One wonders, if those hideous towers stand empty for long enough, when bored kids are going to start taking potshots at the windows with air rifles while crossing the Ross Island Bridge...

Stunning monuments to greed, arrogance, and stupidity.

Remember this screed from less than three years ago? A comedy classic:

Fine. We now have a North Macadam Urban Renewal District. Ok, what do we build there?

It was decided by a series of city councils beginning in 1988 that that area should be mixed use. That vision morphed into what is now the issue at point: Are 325-foot residential towers appropriate at that site?

I never have been nor do I pretend to be an urban planner. I am used to climbing flights of stairs in these high rises with full fire protection gear to put out a fire, not designing them.

However, the Council must resolve what, and now it appears if anything, will be built there.

I believe that the project as it is envisioned will create family wage construction jobs, will provide an expanded tax base for the city and, last but not least, will recover a parcel of Portland land along the Willamette River that has been an eyesore. Additionally, the project will create a dynamic live/work environment that is central to what Portland has been envisioning for decades. The project, when completed, will allow residents of all income levels to live in a neighborhood that will eliminate the need for an automobile.

I remember buying a condo in my 20's and having an upside down loan when the market crashed back in the 80's, having condo I could not sell or even give back to the bank until I had no equity or any other assets to burn or they could threaten to take, and not being able to rent it for the mortgage payment. When the adjacent ones started to go section 8 it got even worse. It really set me back financially for many years forward since I was not a trust fund baby. I swore never again. But I see there is a whole other generation of 20 somethings getting suckered into that deal.

PS.

Love the Lola header the face and expression say it all. Looks like you got yourself a great new Blog staffer.

Well, if the SoWhat district is within 30 minutes of the airport, Sleepy Ted has a biz that is working on developing new solar cell
technology who might need factory space should they develop something after the state invests a few million.

I know that 30 minute rule is a problem with ODOT always closing streets and freeways for their multi-hour investigations.

Just an idea.

P.S. Don't tell Teddy about all the Chinese Solar Cell makers that are doubling their production every 24 hours.

It's probably time for signs to go up near any Gerdling/Edlen developments that any buyer may be sued by the developer after purchase if he or she finds the property has such a low value that a bank won't even loan money for the purchase.

I don't really get the attitude of people who want their deposits back. If the unit appreciated $100,000 between signing up and closing and the developer decided to "back out" you can bet these buyers would be in court faster than you can blink. Why should these sales contracts be enforceable only one way? The buyers in SOWA should be glad the contracts did not allow for other remedies beyond the deposits like specific performance or damages.

I agree. I'm no fan of those developers, but a contract is a contract. Those people have a lot of nerve asking for that money back. Any investment contains risks, and all investors must weigh those risks against possible profits. Many did not buy in SOWA because they were smart enough to see those risks realistically. Those people who jumped in to buy in SOWA, and are now asking for their deposits back are just as greedy and unethical as the developers with whom they're dealing.

Nah don't feel sorry for these guys. They speculated on these condos hoping to flip them when they opened. Now some of them are playing the poor little guy getting beat up by the developer card. You play with the big fishes don't be surpirsed if you get eaten.

No the real news here is that the SOWA buildings are so undersold that the developers need to go after these pennies to try to keep them afloat.

Greg C

"...now scratching and clawing over..."

This blog is nicely permeated by the cat influence. That is a lovely photo in the banner.

"Those people have a lot of nerve asking for that money back."

Those people didn't necessarily ask for their money back - they just didn't sign a paper authorizing the title company to release their deposit to the developer. Who knows what the buyers' performance was conditioned on? There are all kinds of good reasons a buyer wouldn't agree to release their earnest money.

One thing is for sure... now every potential buyer knows these condos are a bad investment and that they're dealing with litigious a** holes.

Good to see the Portland Housing Market finally catch up with the rest of the country.

Condo owners are taking a bath, but this is one of the few places in the country where single family home prices increased during last year--about 4% I believe.

If you look at many of the housing markets with the most problems today, you will find that speculators drove the market to its present insanity.

I believe that many of the prospective condo buyers in SoWhat have evidence of many "promises" made by realtors representing the developers that haven't been met. Such as the Greenway, shopping amenities, parking, and parks. All were promised with timelines established by the URA Amendments and all the planning documents from all the city agencies. Legal experts are probably advising "breach of contract". It will be interesting and the attorneys will enjoy it.

I bet most of those wanting their money back were specu-vestors who lied about their intention to owner-occupy the units too.

Breach of contract probably goes both ways but I'm not sure Gerding/Edlen made those promises, the city did. GE bought that bill-of-goods as much as anyone.

"A contract is a contract"?

Where was that ideal when the developers were blowing through their contractual agreements right and left?

I only need mention the "poodle poop park" was not part of the contract. That park was to be elsewhere within the SoWhat district until Homer decided he could do better by building on that site and making the city spend beaucoup bucks on the storage facility.

From the developers point of view, "a contract is a contract, unless we lose money on it, then it's open for renegotiation and public subsidy."

Thanks for the Comedy Classic link. The funniest part of the article was the part about "Does a URA cause development that would otherwise not occur?" I guess that's for people who never took Econ 101, or even thought about how government transfers and private investment interact in real life.

Got to agree with John, too. Personal responsibility has to come into play somewhere along the line. I consider myself a lefty, but I get sick of hearing about how people who speculated on real estate or got into these variable, interest only type ARMs are victims. Banks shouldn't get bailed out by the Fed so their stock price doesn't fall, but neither should home buyers who shopped out of their range or gambled on the market.

Question to Jack... If the buyer of one of these condos has to forfeit the (let's say $15,000 of) earnest money, can the buyer carry that over as a LT capital loss and get some recovery out of it, even though the asset purchase never occured?

---"A contract is a contract"?

Where was that ideal when the developers were blowing through their contractual agreements right and left?---

Touche. I was looking at this simplistically. There may be many details of which we don't know that complicate the situation. But the two sides still deserve each other, as far as I'm concerned. Let them enjoy each others company in the courtroom for a long time.

Hmmmm. Based on no research and off the top of my head:

First of all, if they were planning to use the condo for personal purposes, it would be a nondeductible personal loss.

Assuming they signed the contract in hopes of engaging in pure investment and speculation, a deduction for the lost earnest money would seem proper. It doesn't seem like a classic capital loss because there is no sale or exchange on abandonment of the deposit. But it's kind of like a lapsed option. If analyzed that way, I believe it would be an ordinary loss if the taxpayer was active in real estate, and a capital loss if not. (IRC 1234.) Since ordinary losses are better for federal income tax purposes, the active speculators might make out better.

Perhaps the buyer could argue that the option analogy is inappropriate, in which case the abandonment of the transaction could result in a nice ordinary deduction.

Again, no warranties -- that's just off the top of my head.

John; GE, Homer, Dike, Weston, Onder and others have several LLC arrangements for vacant blocks and on-going projects in SoWhat. These entities were signatures to most of all the eight Amendments to the NM Plan with the city. Many parts of the Amendments designate explicitly project descriptions, timelines, and even penalties/reinbursements that are required from different parties if they are not met. In fact, there are already conditions that Homer and Co. haven't met, and it is hard to investigate if CoP and PDC have imposed the conditions of the Agreement. That would be an interesting investigation for some investigative reporter.

The article stated that many would-be buyers had finance contingencies, and were not able to get a mortgage for the amount on the contract after real estate tanked. I would think those buyers would have an excellent case to keep their earnest money deposit, and wonder why they haven't gotten it back already.

To those buyers that didn't have such contingencies, well, as the saying goes, caveat emptor.

In both cases, I suppose, this boils down to "a contract is a contract" - regardless of what your opinions are for both the parties involved in the transactions.

And - unrelated - did anyone else note this quote in the article from Mark Edlen: "...If we enter into a contract, we live up to our obligations and we always hope that others will do the same."

Jack, I wonder, in an audit, how the clause in the contract that warranted that the buyers would use the condo as a personal residence would fly?

John Rettig, most of these contracts to not have financing contingencies and if they did they most probably would not have a cap on terms. I bet these buyers could get some kind of financing... 5 points and 15% interest short term loans are not too hard to get. Anyone have a copy of a John Ross Sales contract they might share?

That's how I saw it too. So if somebody had a good tax atty, you would file a Sch C., claim that the deposit you made on the condo was your foray into house flipping, and you lost out. File on paper, because that reduces your chance of audit, too. Then do a LT cap loss until you've milked it for all its worth. That's all I could really say to the folks who got soaked in the downtown condo market. I've always lived by the maxim that land is more scarce than highrise claim to airspace, so when you get to these kinds of valuations, it's better to go for deeded land. Now in a South of Market world like SF, it's a little different, because land has been saturated for generations in The City, but in a city like Portland, you'd have to be crazy to pay those valuations for a slice of air that requires HOA dues, for which there is no tax recovery.

HOA dues, in large part, pay for maintenance, insurance, water, sewer, garbage, hot water, etc. The tax effects of HOA fees are no different than the expenses on fee simple property.

If the property is an investment you can write the HOA dues off your taxes, if it is owner occupied you may not. If you have an investment property you can write off maintenance, insurance, water, sewer, garbage, hot water, etc., but if you owner occupy you may not.

Only 2% of Oregon is developed, land is hardly scarce. It has government imposed restrictions on its use, just like the government restricts the amount of air space that can be used through FAR's etc.

I don't see either of your points Ted...