Michael Landis bought his 23rd-story condo at 210 Trade in January 2007, drawn to its proximity to restaurants and view of the Hearst Tower.
The NASCAR team manager plunked down 5 percent – about $32,000 – and planned to move by December 2008, after construction on the high rise, part of the EpiCentre complex at College and Trade streets, was complete.
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But in February, work on the tower stopped. Now Landis, 43, wants out.
But, like the growing number of others who have tapped into uptown's condo boom – and seen their projects delayed or scrapped – he's finding that he can't get his money out.
As the slowing economy and credit crunch have tightened real-estate markets nationwide, investors are becoming increasingly cautious about putting money into condos before they're built. Experts say it can be wise to buy preconstruction condos, especially in Charlotte, where the market has remained strong – but that it's always a risk.
“I can see why it would be attractive, but on the flip side, you can't be naive about it,” said Allison Vail, a spokeswoman for LendingTree, an online mortgage company based in Charlotte. “You have to feel really confident that if something goes haywire, you can get your money back.”
Delays are to be expected, and while Charlotte's market is better than others, it's becoming more likely that a project won't be finished, Vail said.
Preconstruction sales have come to a halt in other cities, said David O'Connell, a Myrtle Beach, S.C., real estate agent and developer who owns a Web site called PreconstructionCondos.com.
Preconstruction condos hit their peak nationally about two years ago, costing close to $600 per square foot, he said.
The prices have been dropping since then, and developers are hard-pressed to pay off their debt, let alone make a profit, he said.
In harder-hit areas, such as Las Vegas, people are finding foreclosed properties more attractive to buy than preconstruction condos, O'Connell said.
“The risk simply is, you don't know what the price is going to be when it's finished,” he said. “Those who bought at the peak are finding out that the market can go down.”
Uptown Charlotte's condo boom began about four years ago. Since then, people have flocked to luxury residential towers such as 230 South Tryon and The Avenue. Now, about 1,200 high-rise and mid-rise units are under construction or in the pre-sale stage in the center city, and more than half of those are under contract for sale, said multifamily analyst Emma Littlejohn of The Littlejohn Group.
Other condos are springing up just outside center city, including Tranquil Court, a $42 million mixed-use development in Myers Park, where construction started in June.
Charlotte's stalled projects have sold well, but have been saddled with other issues. At 210 Trade, its developer and the EpiCentre's filed lawsuits against each other this summer, alleging various breaches of contract that led to the stalemate.
Last fall, about eight months after Landis agreed to buy his 1,500-square-foot condo there for more than $600,000, he was offered the chance to get out. In September, he received a letter from the sales office saying the project would take longer than the two years promised and that he would have a few days to decide whether to keep the unit or get his money back.
At that point, work was still going on, and news of the dispute between condo developer Charlotte FC, part of Indianapolis-based Flaherty & Collins, and Pacific Avenue, part of The Ghazi Co., hadn't surfaced. Landis signed the new contract.
“In my mind, there's no other project that compares to the EpiCentre,” said Landis, who lives in Myers Park. “People get excited about a project. I held out for 210 Trade.”
But he's tired of waiting. The new contract gives developers until December 2010 – with the option to extend the contract up to four months after that – to finish the building.
“Do I really want to live there? Absolutely,” Landis said. “But I don't really care to wait until 2010.”
Charlotte FC's attorney, Lee Spinks, said the developer has had only one person demand a refund since the legal dispute started.
“It remains the intent of Charlotte FC to both pursue the litigation to recover its damages and to see that the 210 Trade condominium tower gets built on time to meet the deadlines in the existing contracts,” he said in an e-mailed statement.
The Park's future uncertain
At another of uptown's troubled condo projects, The Park, homeowners authorized the developer to use their money once construction began, some said. Now, with construction on hold and the project in foreclosure, some owners plan to hire a lawyer to help get their deposits back.
The future of the 21-story building at Caldwell and Third streets remains unclear after a foreclosure auction Thursday. Its lender, BB Syndication Services Inc. of Wisconsin, offered the only bid, $17.9 million. Another company topped that Friday, but has not announced its plans, and there's still time for other, higher offers.
According to court documents, the building's developer, 222 South Caldwell Street Ltd. Partnership, a division of Verna & Associates of Charlotte, owed more than $27 million to its lender.
Raphael Goldstein, 59, who bought a $300,000 unit for his daughters four years ago, said this week that he's still hopeful the project will be completed, or the deposits returned. Looking back, he did everything he could to avoid an unwise investment, he said.
“The main thing would be to deal with a reputable company, and … they surely were considered reputable,” Goldstein said. “The lesson is, it's always a risk, no matter who the developer is.”
Two other uptown towers have been postponed: One Charlotte, near the Westin, and 300 South Tryon.
The problems don't signal the end of the high-rise condo market, though, experts say.
Cautiously, people are buying
Sales have been strong at The Catalyst, a 27-story tower on South Church Street, where units range from the $180,000s to more than $300,000, despite the economy, the other stalled projects and the usual summer slowdown, sales manager Erin Bradley said.
Since the sales office opened in June, The Catalyst has sold 63 of its 462 units, and she expects sales to pick up after Labor Day, she said.
“People are a little cautious, but they're still buying,” Bradley said. “With ours … you know it's going to go forward, because the building is up.”
O'Connell, the Myrtle Beach developer, said the market will turn around across the country by late next year. And Littlejohn, the analyst, said that, if anything, the delays will mean a shortage of housing uptown.
In the meantime, condo owners like Landis are caught in limbo. If he gets his deposit back – as much as he'd like to live in uptown – he's not sure he'll reinvest it in another project.
“Now, who do you trust?” he said.