Broken condos: Barracks West complex sold short
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Barracks West is a cautionary tale in local real estate annals.hawes spencer
The condo-craze bubble is officially popped. Developer Hunter Craig was part of a team that paid $32 million in 2007 to turn student-apartment complex Old Salem into a condo-plex renamed Barracks West. That recently sold for a bottom-scraping $13.3 million. After putting $4.5 million into repairs and renovations, the new owner plans to return it to the rental market.
"We've gotten pretty active in the broken-condo market," says Michael Brodsky with the Bethesda-based Goldstar Group, the new owner of 265 of Barracks West's 364 units.
Craig's Cheetah Investment Company sold only 99 units in Barracks West, most of those to investors. In October 2011, SunTrust Bank, which lent $22 million for the complex, according to a Goldstar release, appointed a special receiver after the loan went into default.
Virginia National Bank, where Craig is a founder and board member, notes the receivership in an April proxy statement. Craig did not return a phone call from a reporter at press time, nor did Virginia National Bank president Glenn Rust.
The unsold units were marketed earlier this year in the $27- to $28-million range. And while Craig's group– which reportedly included Craig's father-in-law Wick McNeely and music mogul Coran Capshaw– paid an average of $87,000 per unit and sold 99 units for an average of $130,000, some buyers were unfortunate enough to pay as much as $175K for a condo in 2007. Goldstar is picking up the remainder for about $50,000 each.
Goldstar has a "value add" philosophy, according to Brodsky. Barracks West fits its "broken condo" model, and the company likes Charlottesville's location and market, he says.
"There's significant deferred maintenance that needs to be done," says Brodsky. "We think we can restore Barracks West to where it should be in the market."
And that means rental units, not condos, says Brodsky, noting that Goldstar may buy back some of the condos. He says he doesn't see any rebound in the condo market for the next 10 years or so.
New tenants to Barracks West can look for upgraded maintenance along with improvements, including a redone clubhouse, larger pool, and children's playground.
"We're bullish on the market and Charlottesville in general," says Brodsky, who hints, "I hope we can do more acquisitions down the line."
6 comments
If I was one of the independent owners in this complex I'd be pouring over the condo owners association documents. Now that Goldstar owns the majority of units can they replace the owner's association board and squeeze out the single unit purchasers by exploding maintenance fees? In the story they're already suggesting there's $4.5M worth of work that needs to be done, thats more than $10K per unit which may seem reasonable if your acquisition costs were $50K per, but not if you're the person who bought in for say $100k and are already underwater.
And I was one who would have loved to have bought in 2006/2007 but as people were frantically buying homes and condos, I listened to my gut and waited. Love that people who went with the crowd rather than doing their own research now have a pass to so many because of their impulses. Quite frankly, I have no sorrow for them at all.
Cville Native don't you know by now that it was the banks fault! You doing research and not buying something you couldn't afford has nothing to do with it, it was the banks!! Don't forget you have no say and no brain, you were forced and now we will all help you pay for that decision because at the end of the day we're all responsible for those who can't help themselves.
It stunned me when I learned they were condo-izing this complex...these places were in terrible shape twenty years ago as "Old Salem" - what were they thinking?
I don't shed a tear for Hunter Craig, but yeesh...I do feel bad for anyone who 'owns' there.
What's with the earthmoving immediately next door?
Don't shed tears for Craig. He might have lost a lot of money, but it wasn't his!!!