The Morning Report
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Sunday, May 3, 2009 | This is a big week for Vantage Pointe, downtown’s biggest condo building.
Next weekend is circled on the calendars of as many as 72 contracted buyers there, people who signed up in 2004 for a chance to own a piece of the then-hypothetical high-rise.
That’s the date — Saturday for a couple, Sunday for the rest — that comes 42 months after they reserved their condos with 5 percent deposits in 2005. If the developers fail to make their units ready for move-in by then, some buyers could walk away from their contracts, their deposits in hand.
The construction workers on the building have been hustling to finish. Since last fall, teams have worked extra hours and weekends to get the building finished by May. Now the focus is not on finishing the whole building, but just on finishing the units that have been sold to the contracted buyers, as well as the building’s common areas. That way when the buyers’ 42-month deadline hits, their units could be ready for them to move in.
The construction team is in the process of finishing safety inspections with various departments but as of Friday had not yet requested the final inspection from the city.
“It’s like any other building — at the finish line, it’s a mad scramble,” said Al Thompson, vice president of construction for the project’s developer, Calgary-based Pointe of View.
The nearly 300 buyers and the project’s Canadian developers are locked in stalemate as the deadlines loom. Buyers say they’re waiting for clear assurances for the developers that there will be price discounts, financing available and a completed, safe building before they sign their paperwork. The developers wonder how many of the buyers will actually go through with their commitment to purchase units several years — and one housing-bubble bust — later.
Meanwhile, the trade contractors have been given a list of the units that have been sold so they know which ones to prioritize finishing. Beyond the 72 due to close on their condos next weekend, about another 125 buyers will hit the 42-month deadline by May 31, according to the information circulated to the construction teams on the site. Buyers have begun walkthroughs on the building and their units.
But completing the construction on the building is not the only major concern as the deadlines near. Even as those buyers might be asked to close escrow this month, the availability of mortgages with which to buy their units is hard to determine. The buyers — in conversations with each other in various online message boards — fret about financing, getting their deposits back, and whether they’ll be able to convince the developer to lower the prices they committed to in a wholly different housing market.
And one of the latest: they’ve been told the building will also have some units rented out to “bring vibrancy to Vantage Pointe during the sales process,” according to an e-mail from the developers to the buyers. The sales team has launched a website, announcing that two-bedroom units can be rented starting at $1,595 per month.
The building is unprecedentedly large for San Diego, comprising 679 units in 40 stories, built with the largest private sector construction loan — $210 million — for a single building in county history. It takes up the entire block between 9th and 10th Avenues and A and B Streets. In Vantage Pointe, buyers have signed contracts to buy about 290 condos — less than half the building’s total.
The building’s success as it moves through the next several months is being watched by market analysts and downtown planners.
It is unclear even yet what effect the building’s opening will have on the rest of the downtown real estate market, already weighed down by more than 850 finished unsold units, according to MarketPointe Realty Advisers. The homes at Vantage Pointe and another 148 at another under-construction project downtown will double that number.
For months, lenders have told buyers that there is no way to finance the building, citing issues with the number of unsold units.
Last week, the developer said it had obtained conditional approval from Fannie Mae, one of the government’s giant mortgage companies, to make loans on the building with certain conditions. Representatives from Wells Fargo, the project’s preferred lender, told buyers last fall that their biggest hope for getting loans through the bank was if Fannie Mae approved the project.
But last week’s news was not a carte-blanche approval for the building. The developers got the go-ahead from the bank to split the project up into three phases. If they can demonstrate that 70 percent of the units in one of the phases have been pre-sold, the buyers should be able to get a loan on a unit in that phase from a lender that would sell the loan to Fannie Mae.
Brian Stoddard, president and chief operating officer of Pointe of View, said on Friday the company has not yet officially split the project into the three phases, and so it is too early to tell if the Fannie Mae conditions will be met before the first buyers’ deadlines next weekend.
Brian Luternauer, who’s slated to close on a unit on May 22, works in the finance industry and said he hasn’t been able to track down a loan. “There is zero financing available,” he said.
That doesn’t appear to be enough to let the buyers out of their contracts, though. Stoddard said the contract would only be lifted if the buyers can’t close on their units because the developers “don’t hit the milestone” and the construction isn’t finished, not if the buyers can’t get loans.
Stoddard said he didn’t know of more than one or two buyers that had already canceled their contracts on what he called a “landmark building.” He said the company doesn’t have a fixed number of units it will rent out during the sales process.
The news that the building will have some units rented out has been the source of some consternation for buyers, some of whom expect it will lower the values of their units even more than the general real estate market would already.
Luternauer said he’s still not sure if he’ll go through with his purchase of a two-bedroom unit on the 8th floor. He said he would consider it if his monthly payment with taxes, insurance, and $450 homeowners association monthly payment would be what he could rent the unit for. Based on those fees and a mortgage for his $392,000 purchase price, he thinks his monthly cost will be double the cost to rent a unit.
“There’s somebody else that would have my same unit for half the price who has no (ownership) bond to it, either,” he said.
Brad Willis, moderator of a Vantage Pointe message board that he started five years ago, said the developers haven’t yet told the buyers even about the conditional Fannie Mae approval. He said it was one more example of the developers communicating poorly with the buyers, like him, who have deadlines rapidly approaching.
“This whole process has been like a train’s been coming down the tunnel at you since December,” he said. “The developer’s had the option to change tracks, or tell you about the train, and they’ve just kept coming. They’ve just been whistling. Now with barely a week to go, they haven’t really addressed the issues.”