate 25, near East Belleview Avenue.
“I think this will put the fear of God of people who already bought there and have closed,”Cryer tells InsideRealEstateNews.com. “This could have long-term impacts on the HOA fees.”
I asked him if the bankruptcy will have a chilling effect on prospective buyers.
“For someone representing a buyer right now, it would be tough to recommend that you would buy in (at the Landmark) at today’s prices,” Cryer notes. “It could have a long-term impact on prices to get this resolved.”
Zack Davidson, the developer, said that his lender, Hypo Real Estate Capital Corp., wanted him to slash prices in order to attract high-end buyers in this tough market, before it would extend its loans. Davidson said he was unwilling to do that, because it would be unfair to people who already have purchased.
Even if someone wanted to buy, lenders might be unwilling to make loans, unless buyer ponied up huge down payments, Cryer noted.
“I was involved in a couple of condo building with listing, and there was a simple lawsuit between the HOA and the developer, and the lenders would not touch anything with less than a 80 percent loan-to-value,” Cryer recalled. And some were not interested in in making loans at all.”
Long-time housing consultant S. Robert August shared some of the same concerns.
“In a rebounding marketplace, which is showing some signs of recovery, an issue like this is a shame at this particular time,” August said.
Still, he is optimistic, especially given its key location and its commercial components, which by all accounts are strong destinations. The owner of the Landmark owes $93.8 million on a $182 million construction loan from Hypo.
“If I were sitting the bleachers, with as much money they have against the loan, it would seem to me they might still have an opportunity to renegotiate the situation and come out stronger than ever,” August said. “The impact on the marketplace could be a black mark, but at the same time, if everything gets corrected in short order, it will turn out to be a phoenix rising from the ashes. “