It’s funny: while HSH Nordbank AG was seeking repayment of $79.8 million in debt on The House from the folks over at Block J LP, which may now be the biggest foreclosure posting in Dallas, I was touring the fabulous progress over at the Perot Museum. I snapped this photo of The House from The Perot and recall thinking gee, how nice it will be for those kiddos at The House to scamper over here to learn science, just like little ones head to the MOMA after class in NYC. For a fleeting moment I had a vision of Dallas all grown up. Sigh. Then I heard the news:
CD: Bobby, sorry to hear about The House. I thought sales were going pretty well over there when we visited last year — you were working so hard!
BD: Thank you. Sales were going very well. We had changed any negative perception of the building prior to taking over and the documented sales proved it. We doubled the sales within a short period of time, from 13 to 27 units sold.
CD: How many of the buyers coming in were cash buyers?
BD: 15-20% of the sales in the past 15 months were cash.
CD: The economy is improving, at least nationally, though I am hearing Dallas may be slowing. Still, why do you think HSH decided to foreclose now and not give it another six months to a year?
BD: Not sure. I did not have direct communication with HSH. Needless to say, I was surprised. They are a German lender with the decision makers overseas. It was a challenge in many regards.
CD: An economist told me the other day the Dallas economy is actually not so hot…what are you seeing?
BD: I have been lucky enough to do sales consultation in cities like Atlanta, Chicago and Jersey City. Dallas is in very good shape in comparison. It is growing in the right way, especially the Urban environment.
CD: What does this mean for homeowners in the building who have just bought units?
BD: I do not have that answer. I believe the lender should commit and continue to sell out. I hope they do.
CD: If you had a mulligan, what would you have changed differently in the marketing approach?
BD: I do not think it would have mattered. We were selling despite the disconnect in communication with the lender. I sincerely believe that if the lender or another investor moves forward with the building, it is of the utmost importance that they show confidence to the local community regarding their intent for the next 5 years. Otherwise, people are taking a constant leap of faith. The lender’s recent decision is proof. It was unexpected.
CD: How much did financing problems hurt buyers?
BD: In buildings like The House, the occupancy % forces buyers to put a larger % down than buildings with higher occupancy. It definitely limited the number of deals that would have transacted. If the lender of the building would have participated, it would have made a dramatic difference in sales.
CD: If you can, would love to know any messages you have for HSH… I may have to censor you here…
BD: The lending climate is what it is. No one understands it currently. It is a great building with incredible amenities, architecture and owners. Show confidence to the buyers and those units will continue to sell.