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Foreclosed Auctions Reflect Troubles in Multifamily Sector

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By : John Cutts    99 or more times read
Foreclosed auctions are increasingly reflecting financial difficulties in the multifamily sector. Across the country, condo complexes, apartment buildings and affordable housing properties are being foreclosed upon by lenders.

According to Stuart Saft, chairman of global real estate operations at Dewey & LeBoeuf, a record number of multi-housing properties will go into foreclosure this year if the employment situation does not improve and if lenders do not write down problem loans.

The other factors affecting the viability of multi-housing properties are the sharp declines in rents and the sharp rise in vacancy rates. According to RentJungle, apartment rent has fallen by 4 percent on the average across the country over the past six months. For the average monthly apartment rent of $961, the average reduction was about $40.

Major markets like Los Angeles, Denver, New York, Phoenix and Portland posted rent declines of seven to nine percent.

Among the condo projects entering public auctions in March is the Waipio business condo building in Hawaii. The development firm, able to sell only 27 of the 99 units of the building, failed to pay its $35 million loan owed to G.E. Business Financial Services when it became due in June last year. The 72 unsold units will be sold off at the public foreclosed auctions in March.

Four multihousing properties involved in foreclosure lawsuits in Miami-Dade are the 20-unit Soleil apartment building and the 36-unit building in North Miami. The owners failed to pay a $3.6 million loan obtained in 2007 from Washington Mutual, which was later purchased by JPMorgan Chase. The properties were acquired in 2005 for $4.2 million.

A 40-unit apartment building in Miami was also foreclosed upon by JPMorgan after a $2.6 million loan obtained in 2006 from Washington Mutual remained unpaid. The building was purchased in 2006 for $3.5 million.

A 37-acre trailer park in Homestead, Florida which was purchased by Yale-Steam Associates for an apartment complex project is another foreclosed property scheduled for public auction in June on the website of Miami-Dade County. Yale-Steam purchased the park in 2006 for $13.5 million and borrowed $9.8 million from Wachovia Bank. It applied for an additional loan with an option to increase up to $50 million to build 204 units and got initial approval. However, the loan proceeds were not provided and construction never started.

In March last year, the mobile park was foreclosed upon by Wachovia through the court and will be sold through the Miami-Dade online foreclosed auctions in June.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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