The large red-and-white banner waving outside The Hastings condominium on upper Connecticut Avenue says the units inside are "now selling" with an attractive interest rate. In fact, the sales office is closed, the new building is nearly empty and a local bank has foreclosed on the property.
In the center of Georgetown a similar sign stands in front of the Downing & Vaux condominium where some units are listed for sale at $665,000. But on Wednesday 16 unsold units were taken back by the lender at a foreclosure sale.
Area condominium developers have been scrambling for a year to unload hundreds of unsold condominium units after record high interest rates knocked down sales by 50 percent. Some developers drastically reduced their prices and held clearance sales, others sold out to syndicates who turned the units into rentals for tax advantages, and others quietly handed the deed back to the bank that had lent the construction money.
But none of these strategies saved the Hastings and the Downing & Vaux projects.
"Foreclosures are relatively rare," said condominium developer G.V. (Mike) Brenneman, immediate past president of the Washington Board of Realtors. "In most cases lenders have been forbearing."
Bill Sinclair, president of Perpetual Federal Savings and Loan, said these two almost back-to-back foreclosure sales do not presage a trend. Lenders will continue their practice of trying to avoid foreclosures and instead working with developers to find ways of breaking the financial chokehold, he said.
"I personally feel these two are exceptions that resulted because of high interest rates and the economic factors such as construction and acquisition costs.
"I'm confident that the lenders did all possible to keep these projects afloat. We all do everything possible to keep them afloat because we are in the business of lending money and not owning real estate."
The developers of The Hastings and Downing & Vaux declined to talk about what went wrong, as did their bankers.
The Hastings is a completely new seven-story brick building that developers Elliott L. Burka, of McLean, and Alan S. Landau, of Bethesda, built at 4444 Connecticut Avenue on the former site of a BP gas station.
The two developers, who had completed at least two other condominium projects in the area, began marketing the 54 units at The Hastings in August, according to real estate sources.
The sales prices ranged from $88,900 to $118,000 for the one- to two-bedroom units, many of which have balconies. But they did not sell. The prices were lowered and there were still no sales.
Late last year, the National Bank of Washington, which had lent Burka and Landau $5.6 million in May, 1981, foreclosed after the developers defaulted on their mortgage payments, according to a legal notice that was printed in a local newspaper announcing the foreclosure sale.
According to that notice, of the 54 units, only one had been sold. It was purchased for a doctor's office on the first floor.
On Jan. 5, a few hours before the remaining 53 units were scheduled to be auctioned off, a group of businessmen who are allegedly owed $328,210 by the developers filed a bankruptcy case against them. That stayed the foreclosure.
"The debtor is generally not paying its debts as they become due," said the court papers filed by the six companies.
The developers will contest the involuntary bankruptcy case, said their attorney Nelson Deckelbaum.
Last Wednesday after about 20 minutes of bidding a real estate affiliate of the Virginia National Bank took ownership of the Downing & Vaux condominium at 30th and Q Streets NW., after the developers defaulted on a $5.1 million mortgage.
The partnership consists of George H. Walker, of Washington; Richard Nadeau, of Camp Springs, Md., who works for Walker, and Holland Investments, listing Bruce Lyons as vice president, according to documents at the Recorder's office. None could be reached for comment and they did not attend the foreclosure sale.
In August, 1980, the developers received a $3.7 million loan at a 12 percent interest rate to finance the conversion of a 100-year-old Georgetown house at 1517 30th Street and its later additions to 26 high-priced condominium units, according to papers at the Recorder's Office.
A year later Virginia National increased the loan to $5.1 million and the interest rate to 1 1/2 points over the prime rate which was approximately 20 percent.
The following month the units, with high ceilings, many featuring dining areas that lead out onto porticos, went on the market at prices ranging from $190,000 to $665,000 for a duplex with three bedrooms, three baths and a living room with a cathedral ceiling.
But from then until the foreclosure only 10 were sold. At the Wednesday sale Robert Moye of Seventh Commerce Properties Corp., bought the remaining 16 units and three parking spaces for $2.3 million. Only three had completed renovations.
Moye said the bank was unsure what it would do with the property.
"It's a step in the right direction," said June Applewhite, one of the 10 unit owners, who attended the auction,
Attorney Benny Kass, who was hired to represent the individual condominium owners, said the developers had not maintained the buildings and left them dirty, He said he hoped that the bank would be a better neighbor.
"They the individual owners paid a lot of money for good apartments and they have been living in a never never world," Kass said.