Monday, September 27, 2010

Standard-Examiner: Trustee Sale At Junction

We'll predict that this property will revert to First Community Bank's Real Estate Owned (REO) portfolio

Just as foreshadowed on 7/15/10, the Standard-Examiner reports that the Junction's Earnshaw Building goes on the auction block this afternoon on the courthouse front steps, a victim of the still-collapsing U.S. real estate bubble:
Trustee sale at Junction
With depressed U.S. commercial real estate prices still levitating at recession lows, it's a bad time for any commercial real estate lender to be scheduling a foreclosure sale. Despite the lender's chirpy optimism that private parties will possibly show up to bid however, it's obvious that the current loan balance likely exceeds the value of the property, so we'll predict that this failing project will ultimately revert to First Community Bank's (FCB) Real Estate Owned (REO) portfolio.

In the event that FCB does "take back" this property, the scenario will not bode well for the early completion of the Earnshaw Project, inasmuch as FCB will no doubt opt to keep the property on its books and await a rebound in the commercial real estate market, rather than dispose of the property at a loss. Unless and until FCB is able to rid itself of this "underwater" REO liability, don't expect FCB to invest another dime of its own money in the Earnshaw property.

Update 9/28/10 8:45 a.m.: The Standard-Examiner carries the post-foreclosure story this morning, in which a "dejected" First Community Bank Senior Vice President Bob Parks reveals that he still doesn't recognise the reality that the Earnshaw Building financing had been over-leveraged by a factor of almost 100%. And this moron Parks is apparently still employed as an executive officer at a local bank. Scary:
Lone bid received for 32 Earnshaw Building units

65 comments:

Fireman Joe said...

The former Ashton Square condo development has become a parking lot.

Danny said...

I agree with Rudi's insightful analysis of the issues, and note his is far better than the typically incompetent newspapers', but I take issue with the statement that the Earnshaw project is "a victim of the still-collapsing U.S. real estate bubble."

No, it's not. The vast majority of commercial property is not in default, "tough times" or not.

The Earnshaw Building is a victim of one thing, and only one thing: "incompetence".

Speaking of which, note this from the article.

---
"It's the best thing that could happen for the project," Christopulos said of the trustee sale. "The liens will be cleared up, it (the building) will be finished, and it will move forward."
---

Christopulos, head of Godfrey's business-government complex, appears to be rather foolish.

Someone should explain to him that bankruptcy, foreclosure, and auction are in fact, not the "best thing that could happen". Perhaps it is the best that can happen in Godfreyland where government and crony business are one, but it is not the best that can happen in the real world.

RudiZink said...

Nuanced point well taken, Danny. However, the U.S. real estate bubble, (predicated on the faulty assumption that real estate values would always appreciate), was a result of a broad level of incompetence all across U.S. and World real estate markets. As early as 2005, savvy lenders and investors recognized that the bubble was forming. Many of them (your blogmeister included) took defensive positions around the middle of the decade. Some lenders (and borrowers) ignored the evidence; and went recklessly out on a limb.

Yes. The Earnshaw project's financing is an example of extreme incompetence. Still, I believe the real estate bubble was a general economic phenomenon, and that Earnshaw's failure is a result of that.

Real estate investment is similar to a game of "musical chairs." When the market sags (as it always does) it's the least competent investors who are knocked outta the game.

John Maynard Keynes said...

The market can stay irrational longer than you can stay solvent.

OneWhoKnows said...

I bid one dollar!

Watch Stuart Reid win the bid and get his building without even having to build one.

Nicely Done said...

Using Scottie B math where one underestimates construction costs and overestimates rent incomes one can play musical chairs with other people money for quite some time.....Ashton Square was when the real math caught up for that little group....

Nicely Done said...

OneWhoKnows....yup...just like Promontory in Park City....what a crock

Danny said...

Rudi,

I agree with you, but would add another point. You say,

"Real estate investment is similar to a game of "musical chairs." When the market sags (as it always does) it's the least competent investors who are knocked outta the game."

Indeed. That's what is SUPPOSED to happen. What HAS happened nationwide is the least competent, but large and politically connected, investors have been, and are being, bailed out. This has the effect of insulating them from their mistakes, and of preventing the economy from washing them out of the pinnacles of power.

Thus, we are prevented from the cleansing effect this recession could otherwise have. Therefore, the recession will continue, or get worse, until this cleansing collapse can take place.

In the case of the Earnshaw building, the present owner will be out of the picture. This is the true benefit of today's auction.

RudiZink said...

"Therefore, the recession will continue, or get worse, until this cleansing collapse can take place."

Absolutely right, Danny. So true.

jampijimba said...

This is really Residential property. 28 Residential condos, and 4 office suites. In all reality No different than a bank taking back 25 homes or 47 lots in a single subdivision. I don't think there will be any takers this afternoon. However I do surmise that the bank will dump this property, and take the hit within the next 6 - 12 months. There is know way they will sit on this 2-10 years. Rudi says "FCB will no doubt opt to keep the books and await a rebound in the commercial real estate market" Do you know what your talking about half the time? I do wonder.

RudiZink said...

"Do you know what your talking about half the time? I do wonder."

We'll see... won't we?

still puzzled said...

Can we infer that Mr. Earnshaw was lying when he said four and a half years ago that all but two of the condos were already sold?

Nicely Done said...

Puzzled....Scottie Doo math there

Hindman said...

If you Google FCB you will find that First Community Bank, Albuquerque, "will pull out of the Utah market effective Oct. 31.

At the end of June, the Utah operations included $287.2 million in loans and $20.9 million in deposits. The Salt Lake City branch building will be listed for sale while the Midvale location is leased. Twenty employees will be affected."

Marion said...

Does any one know what kind of public subsidies that Earnshaw got from the Godfrey Administration on this building?

In other words, how much did the tax payer's of Ogden lose on this project if anything?

Tom said...

Comment from the Standard article:

This Earnshaw fellow, who is now bankrupt, was one of Godfrey's main cheerleaders in advocating the city go into massive debt for the Junction, and in putting down the people who were questioning the whole project in the beginning. They derisively labeled any one who questioned this mega million dollar boondoggle as "Naysayers" who didn't know anything about modern financing and empire building.

In keeping with all of the secrecy and insider dealing that happened with the junction, scams that may very well cost Ogden's tax payers a hundred million dollars when the final tally is made, they lied through their teeth about almost every bit of the whole project. As an example, the mayor and his crony Earnshaw publicly and repeatedly told every one that this particular building was sold out before they even built it, in a shameless attempt to demonstrate public support for the fiasco. This was an obvious lie of major proportions considering that not even one unit was ever sold!

Curmudgeon said...

Tom and Still Puzzled:

It's entirely possible that all or nearly all the condo units were pre-sold. The problem is, contracts normally specify a delivery [i.e. "available by"] date and the builder did not have the units ready. It quickly became clear that the delay would not be the not uncommon few months, but a year or longer. Much longer. At which point people began demanding to be let out of their contracts because of the builder's failure to perform.

Very often, condo units are "sold" pre-construction, and often the buyers are speculators who buy before construction, then sell [in a hot and rising market] to people who actually intend to move in once construction is completed or nearly so. The Earnshaw builder's failure to complete let the both the spec buyers and the intending to move in buyers out of their commitments.

There were as I recall other problems with the purchase agreements [reported in the SE well over year ago now, I think]. As I recall they were so vaguely written disputes arose over whether the buyers were buying units already including all appliances or not. And so on.

But when the building was announced, in the heat of the speculative bubble then expanding, it's entirely possible that most if not all units were in fact under contract to buyers pre-construction. Common in the Florida condo boom/bust for example.

Nicely Done said...

Ummmm...why does Weber County have the Ashton Square common area at .01 acres and valued at $1,750? more tax breaks from the RDA eh?

Stanley said...

Curm

It is also entirely possible that your speculation about these condos actually being "sold" is just that, speculation. The reality in the end is that not one of them was sold for real.

RudiZink said...

"Ummmm...why does Weber County have the Ashton Square common area at .01 acres and valued at $1,750? more tax breaks from the RDA eh?"

Of course the Ashton Square tax break (which is owned by the Mormon Church) is legit. It is totally legit.

Wait until BYU brings it's new campus to dowmtown Ogden. Given the flutter I've heard in my Ogden Priesthood meeting, it looks to me as if a downtown Ogden BYU campus is on the table"

Curmudgeon said...

Stanley:

If you'll look right at the top of my original post, you'll find this: "It's entirely possible that all or nearly all the condo units were pre-sold. " Possible, Stanley. Just wanted to note that the assumption that the Ernshaw builders were being dishonest when they announced that nearly all the units had been sold might well be wrong. Might. I haven't seen the purchase agreements so of course I don't know for certain.

As for whether such pre-construction condo sales are "for real" --- they're enforceable contracts, just as real as if you sign a purchase agreement on a car you want built to order and then shipped to you at the dealers. If the car is built to your order and is delivered, you have bought it. If it is not -- that is, if the manufacturer or dealer do not fulfill the terms of the contract, you're not obligated to pay. Pre-construction condo purchase agreements, as I understand them, work just as purchase agreements for other kinds of residential property work and are just as valid and enforceable in law.

Nicley Done said...

Correct me if I am wrong...but wasn't Ashton Square Stuart Reid's project not "the church".

Also, as far as BYU/Ogden....from what I "hear" it is an adult MTC....that was master planned about 9 years ago.....

Curmudgeon said...

Nicely:

What's an MTC?

Nicely Done said...

Missonary Training Center....

Curmudgeon said...

Nicely:

Ah. Thank you.

Stein E said...

@ Nicely done

The LDS Church bought it from Reid quite some time ago. Try to keep up dumbass.

Nicley Done said...

Thanks Stein...you are quite the communicator...impressive and indicative.

Stein E said...

The church also sold it to Reid with the condition if he didn't develop it, that they had first Right to purchase back. They also sold the Treehouse Museum their piece. The obviously want to control what is next and around them for good reason.

Danny said...

I've been enjoying Nicely Done's posts.

Just sayin'.

DD

Nicely Done said...

Thanks again Stein....Reid listened to Scottie Doo on construction costs and got burned there....they circle jerked Wadman around for quite some time.

Nicely Done said...

Whoops, spoke too soon on the thanks....gee Stein, got some sort of bug in your drawers?..whats the big beef here? big wrong on new to town.

Nicely Done said...

whats the chance of Ogden City pickin this sucker up???

curious 1 said...

What happened to "G" Train Wilkerson, she sold most if not all of the condos, did she have to return her commission? I remember her asking anyone if they knew of buyers when the first occupancy deadline passed and a few buyers wanted out of their contracts.

She is also one of the insiders running the city in their secret meetings with the mayor, Tom Moore and their ilk.

DS said...

I took off work early and went to the auction, which just ended.

The bank bid $3.2 million. There were no other bids.

So the bank was willing to let a $6.2 million loan go for $3.2 million, along with ownership of the Earnshaw Building, and nobody took it.

What's that, about $100,000 per condo, including the penthouses after taking off some for the offices?

Sheesh! Downtown Ogden is sure cheap!

After the auction, somebody congratulated the banker for his "winning bid".

He frowned, "Yeah, thanks."

Now watch Godfrey's bureaucrats spin this debacle.

Curmudgeon said...

So in essence, it was offered for half price and no takers. That right?

Not good.

So much for the noise in the paper from the Administration about several interested parties likely to bid who could not be named.

Monotreme said...

From the S-E Twitter feed:

1. Only bid for Earnshaw Building is from First Community Bank the note holder for $3.2 mil. Bank retains possession of building

2. First Community VP Bob Parks says bank lost a lot of money of Earnshaw Building

3. Parks says he's disappointed and still wants to sell Earnshaw Bldg. First Community doesn't want to develop it.

Monotreme said...

@Curm:

It occurs to me that there are a lot of people who cannot be named who are interested in investing in Ogden.

In fact, I have here in my hand a list of 205 -- a list of names...

No, 57 names...

Stein E said...

The insides of the units are not finished at all. So no they are not 100k a unit. Where did all the dipshits come from today?

Stein E. said...

"Park says he's disapointed and still wants to sell Earnshaw building. FCB does not want to develop it".

Well according to Rudi "FCB will no doubt opt to keep the property on it's books and a await a rebound in the commercial RE Market"

So we will see won't we.

Stein E said...

This Foreclosure still won't wipe out everything. Earnshaw carried no insurance on the the place, and a Triple AAA Fire employee installing internal sprinklers was badly injured when fallimg through an open hole on the 3rd or 4th floor. Earnshaw is being sued of course, and had no insurance. Besides insisting they were all sold, he also insisted on managing the project himself.

Nicely Done said...

the outside is falling apart as we speak.

RudiZink said...

"...don't expect FCB to invest another dime of its own money in the Earnshaw property."

That's what I predicted... and that seems to be the outcome.

Yeah... the property can be unloaded...

So long as First Community Bank doesn't mind taking a bath.

Look for First Community Bank, (with $20 Million in deposits, and $287.2 million in loans) to be one of the next banks to be shut down by the Feds later this year.

Face it, Stein E. (aka jampijimba), you're a friggin' idiot.

Ozboy said...

Interesting comments going on here in spite of the gratuitous insults flying around.

The Earnshaw building does seem to have some potential even though it is right next door to a penny arcade and day glow bowling alley. The building is rather handsome and the top floor units, especially the one with the east view, will possibly be a prime apartment if the whole building doesn't become a slum first. If the Mo's do build a BYUOG campus next door the whole building could become a prime location, especially after Godfrey's folly - the bowling alley and penny arcade - goes the way of the long knives and is rebuilt into whatever it will eventually become. I think there could be some pretty good buys there if some one was willing to take the gamble.

Speaking of the Mo's, does any one have a real handle on just what they are planning? Is it going to be a MTC, or a full blown campus? There will be a huge difference on the impact of the Junktion and down town depending on which it is. If it were not for the Godfrey wild card I would bid on some of these Earnshaw units myself, but there is now way in hell that I would invest again in a Godfrey Ogden.

Danny said...

But I have also enjoyed Stein E's posts today.

Just sayin'

DD

PS, The guy who went to the auction said $100k per was about what they were offered for. He didn't say they were finished or worth that.

Say "hello" Ogden, to the new Windsor Hotel. Still brand new, and probably not worth the cost to tear it down.

What a mess. What a City. What a mayor.

PPSS, Oz, you gotta be kidding. Yeah, a university campus next door and it would be prime. Really? It would also be prime if it turns out to be near the landing site for the civilization from Alpha Centauri, or if a vein of gold is discovered underneath.

You would bid on them yourself if, if, if. Yeah, so would I. So would have somebody today.

But fact is, Downtown Ogden is a train wreck. Look for it to crash in the years ahead, slow motion or otherwise.

Unless, of course, the Mo's or the Alpha Centauri's come . . .

Nicely Done said...

I'm telling ya....its an MTC...part of the tell is the housing directed at older folks....oh and that master plan...double secret of course.

Disgusted said...

Noticed in the article that they indicated there was parking on the second level. I watched the building going up and don't recall any parking being developed in the building. Is it possible that Godfrey gave away part of the Junction parking stucture to Earnshaw? Would also appears that Godfrey gave away the south end of the Junction parking structure to the Boyer low income housing project.If he did give a portion of the parking structure to Earnshaw does the City Council know about this and how does this effect the city's obligation to provide parking to the Junction?

Stephen M. Cook said...

Reinvigorating a small city with Ogdens historical problems is going to take more than some pasty narrow-minded nincompoop who subscribes to Think and Grow Rich, Make Friends and Influence People, and The Secret.

It will take a longterm investment in the children of Ogden, and encouraging homegrown industries with brilliant ideas.
Trying to re-make Ogden the way a real-estate flipper would do it?
Well, you can see the results on the court house steps this afternoon.

You cannot create actual wealth by overvaluing your own neighborhood and then repeatedly selling properties to one another other, no matter what you were told at the greasy 1990's real estate seminar.

The last thing Ogden needs is more offices, housing, or bank buildings. What it needs is smart grade schoolers willing to stay and break a sweat after high school.

Curmudgeon said...

I notice we no longer have realtors lecturing the City Council on how Ogden missed out on the real estate boom a la Phoenix and Vegas and so needed to act boldly and swiftly to catch up [by selling Mt. Ogden Park to developers and building flatland gondolas]. Imagine that.

Grow Smart, Grow Slow. If we have to have a bromide mantra to summarize city development policy, that seems a better one than the one we've been operating by for the last eight years which often seemed to be "Now! Now! Mega Project! Mega Project! Quick! Quick!" What that's given us is a half finished Junction development and a moribund River Project, both backed by considerable public funding.

Stein E. said...

Rudi your quote about FCB not wanting to spend a dime on the property is like saying boy Dogs like to lift their legs in the air to go pee.

Such a bold prediction.
That is obvious, what you're completely misguided on is the banbk holding projects for years to come. This project will be in somebody elses hands in the next 6-12 months. Guaranteed.
Don't be such a fukin idiot.

what will it cost us said...

So who walked away with all that cash in their pockets? How much of it ended up in the mayors campaign funds?

Poole said...

I've done some math that indicates that, considering the hole this country is in, if you are earning more than a half million dollars a year and are complaining about a 3.6% tax increase, then you are by definition a greedy asshole.

The numbers do not lie.

Instead, you should be down on your knees thanking God and/or Ronald Reagan that you were lucky enough to be born in a country where a banker/realtor/politician who contributes absolutely nothing to society can somehow manage to find himself in one of the top marginal tax brackets.

Another of my favorites, "I don't know where they're going to get all this money, because we're running out of rich people in this country." Actually, we have more billionaires here in the U.S. than all the other countries in the top ten combined, and their wealth grew 27% in the last year. Did yours?

Truth is, there are only two things that the United States is not running out of: Rich people and bullshit.
Here's the truth: When you raise taxes slightly on the wealthy, it obviously doesn't destroy the economy -- we know this, because we just did it -- remember the '90's? It wasn't that long ago.

Poor millionaires -- they just can't catch a break.

RudiZink said...

I see your therapy isn't working, Stein - ask for a stronger prescription.

Stein E said...

Thanks for the Words of Wisdom Dr. Phil.

Jennifer Neil said...

Poole: a bit off topic, but

China seems to be coming close

except when Bill Gates & Mr. Buffett (or some such wealthy American) wanted to go meet with the wealthy Chinese, most balked and wondered if they were going to be asked to donate $$ at the dinner -- so they found other engagements.

We are not running out of rich people, they're just turning up in other places [China] and they are less likely than Americans to part with a dime or two to help out a fellow down on his luck.

TLJ

Biker Babe said...

Rudi,
quit feeding the troll

js
BB

joe walsh said...

Why does Billiam the third worry so much about what people say about the crook that shitcanned his ass and who's schemes are ruining the town? That coward has nobody to protect anymore so why does he do it? I suspects its effects of the very nasty and very dangerous things he did every day for 30 years.......

Leary said...

Oh gods, another my "brain" is purer than yours, anti brain-chemistry-altering joy-killer, who wants extra hormone-laden meat, chickens fed with their own feces, extra big bowls of ice cream, dumping pollution all over the land who comes from a fat family of inbred science-denying Mormon fascists, and yet, thinks they are somehow the Chosen People.

Recreational Cocaine Use by Otherwise Responsible Adults: no ones business but their own.
Cleaning up the city corruption spawned by your insular/sick bigoted holier than thou cult of 19th century spiritualism mumbo-jumbo?
Everyones business.
Quit building and buying shit you cannot afford, and really, quit doing it with snickering-insider lies and, on the tax-payer's dime.

Really. Where are we Utah or someting?

ted demme said...

Is wasnt yayo for that one sellout scion of ogden. it was much worst.

googlegirl said...

"yayo"

AWM said...

"Recreational Cocaine Use by Otherwise Responsible Adults" = Oxymoron!

Leary said...

AMW:
Oh, please, spare us your tired anti-drug rhetoric. Persons of note, historically, have used various substances to feel good.
And, history has marched forward, with nary a blip.
Freedom of choice; give it a try sometime.

Founding fathers, top scientists, religious leaders, the list is endless and goes all the way to the beginnings of civilization and most likely beyond.

This national obsession with what Adults do to their brain chemistry is pathetic. What does it really matter to you whether or not a person eats a pill that makes them laugh in the privacy of their own home?
You are not one of those Frontier Protestants who think that the world will go to the dogs if you do not control every aspect of your neighbors lives?

Worry about real problems. Problems which are your business. Not whether or not I use sugar like it was a drug.

Wiggy Delicious, drag queen said...

Why do I drink?

I drink because it gives me something to do while I'm waiting for my next drink.

Stalin said...

And to close the discussion:
I don't agree with most of Godfrey's vision, but I'm pretty sure he's not Hitler.

Biker Babe said...

Stalin: nope .. he's not. Not smart enough.

js

BB

Ozboy said...

BB

If da punk were grown up enough to grow a mustache he might come close to being son of Hitler at least, but he ain't so he ain't.

With apologies to Goodwin, Godfrey does seem to have those same inclinations only on a bush league scale.

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