Deed in Lieu of Foreclosure

DillDILA Deed in Lieu of Foreclose is sort of  a “friendly” Trustee’s Deed.  The lender takes back the property without the cost and formality of a TD, and everybody moves on.  If a 3rd party is involved, it is like a streamlined short sale.

There has been a lot of discussion of Shadow Inventory and where have all the NODs and TDs gone.  The have moved to DILs.

In March 2014, 114 DILs and 113 TDs were recorded in Washoe.  March 2013 saw 17 DILs and 93 TDs.  March 2012 saw 21 DILs and 199 TDs.  With the changes in foreclosure regulations and the Home Owner’s Bill of Rights, the popularity of DILs is skyrocketing.

HERE is the DIL spreadsheet from the Assessor sorted by date..  The really interesting thing to look at is the 3rd Parties using DILs to acquire properties.  Thunder Properties, TBD, SAC II, Cactus Homes, LVDG, Reno Property Management (Page / NRES).  Here is what Thunder Properties has in their arsenal – they seem to be a rental hold.

All of the 3rd party DIL action is happening under the radar.  There is a lot of money being made by 3rd parties teaming up with the lenders, and no oversight whatsoever about what is going on below the surface.  A lot of institutional firms seem to be joining our local investors.  And why do I sense that the average homeowner is somehow getting screwed by these back alley deals?  Because they always have been and always will be.

Villa Toscana Take III

VillaToscanaDR Horton has just taken baby steps to jump-start their Villa Toscana project at Sharlands and Mae Ann / Mesa Park.  This is the last “major” shovel ready project in the NW outside of Somersett.

Originally designed as 240 triplex units cloning their Esplanade project in the South Meadows (think Wind Ranch Road), mass site work was complete before they pulled the plug the day before the foundations were to be poured in 2007.  DR Horton went back to work and redesigned the site for 83 SFRs, redid the site work, refaced the block retaining walls with stone, then withdrew their subdivision map application.  They have just received a new Subdivision Map for a whopping 5 units at the Mae Ann back door to the project.  Not a huge commitment, but a start.  Design-wise, if the project matches their prior submittal, expect another sea of beige SSBs.

HOA Foreclosures

Can an HOA foreclose on properties for delinquent dues and/or assessments?  Yes (delinquent fees and penalties is a different story).  They normally do this only to perfect their lien position in case of a sale, and the don’t actually snatch the properties.  But their can be some unintended consequences.

It is important to understand the order of liens on a property.  The mortgage / deed of trust is NOT necessarily in 1st position.  Liens for delinquent property taxes or special assessments are actually the 1st lien.  HOA liens are in 2nd, and the bank loan is in 3rd.

There are a growing number of properties being purchased at HOA Trustee’s Sales by 3rd parties.  A $1.5M ArrowCreek home recently sold for $166,000 on the steps, bid up from the $18K owed on delinquent assessments (10750 Renegade).  There was never a NOD filed by the bank on their loan, and it is possible the loan was still performing.  But the bank loan is now wiped out, and the new owner will make a killing.

Buying HOA TDs used to be pretty rare – the banks usually step in to cure the defaults to protect their lien positions.  But right now, we have institutional investors as well as the local usual suspects buying up all the HOA TDs they can get their hands on, leading to the prices getting bid up on the steps.

I can’t really comment on the legality of it all, or why the banks are letting this happen.  Without a NOD, they may not even know the properties are in play, though I believe that ALL lien holders are required to be notified of an impending Trustee’s Sale.  I can see a potentially huge “creative default” market here – stay current on your mortgage to hide it from your bank, let the HOA foreclose,  let your assigned straw buyer buy the property at the Trustees Sale, and take a back end cut on the deal.

Cynical much?  Sure.  But I have always been amazed at how low the real estate industry will stoop to find a new profit streams.  This is one to watch.

 

Hub Coffee Roasters Moves NW

GWM HubThe Hub Coffee Roasters pioneered Midtown before Midtown was cool (or even “Midtown”).  They pioneered the Daytwa Riverside retail project before anyone else and have been a runaway success.  These guys are geniuses a site selection and understanding market trends.  So when the news hit that they are opening an outpost at the Great Western Marketplace, it gave the project a new legitimacy.

The GWM is planned to be a weekend bazaar of sorts, occupying the old Kmart in NW Reno.  Artisans can rent spaces as small as 10×10 for $400 per month, which works out to about $35 per day of operation.  That might be a little steep for low volume home based businesses like Scrappy Lu, but offers a potentially great 2nd outlet location for existing businesses.  Here is the preliminary project plan.  Cages studios can be combined to create larger spaces.

GWM Plan-page-0 (1)The Pantry/Produce section is pretty interesting (and large) and would be a great addition to the NW retail mix if well populated with great vendors.  I can imagine the closing time deals on Sunday evenings!

What are my fears for the GWM?

-  Location – There is a pretty good reason a national retailer like Kmart flamed out at this site.

-  Access – By the time you see this property, you have already passed it.  If you do try to get up there, access is not intuitive.

-  Critical Mass – GWM can accommodate up to 370 vendors in 167,000 SF.  It won’t be anywhere near full when it opens in May.  I can see the early adopters being disappointed at the opening offerings and not returning.  I’d be offering free space to legitimate businesses to make the project less disappointing on opening day.

-  Marketing – I follow this project closely, and it is almost invisible except self generate Tweets.  I hope the outreach to the retail community has just been under my radar.

But the Hub is in.  That gives me some confidence that this wild ass concept might have legs after all.

Caughlin Ranch Annexation?

CaughlinRanchItem L4 on tomorrow’s Reno City Council agenda is a request from Mayor Bob Cashell for staff time to be used to study annexing Caughlin Ranch into the City from the County.

Most of Caughlin Ranch as you think of it is already with the City of Reno Boundaries.  But the more custom home areas west of Caughlin Parkway are (defiantly) under Washoe County jurisdiction.  Excluding this area from Reno’s Sphere of Influence and right to annex was part of a contentious lawsuit and settlement immortalized in the sacred Region Plan.  I don’t know what Mayor Bob is smoking.

What I think he is calling “Caughlin Ranch” for annexation purposes is everything in the island that previous annexations have created.  This would include Juniper Trails (Eagle’s Nest), Juniper Hills (the “real” Reno), Highland Park (where I own land under development – see Mayberry Canyon), and probably Ambrose between Mayberry and the Truckee.  Here is a MAP of the area.

What would annexation mean for the residents?

- Instant 15% increase in property taxes (there is some trade off on fire department services).

- Adherence to Reno Zoning Codes, which are heavily weighted towards new subdivisions and Balkanized micro neighborhood plans.

-  No more chickens in the backyard or the flexibility to build Accessory Dwellings, both if which Reno prohibits.

-  Having to deal with Reno government instead of the County.  ‘Nuf said.

I’m pretty sure Reno Planning staff will get their go ahead to study the annexation. I am equally sure that holy jihad (I can say that here, Fred!) will ensue from the affected homeowners including Governor Brian Sandoval.  Why Mayor Bob is risking the support of this Red stronghold in an election year is beyond me.

Anyway, should be an interesting discussion.  Any thoughts from the annexees?

Weekend Fodder

weststmarket-  340 E. 2nd Street is the vacant lot on the Truckee across the street from the Aces Ballpark.  We have been hearing for years about the extended stay hotel planned for the site, but it keeps being delayed.  The wait may finally be over.  Reno Hotel Partners LLC (Basin Street Properties) just sold an 18.44% piece of the project to Redbird Reno Hotel LLC out of Mill Valley CA for $1.7M.

-  Another stalled hotel project is the Hampton Inn planned for the corner of Robb Drive and Sharlands at the I-80 interchange.  The permit has been filed (the original permits expired).  This will be a nice addition to the NW.

-  The favorite sport in town the past few weeks has been trying to suss out what Tesla is up to with their 10,000,000 SF Gigafactory.  Logistically, Reno makes a lot of sense.  We are halfway between the local lithium supply and the Factory in Fremont CA, great access to the Ports of Oakland / Stockton / Sacramento to receive shipments from overseas.  Stead Airport has 3000 acres of develop-able property and would be an ideal site.

-  West Street Market is once again rearing its ugly budget sucking head.  Reno Redevelopment is 6 years into a 10 year lease on the property that is now listed at $2.15M (up from less that $600K in 2005 and reflects the TIs Reno RDA has poured into the hot mess).  To keep from defaulting, the RDA currently receives $100,000 per year from the Parks and Rec budget. HERE is some history from the last go round.   Fair Market Value on West Street Market is probably right around $1M.  Please, Reno, let this albatross go.  Maybe the new owners will allow you to exit this investment gone (seriously) wrong early.  Sorry for the businesses there that are trying to make it work, but this is a job for the private sector.

-  The Montage (aka Mantage) retail units have hit the market at a uniform $125/sf.  These are “Cold Shell” in industry speak – boxes without any improvements or mechanical systems.  The owner is throwing the spaghetti against the wall to see what sticks with the asking prices (2nd and Sierra space is not equal to Commercial Row space), but it is nice to see the listing and sales process has at least started.

Sorry for the lack of updates lately, but some good stuff coming up.  Can your HOA sell your house for lack of dues payments?  Yup, and finding these TDs passing under the radar of the banks has become a new cottage industry.

Apple Goes Big

bigappleApple just applied for permits for 4 additional “data cluster buildings” on their campus near Mustang.  And this time the are going large.  Reverse engineering from the permit fees, the base building construction cost of these 4 buildings is $18.2M and the tenant improvement costs are $28.7M.  with the site prep permit, the value is nearly $50,000,000 (and permit valuation is always drastically under permit cost).  The equipment cost is probably at least equal to the construction cost.  HERE is Apple’s permit log since they bought the property, including the world’s most expensive detached bathroom.

No action to report on Apple’s downtown outpost, though locating in Tessera seems out of the question.  The old Post Office comes up often in discussion (loading docks already exist, great retail presence if the want an Apple Store). I would guess that Apple will want to get a facility up and running ASAP so they can take advantage of the tax breaks they have been given to uncrate the server components in Downtown Reno.

And Tesla’s Giga Factory?  The site announcement is projected for later this week.  Reno/Washoe is a natural from a logistics standpoint – halfway between the Western Lithium mine north of Winnemucca on the Idaho line and the production facility in Fremont.  How far did NV bend over to get this project and was it enough?  We will know soon.  If we get it, it is a game changer for our entire region.

Downtown Permits

OLYMPUS DIGITAL CAMERAAnother $10M permit week in Reno, with some interesting stuff downtown.  HERE are all the permits issued last week.

650 Tahoe Street (pictured) applied for a $10,000 grease trap permit.  that means a new restaurant is on the way – the Laughing Planet Cafe.

50 South Virginia Street is the old main post office.  Several interim permits have been issued over the last few months, but last week a $1,500,000 permit for base building improvements was issued.  The permit report is HERE - you can sometimes learn a lot about what the end product will be by exploring the permit tracking.  I track somewhere near a $5M investment in this property so far, and the ownership hasn’t even gotten around to the tenant improvement level yet, which could at up to another $5M.

241 North Virginia Street is Siri’s Casino, though it is leased from the Whitney Peak owners.  $1,000,000 tenant improvement permit, details HERE.  They should be complete by the time Whitney Peak (witless pork to the trade) finally opens.

If you like digging into this sort of stuff, check out permit BLD13-03449 at the Virtual Permit Place under the Building tab, and BLD14-04101, BLD14-04103 and BLD14-01694 just for fun.  Midtown’s rising!

Not issue yet, but in the permit loop, is the new Hampton Inn at Robb and Sharlands.

MIA are The Siegel Group’s Truckee River Lane Building and Virginian Hotel on NVA.  Design takes time, and cool cost money.  Watch for these downtown additions in the near future.

Park Center Tower NOD

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OLYMPUS DIGITAL CAMERABasin Street Properties’ Park Center Tower at 300 E 2nd Street received a Notice of Default today.  When purchased in 2007, Park Center Tower LLC assumed a $17,000,000 loan from the seller.  The 6  July 2013 payment was missed, and there is now a $1,478,044.01 balance due (I assume this is missed payments and penalties, and not the total loan remainder).  At least property taxes are current.

Basin Street was a true believer in Reno and they are a major player downtown.  They have been planning to build and extended stay hotel just to the east of Park Center Tower and across the street from the Aceball field, but the promised permits just never seen to get pulled.

Basin Street leased up the building with Jones Vargas, Fennemore Craig, Fusion Contract Centers, C4Cube Incubator, Slice of the Peak and other tenants.  But at what cost?  The achievable rents do not like they could support the loan carrying costs and the tenant improvement investments.

I am hoping this is just a tactical default, and not reflection that downtown class A projects are unsustainable.  Losing Basin Street would be a devastating body blow to the progress that has been downtown to date, and a stain on Reno’s ongoing redevelopment efforts.

Somersett Special Assessment

SomersettParkwaySomersett Parkway was constructed with a $18M bond financed through the city of Reno.  Residents pay a quarterly special assessment to repay this bond, and there is just under $8M in principal to pay off.

Reno has found a way to refinance these bonds, and it will save the average Somersett homeowner $100 per year in interests payments.  That’s good news on a rainy day!  This $8 per month is exactly the amount needed to buy the golf course, ironically.

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