Detroit reaches deal to settle Book Cadillac financing lawsuit

[Bham1982]

The B-C renovation made no financial sense. It was, and is, an economic turkey, with low room rates and lethargic residential demand. It's a pretty good metaphor for the wildly exaggerated "downtown boom" meme. If a hotel as grand as this can't get a respectable room rate, and condos can be had for a song, there's still a demand issue.

That doesn't mean it shouldn't have been renovated, though. There's certainly a non-economic argument for restoring this grande dame of hotels. And I'm happy this beautiful structure is in its current shape.

[dtowncitylover]

The B-C renovation made no financial sense. It was, and is, an economic turkey, with low room rates and lethargic residential demand. It's a pretty good metaphor for the wildly exaggerated "downtown boom" meme. If a hotel as grand as this can't get a respectable room rate, and condos can be had for a song, there's still a demand issue.

That doesn't mean it shouldn't have been renovated, though. There's certainly a non-economic argument for restoring this grande dame of hotels. And I'm happy this beautiful structure is in its current shape.

Lol $200-500 per night isn't respectable and low?!?!?!

[Bham1982]

Lol $200-500 per night isn't respectable and low?!?!?!

Those aren't the room rates. They frequently offer $99 room rates.

Big city grande dame hotels should be getting $500+ a night. It's a spectacular property, the best in Michigan [[even better than the Townsend).

The B-C fills during special events, and has minimal demand at other times. It's been losing money since opening.

[dtowncitylover]

Those aren't the room rates. They frequently offer $99 room rates.

Big city grande dame hotels should be getting $500+ a night. It's a spectacular property, the best in Michigan [[even better than the Townsend).

The B-C fills during special events, and has minimal demand at other times. It's been losing money since opening.

So the $500+ rates for next weekend and the $200+ for a random weekend in August were all just an imagination. Got it.

[drjeff]

So the $500+ rates for next weekend and the $200+ for a random weekend in August were all just an imagination. Got it.

Cheapest room available for tonight is $439. I'm not aware of any large events happening on a random Wednesday night and there are no sporting events in town.

[rjlj]

Where are your numbers to back your statements?

The B-C renovation made no financial sense. It was, and is, an economic turkey, with low room rates and lethargic residential demand. It's a pretty good metaphor for the wildly exaggerated "downtown boom" meme. If a hotel as grand as this can't get a respectable room rate, and condos can be had for a song, there's still a demand issue.

That doesn't mean it shouldn't have been renovated, though. There's certainly a non-economic argument for restoring this grande dame of hotels. And I'm happy this beautiful structure is in its current shape.

[Bham1982]

Where are your numbers to back your statements?

Read the thread post before getting ultra-defensive. This entire thread is about the B-C losing money.

And ask anyone who has an interest in downtown real estate [[lead brokers, property owners, anyone with hospitality business downtown). The Westin contract has been a money-loser since Year 1, and they basically gave up on selling the condos. They rent out the unsold units.

I know it doesn't jibe with the "there's a real estate frenzy downtown and no availability, but nothing is being built because property owners are dummies" meme. Property owners are generally a better judge of market conditions than starry-eyed 23 year old downtown boosters who just arrived from exurbia. If they can make money adding new housing, they'll do so.

[jt1]

Read the thread post before getting ultra-defensive. This entire thread is about the B-C losing money.

And ask anyone who has an interest in downtown real estate [[lead brokers, property owners, anyone with hospitality business downtown). The Westin contract has been a money-loser since Year 1, and they basically gave up on selling the condos. They rent out the unsold units.

I know it doesn't jibe with the "there's a real estate frenzy downtown and no availability, but nothing is being built because property owners are dummies" meme. Property owners are generally a better judge of market conditions than starry-eyed 23 year old downtown boosters who just arrived from exurbia. If they can make money adding new housing, they'll do so.

So no actual data as usual? 'asking anyone' is really proof or quantitative data. Of course, whenever asked to prove your statements you respond with additional anecdotal statements and no data.

[corktownyuppie]

Property owners are generally a better judge of market conditions than starry-eyed 23 year old downtown boosters who just arrived from exurbia. If they can make money adding new housing, they'll do so.

For what it's worth, a friend of mine at a $6-Billion, home building company based out-of-state just contacted me last week because they are starting due diligence work for possible development in the city and wanted to get my opinions on site selection and renter/investor demand.

I'm almost 40, so I try to keep my starry-eyes to a minimum.

They haven't plunked down any money to build anything yet, but they are definitely starting to take a hard look at the numbers. For a company known for building suburban developments with homes in the $300-500k range, that in itself is progress.

[Eber Brock Ward]

For what it's worth, a friend of mine at a $6-Billion, home building company based out-of-state just contacted me last week because they are starting due diligence work for possible development in the city and wanted to get my opinions on site selection and renter/investor demand.

I'm almost 40, so I try to keep my starry-eyes to a minimum.

They haven't plunked down any money to build anything yet, but they are definitely starting to take a hard look at the numbers. For a company known for building suburban developments with homes in the $300-500k range, that in itself is progress.

Toll brothers? Their CEO or prez was prominent in death of the suburbs talking about focusing on such development going forwsrd

[corktownyuppie]

Can't share the name, just to keep things tight. I recognize that might move me from the "credible source" status to the "rumor-mongering booster" status. Hopefully my track record in posting here is given some weight.

I promise you this, though, as soon as they make any development decisions public -- if they ever do -- I will come back to this thread and let you all know.

[corktownyuppie]

Can't share the name, just to keep things tight. I recognize that might move me from the "credible source" status to the "rumor-mongering booster" status. Hopefully my track record in posting here is given some weight.

I promise you this, though, as soon as they make any development decisions public -- if they ever do -- I will come back to this thread and let you all know.

Also, they aren't thinking about putting up 40 houses on a cul de sac, a la Hayes and 23 Mile Rd. It will more likely be 3-6 unit townhouse developments sprinkled around the area. Think about the new Corktown development as an idea.

[corktownyuppie]

The Westin contract has been a money-loser since Year 1, and they basically gave up on selling the condos. They rent out the unsold units.

I can't speak to the Westin contract, but I will mention the condos because I was under contract to live there. They didn't "give up" on selling the condos. As they were approaching the closing date on all of the sales, National City -- the bank which had committed to doing all of the mortgages -- was on the verge of bankruptcy. They eventually sold to PNC Bank, who was unwilling to honor the lending commitments made by National City.

Now one could argue that it's because when they re-appraised the collateral, the appraisal value fell below the sales prices -- prices which buyers had already agreed to pay and a bank had committed to lend, btw.

Is that because the B/C was a bad investment? Plausibly. But the reality is that this dynamic was taking place all over Michigan and all over the country. I saw a condo in Livonia go from $180,000 to appraising under $90,000 in 12 months.

So they didn't "give up" on selling the units in that it was a "bad investment". That's sort of implying that there were tons of developments holding stable value while these dropped. That's not what was happening...prices dropped everywhere and universally. And so they stopped trying to sell them at their original list prices because banks wouldn't lend on those prices coinciding with the real estate crash.

How often do you see a development go bad because the bank pulls out last minute?

In any case, I don't know how many unsold units are left, but recent sales prices in 48226 imply that they should be able to liquidate any unsold inventory if they haven't already.

[Bham1982]

So they didn't "give up" on selling the units in that it was a "bad investment". That's sort of implying that there were tons of developments holding stable value while these dropped. That's not what was happening...prices dropped everywhere and universally. And so they stopped trying to sell them at their original list prices because banks wouldn't lend on those prices coinciding with the real estate crash.

Fair enough. I did not mean to imply that the B-C had some unique conditions that made it a bad investment. Most of metro Detroit was a pretty bad investment, for a pretty long time. However, it's pretty clear that the original pro formas just didn't work out.

Michigan's economic crash is pretty old news at this point. The U.S. recovered all jobs lost in the recession a couple of years ago, and real estate prices are at historic highs. Michigan's real estate markets have been pretty strong for a good five years at this point. Some real estate jokers in Birmingham think they can sell condo units for $2-$3 million. That's a lot of dough for condos with no outdoor space in Metro Detroit.

I don't think it's unreasonable to think that if there are still unsold units, then there isn't a sufficient demand for this product at the desired price points, at least not yet.

[corktownyuppie]

Some real estate jokers in Birmingham think they can sell condo units for $2-$3 million. That's a lot of dough for condos with no outdoor space in Metro Detroit.

I don't think it's unreasonable to think that if there are still unsold units, then there isn't a sufficient demand for this product at the desired price points, at least not yet.

Admittedly, some of the asks I'm seeing on condo units are totally absurdly high. And, of course, asking isn't the same as getting. At the same time this is going on, there are certain segments or price points where people are getting far higher than I would have expected.

The number of potential buyers on a $2-3MM condo is very, very small. I am, however, seeing $300,000-$400,000 closings on places that were on the market for under $150,000 not that long ago.

In any case, that aside...does someone have any definitive answer on the number of Ferchill-owned, unsold condo units in the B/C? Not talking about individuals who purchase and may now be listing for re-sale. I'm referring to the original inventory from the builder.

My understanding was that such inventory was almost non-existent, but I defer to someone who can speak to the question with more concrete information.

[Packman41]

Where are your numbers to back your statements?

Did you read my earlier post? It is #3 above.

The appraised value was between $78.0 million and $96.3 million, yet they borrowed $98.5 million. This did not include ANY real equity from the borrower.

“Neither the city nor the two pension funds have received payments in return on their investments in the Book Cadillac development.” Quote from today’s Free Press.

What else defines a bad real estate investment deal for you?