Crying All The Way To The Bank
December’s housing sales data seems to point toward the beginnings of a recovery in the residential markets. And a couple of enterprising downtown Boston condominium owners have taken advantage of this nascent optimism to price their high-end units like the Great Recession never happened.
A two-bedroom, 2,000-square-foot unit at the Heritage on the Garden was listed for $4 million last week. The seller bought it for $1.2 million back in 1988, when the building first opened. It’s a big number, but it’s also had a while to appreciate.
But how to explain a two-bedroom, 2,000-square-foot waterfront unit at Rowes Wharf listed for $2.1 million on the same day? The current owner only recently bought the unit, in the summer of 2007, for $1.86 million.
It’s one thing to go to sleep weeping softly and wishing that 2008 and 2009 never happened. It’s how The Teller ends every day, actually. But who knew it only took an MLS account to make that wish come true?
Desperate For A Better Day
There’s only one reason you file for Chapter 11 bankruptcy protection the night before your real estate hits the auction block: You’re desperate for a better day.
That was the logic Steven Fustolo, the would-be developer of 242-unit Ocean Club condominium development in Revere, used in hauling his Revere Beach Holdings LLC into bankruptcy court last week. He wanted to derail an auction that would sell his 2.1 oceanfront acres out from under him.
Fustolo’s attorney, Frank Kirby, told The Teller his client would seek a note sale or some other form of debt restructuring that would stop an outright auction.
"He wants to find someone with a more sympathetic view of the project, who will work with him to move the project forward," Kirby said.
Only a few minor hurdles stand in the way.
The first would be finding an investor who doesn’t just believe in large-scale condo development right now, but who is also fervent in the belief that Revere Beach is the place to restart a condo-building boom that fell off a cliff two and a half years ago. Said investor must also be willing to put several million dollars behind that notion – several million dollars that could otherwise be invested in any number of vehicles, such as bonds, or real estate that’s actually generating cash flow now, or, you know, cookies or something.
But even assuming all that – person wants to build luxury condos, in Revere no less, and doesn’t mind parking bundles of cash on a plot of beachfront property instead of buying something else like a building or delicious confections – why would such a person want to buy the Ocean Club in a note sale?
Foreclosure auction would clean up the messy secondary liens on the Ocean Club site. There are unpaid vendors to make whole, and a $1.1 million second mortgage on the property. Foreclosure wipes them out; anything else keeps them alive, and eats into whatever return a white knight investor could reap.
Besides the fact that, if you were really interested in the property, you’d probably get a better price at auction. And that’s the point, right? To make money?
