Milwaukee Journal Sentinel: Ruvin sues Palomar developer over failed condo/hotel plans
The writing was on the wall and yet, nobody wanted to face the music. This is how I can best describe what happened with the fallout of the Palomar development in the Park East.
Gatehouse Capital Corporation of Dallas was the majority owner of Palomar. With the assistance of local developer, Ruvin Development, Palomar was able to secure the financial backing of other local investors and the City of Milwaukee.
According to Tom Daykin, writer for the Milwaukee Journal Sentinel, within weeks of opening up their amazing sales center on McKinley, Gatehouse sent messages to Ruvin stating that the Palomar development was not a “viable project” based on real estate trends for the downtown condo market. In fact, as early as September, Gatehouse suggested that they would cancel the project if they couldn’t secure additional funding from the City of Milwaukee.
Due to recent economic conditions, tighter credit markets, lack of additional financial assistance from the City of Milwaukee, and a stagnant housing market, Palomar ran into delays. Ruvin requested extensions for paying back loans and requested additional funds from investors.
Finally, on January 13, Gatehouse pulled the plug on Palomar.
The $158 million, 22-story Palomar project would have included a 175-room Kimpton boutique hotel and 66 luxury condominiums.
Now that the project is canceled, everyone wants their money.
The local investors are suing Ruvin. Ruvin is suing Gatehouse. According to Daykin, the investors claim that Ruvin owes them $700,000 in unpaid loans, plus interest.
Ruvin’s lawsuit with Gatehouse claims that Gatehouse wasn’t honest and forthcoming regarding the financial position of Palomar. Ruvin claims that Gatehouse knew about the delays and financial problems early during the project, but didn’t communicate the going concern of the project. Ruvin stated that the delays caused them to fall behind on paying off loans to investors.
Clearly, this story does not have a happy ending. However, there’s one other party who is also hurting as a result of this mess. The people who work downtown, live downtown, and those who enjoy all that downtown has to offer.
The Park East remains an eyesore. McKinley is a major gateway to downtown Milwaukee and it looks like a wasteland. Piles of gravel, mud, and undeveloped parcels greet out-of-town guests to our up-and-coming downtown. Is this the message we want to be sending to those who visit our downtown?
Now that nearly every single planned development is canceled, the county should step in and invest funds for cleaning up the entire length of the Park East. The county should remove the tall piles of gravel and mud. As long as nothing is planned for the area, why not plant grass and trees along McKinley, Knapp, and Water? Why not make the investment for making this gateway to downtown more appealing to those who live here as well as those visiting our downtown. What do you think should be done with the Park East?
Next topic: Let me clear away some myths regarding the impact of these canceled projects on the downtown condo market.
Myth #1: The much smaller number of new condos now under construction is indicative of the dismal outlook for the housing market.
The reason why the Park East projects have failed is because inventory of downtown condos is very high. The last thing we need now is more new condos being built. Condo developers have cut back sharply on production, which will help lower inventories and stabilize prices. Developers have done exactly what market forces are dictating under current economic and housing conditions.
With many new condominium developments completed but not sold, buyers can find great opportunities in today’s buyer’s market.
Myth #2: It’s the wrong time to buy.
Forget about everything you read in the newspapers regarding the state of the housing market. The Associated Press, which provides much of what you read in local newsprint, provides facts and figures regarding the housing market on a national scale.
All real estate is local. In fact, certain submarkets in the Metro Milwaukee Area are performing quite well – despite the doom and gloom that is reported.
For those who are financially and mentally ready to buy, there has never been a better time to be a buyer in many markets. An abundant selection of homes and historically low interest rates give buyers an edge over sellers. The recently passed $7,500 federal tax credit for first-time home buyers creates an added incentive.
Prospective home buyers need to understand that real estate is considered a long-term investment. Home owners are still creating and building wealth in today’s real estate market. Where home owners get into trouble is when they try to sell real estate every couple years.
Home ownership is not for everyone. I suggest that you compare the pros and cons of renting versus buying to see what makes sense for you. If you need assistance with this analysis, then please call me at 414.412.7980 or e-mail at dray@shorewest.com.
Myth #3: It’s the right time for everyone to buy.
Again, all real estate is local and everyone is unique.
Potential homeowners need to understand that the decision to move up to ownership requires sacrifices, like saving up for down payment and elevating their credit scores.
I recommend that you take a good hard look at your financial status and create a homeowner’s budget to see if you’re ready to buy a home. Let me know if you need any assistance. I can help figure your monthly mortgage amounts and monthly escrow requirements. This has helped prospective buyers in the past to determine if purchasing a home makes the most sense.
Myth #4: It’s a terrible time to sell.
In markets where home sales are picking up strongly, a seller can easily get an offer if the property is priced correctly.
Also, for those looking to trade-up, selling low on an existing home is more than offset by buying the new move-up home at a lower price. When the market recovers, home price appreciation on the traded-up home will bring bigger bang for the buck.
Lawrence Yun, chief economist of the National Association of Realtors, and FrontDoor.com provides additional advice for navigating the waters safely in the current housing market.
Daykin provides more details regarding the lawsuits involving Gatehouse, Ruvin, and local investors. Click here to read how Palomar went from utopia to bust in a short amount of time>>>
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