Wednesday, September 26, 2007

The Metropole: "Goodbye Glen, Hello Foulger-Pratt"

This morning while returned from my ever repetitive daily walk to the Starbucks Coffee on P St NW between 14th St NW & 15th St NW I passed a new sign on the site of the Metropole, a new condo building at the corner of 15th St NW and P St NW. The Glen Construction sign was gone and in its place stood a new sign reading "Foulger-Pratt We Build to Last." While this wouldn't usually be something I would write about I thought it would be something interesting given the press release two days ago by Glen Construction in the Washington Business Journal.

Apparently Glen Construction, a company who has been around for nearly half a century, is going to be "closing" its doors come winter and is now down to a workforce of 12 employees, from an estimated 300 in its heyday. Locally, Glen Construction can be best known for their projects known as Rainbow Lofts and Georgetown Heights, two projects which epitomize quality in the construction industry. Recently, however, it seems like they have made some very big mistakes on their three current projects; 1010 Mass sold by McWilliams Ballard, Madrigal Lofts sold in-house, and the Metropole sold by DCRealEstate.com. The two greatest contributing factors to their demise was the slowdown in the high-end condo market and no having subcontractors ready to begin construction upon signing contracts with the developers. The latter of the two cause them to become victims to rising construction costs and slower construction scheduling, delaying both payments and project completion.

At the current moment, 1010 Mass is near completion and the project has been taken over by Faison Construction, who is suing Glen Construction for breach of construction and damages. Glen was not insured on this project. Fortunately they were on the Metropole, nearly 50% complete, and Madrigal Lofts, nearly 85% complete. Foulger-Pratt has taken over both projects in Glen Construction's place determining that "it was best to have another contractor complete the work."

The results of such poor planning will only cause turmoil throughout the chain of parties involved. From the sales companies, to the clients, a catastrophe like this is sure to lose a few clients for the developers and sales companies.

VIDEO UPDATE

5/5/08 "The Market & The Metropole"

27 comments:

Anonymous said...

I did hear that the Madrigal Lofts is having some problems completing the project and that several purchasers are walking from the deal. I wonder how the banks feel about this.

Anonymous said...

11:28, would you be willing to say more about what you've heard about ML?

Anonymous said...

Sure,

A friend of mine is a local real estate attorney in Maryland. I was chatting with her about the mortgage crunch last week and she indicated that she has several clients who are working toward getting out of their contract with the Madrigal. She said that some people have already done so and that the project may be in for some trouble ahead if too many people walk. I don't know about how this kind of thing works but apparently if too many people don't close, the banks who loaned money to the builder somehow pull out of the deal. Maybe someone out there is a lawyer and knows how this works and can enlighten both of us.

Anonymous said...

Actually, I am both a lawyer and someone planning to move into ML, so this is very interesting to me. I have a hunch that I know what might be going on, but don't want to speculate on a public forum. Would you be willing to send me an e-mail (MadLsecrets@gmail.com).

(Feel free to send me a mail and I'll mail you back from a real account in case you want to make sure that I'm not some secret agent for ML.)

Anonymous said...

I'm new to the city and looking at 1010 Mass. Is there a place I can go that will provide some hard truths I might need to know about the building or has anyone heard any negatives?

Jesse Kaye said...

Last I heard they were 3/4ths sold out and I haven't heard one negative about the building. I actually have a client who regularly invests in that area (he has 29 units) and 1010 is one of his preferable locations but he doesn't have one in the building yet. I trust his judgment.

Anonymous said...

It would take a particularly unique circumstance to justify purchasing a condo in that area, let alone anywhere, at this time. Jim Cramer, host of Mad Money, and others strongly warn against purchasing real estate generally, and condo specifically, at this time. Prices will continue to fall, and the interests rates will likely drop too. If you can rent and hold out for 6 months to a year, I would strongly suggest that course. Especially new to the area, relax and take time to learn the market and the city before diving into something that you will regret later.

Anonymous said...

Does anyone have more information on Madrigal Lofts Condo? I've recently purchased one and I'm a little nervous about my investment. Any helpful hints? Thanks.

Jesse Kaye said...

I would return the question and ask you to provide a bit more about the unit you purchased. Its difficult to determine how strong of an investment you made without knowing what your settlement price was, some stats about your unit and what the primary purpose for the purchase was.

With regards to the building...last I heard the building is about 80% sold out, which is reassuring news as far as I am concerned. While the market has taken a turn, especially in the price range of most of the units at Madrigal Lofts (i.e. over $417k), DC's short and long term growth shows nothing but strength. Between the investment of Douglas Jemal, Victor MacFarlane, Akridge, etc, the city shows no signs of further development in economic and residential growth. What I would offer as a thought is that these companies far exceed the research ability of any small company and are continuing to develop. If self made uber-millionaires/billionaires are still investing solely in DC, I believe the local owners should be somewhat reassured.

As a prediction...
while we cannot guarantee anything, I believe the market will continue downward in the prices ranged from $400k-$1.2 mil due solely to the fact that between last year (when 100% financing was available for any price) and now, buyers have not had the time to save enough money to make a down payment on a home where banks are requiring upwards of 10% for 'A' paper buyers.

Tell me a bit more about your unit.

Anonymous said...

I too am scheduled to go to settlement on a one bedroom/one bathroom unit at Madrigal Lofts. I have been VERY apprehensive about moving forward with the purchase. Is there anyone who has been pleased with their purchase? Are these units appraising for the purchase value? Has anyone decided to back out? I would love to talk with someone who is in a similar situation or can offer some great insight. This whole process has been very stressful.

Jesse Kaye said...

I have received question after question over the last few days about Madrigal Lofts and the condo market. The first question I would ask is what company is financing your mortgage? Some companies have a tendency to only use appraisal companies that inflate the price to make the sale for the mortgage company (who in turn will continue to use that appraisal company.

The awkward answer in short is that I have not heard about anyone backing out last minute. The building is quoted to be 80% sold out. Can you provide a mit more about the 1br/1ba you are purchasing...size, floor, ratified price?

When I searched the MLS, there is a 1br 1 ba available at 720 sq ft for $398k and another at 760 sq ft for $365k. Both have been on the market for four months and two months respectively so if I had a buyer interested in purchasing I would likely recommend discounting the 8% off of the asking price. If you are considering walking away I would ask what your earnest money deposit is and if you are willing to risk the EMD to play hard ball. Chances are that the Mayhood Company will be willing to negotiate on the price rather than let you walk. Do you have a Realtor? It always helps to have a buffer in between you and the seller but chances are your Realtor will not enforce playing hardball because if you walk, they lose the commission.

Anonymous said...

Jesse,
Thanks for your thoughtful info.

BTW...I'd tried to re-negotiate my price from over 2 years ago (costing over $400k for one bedroom) but Mayhood Company would not budge. I even got a lawyer to review the contract. It seems that they're only interested in negotiating with the new buyers and in some they're just giving away a free parking (starting at $26k). The builder (Quadrangle) didn't seem too stressed/worried about me walking away from the deal. Mayhood simply stated that I would lose my $25k deposit.

They really do play "hardball" and they're simply not interested in negotiating. They even told me that the builder has not lost a legal case yet. BOLD statement...I'd say.

Perhaps, I may be stuck with the purchase...or lose the 25k.

Anonymous said...

I am in the exact same position with ML! Please feel free to shoot me an email if you would like to discuss. I think there is a way to negotiate.
loftdc@yahoo.com

Anonymous said...

I could not secure financing and Madrigal is keeping my emd. I spoke to someone else who was buying in the building and they told him the same thing and they refuse to return his EMD. Can you keep someone money because the market went bad and they no longer qualify for the loan? They even had their attorneys send letters stating that I told someone I was flipping the property. That was just absurd! I filed a complaint with the DC office of Attorney General at http://occ.dc.gov. They told me if they get enough complaints about Madrigal, they could force them to return the emd of people who no longer legitimately qualify for their loans. I have found 3 others who filed. Is there anyone else out there who is facing the same problem with Madrigal Lofts? We need to ban together! The market is bad. Does that give Madrigal the right to retain my emd because I can no longer qualify??

Anonymous said...

Wow! And I thought my experience with Madrigal went from great to horrible! I am in the same position too!!! They refuse to return my money. I have obtained a lawyer. He has sent a demand letter, but they have not responded. They did tell both my attorney and realtor they have not lost a case yet and do not intend to loose any! I think they are trying to mitigate their losses by keeping the deposits; whether it's warranted or not! What can I do? Please help me! I have $22k on the line....

Anonymous said...

Yea I think we should start a petition and take it to the attorney general. this is absurd. the Madrigal developer failed to fulfill its obligation to have the building ready in time and now its illegally holding deposits. Maybe we can beg for a hearing on the Hill about it. If there are any lawyers that have had luck in getting deposits back, could they post their names and contact information?

Anonymous said...

I say we call all the major news outlets and attract as much attention to this Madrigal situation as possible. We could create a class action suit. I have a lot of reporter/editor friends that can help. We can mount a campaign. I say we call the mayor. This is robbery.

Anonymous said...

I also went through a lawyer. He wasn't much of a help. ML told me the same..."we haven't lost a case yet.". After several attempts to back out, I finally decided to move in. Otherwise, I would have lost 25k. Now I'm thinking that I made a mistake. I only wish I knew everyone's contact information before I moved in. We could've certainly filed for a petition (for them to return the EMD). BTW...the builder's workmanship is pretty "poor quality" as well. I've been working with the construction PM to get everything fixed but even after 4 months, I still have list of things to be done/fixed. Now I know why they were rushing me to move in. If they don't fix these things pretty quickly, I plan on writing a letter to BBB. I suggest you do the same (if you've moved in already).

Even though I moved in, if you need my support, please let me know. I'll send you my contact info. I'd like to help whereever I can.

Radha said...

All the stories sound like mine. I am in real estate and this is happening all over the country.
I am interested to know if anyone has hired an sttorney who has been successful in getting the deposit back. My family attorney who is fantastic at contract law (but not located in DC) said that they violated the Interstate Land Sales Act becuase they were not finished with the building within the 2 year time frame. Basically, if a developer markets outside of his area, ie has a website, then they are liable to comply. According to him, it should be a "slam dunk". So, I am seeking a strong contract law/ligation attorney in DC who can get the job done. We hired one and he is having difficulty getting the moeny back. Developer keeps stalling. Anyone have any suggestions? Please email me at grandstrand@gmail.com

Anonymous said...

Grandstrand, I am going to email you. Also, I am in the same situation. I was checking this blog months back but no one had posted anything for a while. I have hired an attorney but have had no luck. I would love to get a group of folks together to meet. I think if we can join together, we can win. I, too, am trying to obtain my EMD back. This whole process has been a nightmare. Please contact me if you would like to join together to take action.
wordsofaqueen@gmail.com

Anonymous said...

For what it's worth, I, too, did not qualify. I hired a lawyer to try to get my EMD back, to no avail. I'm still trying to decide whether to spend more money to try to get it back.

Jesse Kaye said...

Everyone, I just published a new post on the building today. Good luck with your efforts. Also, take note that we are slowly transferring this blog over to our new site, BuildingDC.com and while this will always be available for you we expect people will be responding at BuildingDC.com and it will not sync back to DevelopersAgent.com

Anonymous said...

I've been in madrigal lofts since november. I can say that the workmanship of the building is not of "poor quality". Aside from a few minor problems expected of a new unit, and the lack of response from one quadrangle employee, this building has been pretty good.

Also, for those of you who signed a contract and want to back out of it, hoping to get your deposit back...you did sign a contract. What if the price of the units went up over the past 3 years since you signed the contract? Would you still want to back out? A contract is a contract. And Madrigal started delivering in November 2007, which was the expected delivery date.

If you look at the DC recorder of deeds website, it shows that Madrigal has close to 100 recorded deeds of closed units out of a total of about 259 units, so we're getting there.

Jesse Kaye said...

6/26/08 Anon - While I am not commenting on the workmanship on this site - you can rate the metropole and the rest of the buildings in Washington DC at:

http://buildingdc.com/development-index/metropole/

With response to your comment - quality is in the eyes of the beholder, or in this case owner. Marty, my associate, wrote a post several months ago titled "What is Luxury?" It can be seen here:

http://buildingdc.com/uncategorized/what-is-luxury-in-dc/

Could it be possible that you have been conditioned to think that the workmanship is wonderful when in reality its just mediocre - based on the marketing of similar buildings as luxury?

Just a thought.

Anonymous said...

In response to Anon 6/26 @ 12:07 pm:

Exactly. A contract is a contract. Section 2, Paragraph (b)(ii) of our contract states that if we are unable to obtain a mortgage "for any reason whatsoever" we are to get our EMD back. Circumstances change. We didn't qualify. The developers need to abide by their own contract.

Sean said...

I purchased a condo at the Metropole in February '05 and it was supposed to be delivered 2 years later. Here we are in August '08 and it still is not ready. The building company they were using went ouf of business and their stance is that this is out of their control and thus nobody can get out of their contract. My stance is that it is NOT out of their control. And even so, this should not have sent them off course for a year and a half! I have no interest whatsoever in moving forward with this purchase. I want to back out and get my 10% deposit back. I know I will recieve "resistance" in getting back my deposit. If anyone can help or is in a similar situation with the Metropole, please contact me- sean.aalai@gmail.com

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