A Beacon (250 King Street) and neighborhood comp at $906,666 ($614 per square foot) in April 2006, the 1,476 square foot two-bedroom on the eighth floor of 250 King Street (#802) was bought off the courthouse steps for $527,077 this past November.
And while we don’t consider courthouse step sales to be apples to apples (all cash changes the equation), we will consider its resale to be so (assuming the banks are lending again).
On the market and asking $669,000 ($453 per square), 26 percent under its 2006 price.
UPDATE: A plugged-in reader adds:
This is a symbolic foreclosure as the (former) owner of Unit 802 was the lead plaintiff on the lawsuit against Catellus Development. I guess he decided to throw in the towel. Then again, I can’t blame him IF Property Shark is right; they claim a $799,900 variable first and $150,000 second (JPM was the loser on that one). Yes that’s a 105% LTV…
Emphasis added.
∙ Listing: 250 King Street #802 (2/2) 1,476 sqft – $669,000 [MLS]
∙ Unable To Fund Loan(s) At The Beacon? Hmm… [SocketSite]
Not bad for a 1,476 sq/ft 2BR, but the HOA w/parking is almost $900/month.
It is probably going to be VERY tough to get a loan for an expensive California condo in litigation right now.
Wow….I knew the Beacon had some issues, but I’m admittedly surprised about a true resale unit for under $500 per sqft. With that said, what’s up with the $890 HOA/parking fees??! That is incredibly expensive for a sub $700K condo in a questionably run building.
Who on earth would be dumb enough to buy in this building now? This place is going to be foreclosure/walk away central in the coming years, HOA’S will keep on going up, there is going to be massive supply, I think you could see condos in this building eventually go for $200-$300 a sq ft.
This is the only building in the area that carries earthquake insurance, which explains the high HOA dues. This appears to be a south/west corner unit, which is probably the hottest (as in temperature) unit in the building. The heat issue in the south and west facing units is a major thing in the litigation.
what does the HOA’s earthquake insurance cover? say for a scenario where: 1) the structure is damaged and can be fixed with retrofit work but no interior damage to one’s specific unit; 2) the structure is badly damaged and one’s unit’s interior is damaged as well; 3) the structure totally collapses. what’s the coverage in these scenarios?
what does the HOA’s earthquake insurance cover?
I second this question. For a couple of years now, I’ve been trying to figure out what happens when a big multi-family building suffers an expensive failure. Nobody seems to have an answer.
i’ve searched on socketsite about the pending litigation and does anyone know what exactly is going on? the suits i’m aware of (1) HOA v. COA and (2) HOA v. builder, however, i read somewhere that this lawsuit has settled. does anyone know what else is going on here?
i think whoever bought this place for $527k is going to see a sizable profit off this one. I’d guess this unit sells for at least $620k
3) the structure totally collapses.
In that case, the damage would be so widespread that the insurance company would go under from all of the claims, or you’d get pennies on the dollar.
“Sizeable profit”
*If* this sells for $620 then after transaction expenses of about 7% the net is $576. $49k in profit, or about a 9% return on the investment. Seems like a lot of risk to have $527k parked in an illiquid investment for 6 months to get a 9% return.
Whoever buys at Beacon should do so with as little money down as possible to limit exposure.
Is the situation that bad for this building that the HOA could actually collapse? I’d be curious to find out what happens if that (unlikely) scenario transpires…
“going to see a sizable profit off this one”
Yeah, that’s what the 2006 buyer was likely told as well. Didn’t quite work out that way.
There are a ton of rentals in this building for much less than the cost of buying, with none of the very substantial risk. You’d be crazy to buy in this building unless you could do so at about a 30% discount to this asking price.
This is a symbolic foreclosure as the (former) owner of Unit 802 was the lead plaintiff on the lawsuit against Catellus Development. I guess he decided to throw in the towel. Then again, I can’t blame him IF Property Shark is right; they claim a $799,900 variable first and $150,000 second (JPM was the loser on that one). Yes that’s a 105% LTV…
Symbolic Foreclosure? Great new term. I’m a little confused about some of the above. 4/06 buyer at $906K has a $800K variable first and a $150K second. 4/06 buyer defaults and property is sold on courthouse steps in 11/09 where a cash buyer other than the bank purchases the unit for $527K. Said cash buyer now lists the unit for $669K.
The question is: why didn’t the bank buy the unit on courthouse steps? Were they smart enough to know that $527K today was better than owning a unit in the Beacon with all it’s attendant resale issues? That’s all I can think – but 99.9% of SS posters declare the banks to not be that bright.
For the plugged in reader:
Not to nit pick, but it is actually much worse than you think. The loans were for 105% “LTC”. Based on the trade on the courthouse steps it actually ended up being a 180% “LTV” (!!!). If only someone could have seen the real estate crash coming…
And for the Editor, yes I agree that that all cash being required doesn’t mean it isn’t literally an apple. But at the same time, leverage does not create value, so the real value add here is not the loan, but the fact that an investor took time to research the property, find the foreclosure, raise the money, go to the auction, buy the property, probably some minor cleaning/fixing, and sit on it while it is re-marketed. How much all of this is worth over the auction price? We’ll see…
And you have to love the name of the entity that bought this unit: Courthouse Steps II LLC (as well as Sausalito based Parker Pacific Investments).
The original owner is the president of a financial services firm, so he is no slouch (and probably explains the high LTV).
Earthquake insurance certainly is expensive and in most cases doesn’t make financial sense. Tipster’s view of collapse of the insurance company is completely incorrect as insurance companies themselves actually carry a very small portion of the risks as the rest is all re-insured or effectively sold off to other insurers or financial institutions, usually in other parts of the world to spread the risks.
For condominiums, damage is shared by the entire HOA. Your building may be spared in an earthquake but cost to repair damage in the next building of the same condo development will be shared equally by you in the form of an assessment. Its the one for all – all for one senario. The deductible is the killer here. Say your 100 unit development is worth 50 million and you are insured for 10 million (buying the full 50 million will be prohibitively expensive). A 5% deductible is calculated from the worth of the development, which in this case is 2.5m. Any damage up to 2.5m will be the deductible and insurance will pay the amount above 2.5m up to your insured limit which is 10m. So even if you have earthquake insurance, the 100 unit would have to each pay out $25,000 to cover the deductible. If the damage is 20m and you are only covered for 10m, assessment for each unit would work out to be $100,000 + $25,000 = $125,000. That, mind you, is cash you need to come up. FEMA may make short term loans but these are only for two to three years. In the meanwhile, where are you going to live ? And you are still on the hook for the mortgage and HOA dues and taxes… The unfair part is that the person who owns a small $400k 1/1 will pay exactly the same amount as the person who owns the $2,000,000 penthouse three times the size with a panoramic view. I am guessing all the lower value unit owners will bail essentially rendering the development dead in the water. Now, if you are a renter, you would be immune from all this although in a disaster of this magnitude, your job may be gone as well…
Geez, the real winner here is the former owner.
I’m guessing he probably made no payments for the last year of his 3.5 year hold. If he had an option arm loan, he could have used the money he got at closing to make the first two year’s payments of the 2.5 years he actually made payments. The odd purchase price ($906,666 – really? Who was he, the devil and that was his lucky number?!) means he probably got the developer to pay all closing costs and roll them into the purchase price and so he used all the cash back to fund the first two years’ payments, making only the minimum on an option arm loan.
So he paid a fraction of the interest only for about 6 months for a 3.5 year hold while the rest of us schmucks were making rent or mortgage payments, then he strolled out of there.
And now for some sarcasm: this is exactly the type of person the government should help to “stay in their homes”!
The only thing is, this guy was too smart to fall for some sort of restructuring offer. He milked the system for all it was worth, the banks had no recourse, and now his “credit” has a “black mark” on it for 3 years – big deal. You can go three years easily without ever having a credit check. I haven’t taken out a loan or gotten a credit card for three years. No one has checked mine in a long time. So in the end, he gets off scott free.
Second in line feeding at this trough are the realtors! Remember their slogan, two years ago was “A good time to buy and sell real estate!” That was great advice! Still is.
Outsider: is it true that the assessment for the earthquake insurance is shared equally among all owners? At my old condo association, the HOA dues and I believe also assessments were scaled by the size of your unit. So maybe the penthouse owners will pay proportionately more of the deductible.
It would be interesting to see more thoughts on at what point units at the Beacon would reach a good value from an investment perspective. There’s the usual rent vs. own calculation, tweaked in this case for the HOA conflicts – at some point the association will be reconstituted in a functional way, at some cost to existing owners. Can we estimate that? Another lower bound might be how much it would cost for an investor to buy out some of the disputing parties (including the owners of the commercial spaces) and force through an agreement that would resolve the conflicts and reduce the risk discount of these properties.
The CC & R for each HOA is different. I have seen both but the difference, if there is any, is usually surprisingly small. Just look at how HOA generally determines dues. The smaller units almost always pay significantly more per sq ft. plus there is seldom an adjustment for higher value due to view and location of the units. The difference in dues is more fairly adjusted in New York, I noticed.
Earthquake insurance at my building is 10% of my HOA dues. I’m in the north end of town, and my dues are less than the Beacon’s. I read and hear all the time how EQ insurance doubles the HOA dues. Admittedly I’ve only seen my building’s financials, so I can’t speak for the Beacon and other EQ insurance buildings, but I suspect it’s no where near 1/2 the Beacon’s dues. I’d bet 20% at the upper limit.
As for what EQ insurance covers and how it works? I’ve tried to get that answer with no success.
Sale date 4/28/2010
Sale price $670,000
of all the nonsense that happened back in the day, the Beacon is the one building that I still shake my head at the most. Even today $670k seems like a big price for this one. Huge HOA dues at $774.80 per the MLS plus leased parking at $115.50 per month. And in a building that seems fraught with litigation and will continue to see other foreclosures and short sales. How does this not sell for more like $600k?
Of course back in the day it was leased land too. i didn’t get this building back then, and at $670k for this unit I still don’t get it.
If 88 King #717, a 2/2 with $800 HOA, sold for $740k; a 1/1 at the Artera sold for $600k; it’s not far fetch to think that this sells for around asking.
Personally, I’m not into condos. But would you rather pay $740k for a 2/2 at the Towers or $599k for a 2/2 at the Beacon?
3) the structure totally collapses.
In that case, the damage would be so widespread that the insurance company would go under from all of the claims, or you’d get pennies on the dollar
A major insurance company has never gone under paying claims for earthquakes, massive fires, hurricane nor tornados.
Why? Cause all the policy’s are re-insuraced by reinsurance comapnies.