Colleen Sullivan a Banker & Tradesman staff writer wrote an interesting article today, asking the question: Will the W Boston Residences need to go into a foreclosure auction?
The following are a few excerpts from the article:
Buyers Balk At W Bankruptcy
Though sales have been slow since the beginning, the fact that the W’s developers, SW Boston Ventures, declared Chapter 11 Bankruptcy in April isn’t helping matters. In early May, bankruptcy court filings by the developer listed 12 units as having signed purchase and sale agreements and awaiting closing. Only four of the units named have closed since then – though one buyer did back out of their original agreement in order to purchase a larger unit within the building.
While it’s normally difficult to extricate oneself from a purchase and sale agreement, the uncertainties created by the developer’s bankruptcy may provide an avenue for buyers to get out of their contracts, observers said. Additionally, lenders are scrutinizing the overall fiscal condition of condo buildings much more closely than in the past, according to Richard Vetstein, a real estate lawyer and founder of the Vetstein Law Group in Framingham.
“Anytime there’s financial distress and chaos, it might be time to renegotiate the deal,” Vetstein said.
Post-bankruptcy, two large units – one on the 27th floor and one in the penthouse – have sold for $2.2 million and $4.1 million, respectively. But in the sub-million-dollar price range, post-bankruptcy prices for the sales that have occurred have been considerably less than pre-bankruptcy prices.
Three units sold in December of last year – pre-bankruptcy – for $710,000, $750,000 and $850,000. Similarly-sized units sold in May – post-bankruptcy – went for $600,000, $635,000, and $655,000. It is not clear based on available data whether and how interior fixtures may differ among the units. All units examined were on comparable floors.
If it was left to the lender’s hands, the properties might already be on the block. Prudential Insurance Co. of America, which owns the senior debt on the property, has already filed a motion in court seeking the right to foreclose, arguing the developer’s lack of sales means a timely exit from bankruptcy is unlikely.
The property’s fate may be decided as early as next month, when the bankruptcy court is scheduled to hold hearings on Prudential’s petition to foreclose. Prudential did not return calls seeking comment.
Court filings reveal that the original loan agreement between SW Boston Ventures and Prudential required units be sold for certain minimum sales prices. While in bankruptcy, developers must seek Prudential’s permission to discount the units, which the insurance giant has granted to allow some of the post-Chapter 11 sales to go through.
A Little Leery
But it’s not clear whether the already steep cuts are deep enough, given the current environment. Recent luxury auctions have seen units go for an average of 70 percent below the original asking price.