Montage Woes Worsen with Corus Bank

UPDATE 8-28-09 - Corus Bank's woes have now extended beyond its condo projects. Corus Bank filed a notice of default this month on its $180 million loan to Terranea, a luxury resort spa in Rancho Palas Verdes which has 360 rooms and a golf course. Councilman Steve Wolowicz says he hopes the property remains open.

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UPDATE 8-24-09

Corus Bank continues to seize assets, including Lansbrook Village in East Lake Florida for failing to pay $75 million in outstanding debts. Also in July, Aventine Apartments on 14.2 acres in Boynton Beach Florida was also repossessed by Corus Bank.. This marks the second repossession in South Florida by Corus, the first being Tao condominiums in Sunrise. They also have a pending foreclosure action against the developer of the Onyx on the Bay in Miami.

Meanwhile in Austin Texas, a highrise 'W Hotel and Residences' could be delayed because it was counting on a $165 million construction loan from Corus, of which looks iffy at best, not happening at worst, according to these sources:
http://austinist.com/2009/08/11/w_financing_may_be_on_shaky_ground.php
http://www.statesman.com/business/content/business/stories/realestate/2009/08/11/0811stratus.html

While Corus snatches up assets on outstanding loans, the Wall Street Journal is reporting two additional real estate investment firms have teamed up to bid on the assets of Corus Bank, which puts them against a rival offer from Los Angeles private equity fund/commercial mortgage trust team Colony Capital and iStar Financial. New York developer the Related Cos. and Lubert-Adler Partners LP, a Philadelphia real-estate investment firm, are the two new players.

According to the Wall Street Journal article,

Several real-estate professionals see the Related-Lubert team as having the inside track to the bank's assets in a sale brokered by the Federal Deposit Insurance Corp., though other private-equity firms remain in the mix, including Starwood Capital Group. A sale still could be weeks away, according to people familiar with the matter, and Corus, a unit of Corus Bankshares Inc., said last month that it was unlikely it would raise capital without the help of regulators, including the FDIC.

If successful, Lubert-Adler and Related would provide funding for any purchase and would bring in the Related Group of Florida, a separate firm with ties to Related of New York, to provide boots on the ground in completing Corus's condo projects.

What does this mean for the Montage? I truly don't know, but it's important to keep an eye on. Why? Because it's a $200,000,000 investment in downtown Reno. It's the the most-empty building downtown in terms of residents, yet it's the best product in town hands down (I was just there over the weekend and the property is immaculately clean and well-maintained). It has the opportunity to change the dynamics of downtown, if it fills up with people. While the Palladio only has 15 or so units available, the Montage has hundreds. I view that as hundreds of opportunities to get folks downtown. A vacancy of people downtown would be reduced if even half of the building would fill up with occupants. That would be 200+ more people downtown utilizing services and buying goods. That may not seem like much, but over the long term those extra residents provide a significant boost.

I also want to chime in on a related subject. A lot of people have been trashing Corus Bank as just another condo loan-based bank that should have known better etc etc. It's important to remember that to this day, they've refused to turn the Montage into rentals, or reduce their inventory via fire auctions. They've offered buyers significant discounts, thanks to negotiations with L3 Development. The folks actually living in the Montage are happy, I've spoken with a few of them. When I stopped by over the weekend, both sales agents were up in the building giving tours, and on my own web site, last month over 140 people clicked to my site from google using the search term 'Montage Reno Prices'. The interest is there, the prices may not be quite what people are comfortable with yet.

I guess my point is all is not bad for the Montage. It's built, it's beautiful, the amenities are among the best of any condo project in the city, and eventually, one way or another, the building will fill up. If a private entity seizes Corus' assets with a successful bid, then it's possible the new owner will have an entirely different plan to fill the building. But for now, Corus will keep doing what it's been doing....giving tours of the building, and pushing on with sales and closings, as the September 3 deadline for bid submittal approaches.