A block of eight downtown condominiums is going to auction Feb. 7 following almost five years in which they failed to attract buyers through traditional means.
The mostly two-bedroom units represent the bulk of the ill-fated Chatham Kynett Court project at 716 N. East St. in the Chatham Arch neighborhood. The condos, spread over three buildings, were developed by locally based SC Devcon and came to market in 2008 shortly before the recession ravaged the residential real estate market.
Key Auctioneers is selling the units, which range in size from 1,400 to 2,200 square feet, for BMO Harris Bank. There is no minimum bid, said Jeff Doner, a vice president of the auction company. The high bidder is required to put up $10,000 in earnest money and close on the purchase within 30 days of the auction.
The units are being sold in "as is" condition. Doner said one of the units is finished and three are drywalled and have mechanicals but need finishing. Of those four units, three are in a four-unit building that faces East Street and the other is in a three-unit building directly behind it. Both of those structures were built when the condos were developed. The other four units that are part of the auction package are yet to be built in the Kynett building, a historic brick structure that fronts Cleveland Street, an alley behind and parallel to East Street.
Doner said nothing would prevent a buyer from taking advantage of the hot downtown rental market and leasing the units rather than selling them.
Chatham Kynett Court included 11 units when it was built. Three of those sold, but potential buyers turned up their noses at the rest of them, which ranged in price from $249,000 to almost $400,000.
Kurt Flock, whose company specializes in selling downtown residential property, had the listing for nine of the condos when SC Devcon brought them to market.
Flock felt they were overpriced to begin with. Anyone trying to sell the Chatham Kynett Court units now will have to figure out how to finish them without breaking the bank. They will have to remain competitive with resale units, which are commanding about 20 percent less than they were before the housing bubble burst, Flock said.
"There's not enough profit potential there without buying the remaining units at a stupendous discount," he said.
Flock noted that banks are especially stingy about loaning money for the purchase of condominiums. Common areas and the land underneath a condo building are typically owned by an association supported by building residents.
Flock said banks usually look more favorably upon planned unit developments, in which the owners of individual units also own the land under their unit. Whoever buys the Chatham Kynett Court units could, theoretically, convert the project to a planned unit development.
"It's going to take some real estate gymnastics" to rescue the project and make a profit, Flock said.