JSOnline: Condo developer files for court receiver - First Place project beset with debt, lawsuits
Individual homeowners are not the only ones feeling the pain of a sluggish housing market.
In a recent article, Tom Daykin, writer of JSOnline, describes the financial woes that the developer of
First Place on the River is experiencing.
Scott Fergus, owner of First Place Milwaukee LLC, is facing construction cost overruns and mounting debts close to $60 million.
Daykin disclosed that Fergus has filed for receivership which effectively terminates his control of his own condo development.
Filing for receivership requires the courts to appoint a third party to operate the company for the benefit of its creditors.
This action is somewhat similar to bankruptcy.
First Place on the River is a 12-story condominium development
featuring 115 condominium units.
As the name suggests,
First Place on the River (106 West Seeboth) is located on prime real estate - where the Menomonee and
Milwaukee Rivers meet in the Fifth Ward.
First Place includes a Riverwalk and other publicly-funded improvements totaling $6.7 million.
The total value of
First Place Milwaukee is not known.
The sale of 70 of the 115 condominium units are pending.
These
sales will help raise funds to reduce the development’s debt.
Unfortunately, the sale of these condominiums has been delayed because of other litigation related to this development.
What causes the housing market to swing so wildly?
Downtown
Milwaukee, similar to other urban real estate markets nationwide, has experienced rapid growth in a relatively short amount of time.
Think back to how downtown looked in the mid-1990s.
And look at how far we have come since.
Real estate doesn’t react as quickly to market conditions as other investment markets (e.g. stock or bond markets).
Condominium developers make projections and predict that demand for condominiums will continue at a steady pace.
By the time condominium developers commit to a project and break ground, they are hoping that the market doesn’t change over the course of a multi-year construction project.
Unfortunately, the market has changed since
First Place first broke ground.
Last month, I reported that Mandel has agreed to postpone construction of Domus in the Historic Third Ward and Ruvin has postponed his Park East development due to the slowing housing market.
I’m confident that both of these developments will be constructed.
Their decision to delay adding more condominiums to our abundant supply of condominiums will help to stabilize our over-heated condominium market.
I predict that demand will increase at a greater rate than the supply for downtown condominiums which should maintain present housing values.
Daykin writes more about First Place’s financial woes and identifies the creditors involved.
Click here to read more about who is affected by First Place’s filing of receivership>>>
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