According to this Nashville Business Journal article, Terrazzo to slash prices, auction condos, Crosland, the developers the Terrazzo, a $68 million 117 unit luxury high rise condo project in the Gulch section of downtown Nashville Tennessee, will auction off up to 30 units at 1:00 PM CST on November 21st at the Renaissance Hotel. According to the article, sluggish sales are the reason that the developer opted to auction off some condo units.
The article quotes Bill Barkley, president of Crosland's Tennessee division (the developer of the Terrazzo) as saying that the auction "offers Terrazzo the opportunity to sell a significant number of condominium homes and instantly build the growing community at Terrazzo — all in a single day." The article goes on to state the following terms and conditions of the Terrazzo auction:
- "Minimum offering bids will range between 40 percent and 50 percent of list price. Minimum bids for one-bedroom units will range between $159,000 and $225,000, two-bedroom units will start between $250,000 and $310,000, and three-bedroom units will start at $399,000. Bids will include one parking space in the mixed-use building’s underground garage."
- "Interested buyers are required to register and preview the units before bidding. According to the Terrazzo’s Web site, bidders will need to come prepared with a cashier’s check or money order for $5,000 and a blank personal check, which will be added to the $5,000 to equal 5 percent of the winning bid price."
- The minimum bid prices are still too high. This will result in very light bidding.
- Overall, I do not think many units will sell at these prices. See my previous blog post, Birmingham Auction Ended Abruptly After Too Many "Low Bids", for the results of a condo auction in Birmingham Alabama. The highest bids at that auction were only about one-third of the original list prices.
- According to the City Federal Condos (the Birmingham condo project mentioned above) website, the developer is now trying to sell the condo units that fetched $80,000 at the auction for $139,000. My guess is that this project will be bankrupt in less than 12 months.
- Even if the developers do sell some some units at 50% of the original list prices, what happens to the people who already purchased condos before the price drop? If they have to sell due to a job loss, job relocation, illness, or other reason, they will lose over $100,000, or be forced to short sale their condos.
- Based on the above information, I think that the Terrazzo will end up being auctioned off by the lenders who financed the project. Until the developers accept the fact that there is only a limited number of high income young people and wealthy "empty nesters" they will never price their condo units where the overwhelming majority of the market is. It seems like the developers are still in denial.