clock menu more-arrow no yes mobile

Filed under:

CurbedWire: We Got Updates!

1) Griffith Observatory: The Los Feliz Ledger, which landed at our doorstep yesterday, has good news for those wishing to see the newly redone Griffith Observatory. Yes, its true that shuttle ride reservations from the Zoo to the Observatory are sold out. However, according to the Ledger, shuttle reservations from Hollywood & Highland still seem to be plentiful. We just checked, and for both Saturday and Sunday, 8 or more tickets are still available during morning and afternoon hours (see Reservations). Take your whole embarassing family.

2) Furama Hotel: We're having problems with our comments. They let in porn and viagara spam, but kick out quality info. One "insider" emails in his updates after the comments get cranky. "With regard to the Furama would not be operated under the Pali House brand, mainly because it would be a pure hotel and have no serviced condos. [The Pali House brand is a hybrid of hotel rooms and serviced condos.] I'm sure it will be hip and upscale though."

3) KB Homes: The "insider" also has some info with regards to KB Home's layoffs and cash flow. "I also posted a comment about the KB Home bond default, which falsely implies that they are having trouble paying their bills. The articles you linked plainly stated that KB breached a non-monetary covenant (late quarterly filing due to stock options accounting). Their business activity may be down, but none of the large homebuilders are short of cash, not even close. They have had record profits five years running. Layoffs are to protect profitability in future reporting periods with the anticipation of lower revenue."

4) 1100 Wilshire: And finally, an actual lawyer writes in and isn't threatening to sue us. Mark D. Baute of Baute & Tidus emails us after taking a look at the complaint filed against the 1100 Wilshire development team by soon-to-be, but maybe not, tenants. "I read the complaint after I read your website/blog and related bulletin board comments. The lawsuit does focus mostly on square footage. While square footage is a real problem for buyers who thought they were buying larger units, the paperwork signed by buyers seems to suggest that the real leverage for any buyer who wants to protect himself or herself from the collapsing market is to focus on the long delay on delivery and the delay by the owner on closing escrow." The rest of Mark's take after the jump.

"Most of these abusive boilerplate agreements allow buyers to escape and get their deposits back for things such as long delays on closing escrow, or for real (as opposed to feigned) financing contingency failures, and the like. Condominiums that are not ready for occupancy a year after escrow has been opened would generally allow a buyer to cancel and get his or her money back. One of the contracts attached to the complaint seems to indicate a fall 2005 signature date, which means that buyer may be able to cancel and get his deposit back because the owner has violated the one year escrow closing deadline. Section 3(a) requires that escrow is opened immediately after the deposit check and signatures, and Section 7(a) enables buyers to cancel if the owner can't deliver the unit and allow occupancy and close escrow within a year. Condominiums where the owner/developer has come up way short on square footage can also cause a real appraisal/value problem, especially in a declining market, but on that sort of issue (as with square footage estimates), the language generally favors the developer/owner unless the financing contingency problem is directly linked to the owner/developer misleading folks on square footage issues. The reason is simply this: square footages are almost always styled as mere "estimates," but often times financing contingency language is more protective of buyers. Here, the situation is unique, in that the owner/developer has overstated square footage estimates, which, in turn, in a rapidly declining market, are going to cause significant appraisal problems, resulting in either no loan approval or loan approvals for lower amounts. That problem can be absolutely devastating to individual buyers because buyers may have to come out of pocket an additional $50,000 in a market where prices are collapsing and more units are coming on line. It's the worst of all possible worlds for a home buyer: value goes way down, loan amount goes down, but the down payment goes up, and then the buyer is locked into a property where the mortgage amount is larger than the value of the condo. This was commonplace in LA in the late 80s and early 90s, and the most common solution was thousands of defaults and non-judicial foreclosures, again, usually bad for the homeowner, but tolerable for the bank because the bank just resells the unit at a minor loss. The other things that the owner/developer must fix before anyone is required or allowed to close are set forth in Section 6(a). Here, buyers who want to get out should look at that required laundry list and make sure that the owner/developer has done everything that is required, because if they haven't and the one year to close escrow deadline expires, then folks can demand their deposits back and either "walk" or renegotiate. The common area build out needs to be finished, among other things.

With an additional 5,000 lofts, condominiums and apartments coming on line in a six month span in a one square mile area, it seems like the best remedy for all these folks to opt out, insist on getting their deposit back, and either (a) renegotiate after they have been given their money back based on the new marketplace conditions, or (b) look at other buildings given the dozens of other choices. That said, the reality is that some folks do seem to want to try living downtown in a high rise, even if they overpaid months ago in a market that is about to collapse, so maybe the remedy for them is to seek a price reduction prior to closing and to open the door to negotiations now."

Thank you for this interesting take on this issue.