A Florida mortgage company has launched an aggressive sales program to remarket units at the Park Place Condominium in Alexandria after investor-owners of 274 of the complex's 403 units defaulted on loan payments and left the mortgage company holding the keys to the foreclosed properties.
But the first target of the sales program, the complex's tenants, so far have failed to jump at offers of discounts on units at Park Place and instead have raised questions about the future of the troubled condominium.
"Many tenants are apprehensive about purchasing, considering the physical state of the building and the financial health of the condominium association," said Georgia Sacher, president of the Park Place Tenants Association. Alliance Mortgage Corp. of Jacksonville, Fla., is "going to have to work out the bugs and give us full disclosure before people will feel confident about buying."
Although many Washington-area condominiums have some investor-owners, industry analysts said it is unusual for a condominium to have a vast majority of investor-owners. Only 14 units at the complex are owned by people who live in their units. Park Place is primarily filled with tenants, many of whom moved in before the project was converted to condominiums.
It was the nature of the conversion that has turned Park Place into a headache for Alliance Mortgage, according to real estate agents familiar with the project.
The triple-tower complex at 2500 N. Van Dorn St. was converted from rental apartments to condominiums in 1984 by Park Place Development Corp., a partnership set up by a California company called Consolidated Financial Services.
But instead of marketing the units to the general public, Consolidated Financial Services offered them to investors as a way to shelter their income from taxes.
With sales prices that were inflated to exaggerate the tax benefits of the units, Alliance allowed people to purchase units by making a cash down payment of only 1 percent of the purchase price. In addition to the low down payment, the loans from Alliance were graduated, meaning that payments started out low and gradually increased after several years.
According to one real estate agent who analyzed the prospectus offered by Consolidated Financial Services, the tax and investment benefits of the condominiums were front-loaded in the first few years, and it was not surprising that many of the investors abandoned their units and stopped paying their mortgages after those benefits ran out.
Alliance made loans on 389 units at the complex. Company officials said they expect that many of the remaining investor-owners eventually will default.
Dennis Kirkpatrick, vice president for Alliance Mortgage, said that at the time the units were sold to investors, Alliance believed the loans were "prudent." He said the lack of appreciation in real estate during 1984 and the subsequent drop in interest rates probably contributed to the collapse of the investor program.
The new sales prices at the complex are between $35,600 and $84,500. That is 20 to 25 percent less than when the units were sold as tax shelters. They will be offered to the public after the tenants have had a chance to buy their units.
At a tenant meeting this week, residents considering the sales offers made by Alliance asked for full disclosure of engineering reports on the building and financial statements for the association, which is controlled by Alliance. They also asked for several more weeks to make purchasing decisions.
Many tenants at the meeting said they still like the building and are attracted by the discounts of 10 percent off the public sales price. They said that, if the complex is fixed up, they would consider buying.
Alliance said it is planning to reburbish most of the common areas of the building and has offered to renovate units for purchasers for a fee. The company also said it would consider extending the decision period for tenants, now scheduled to end in about two weeks, to July 1.