If Only MCL Didn’t Build the Vue Charlotte?

As I reflect on the truly devastating ramifications of appraisals coming in well below contract prices, it saddens me that all of us: the pre-sales buyers, the Uptown Charlotte real estate community, and MCL are in the position we are in.  As you may have guessed, I am in NO WAY OUT mode, and that goes for all parties in this transaction.

As I hear from pre-sales buyers through email at vuebuyer10@yahoo.com, I get the idea that at least some of the buyers were well aware of the precariousness of their investment and tried to get out.  By all accounts, MCL would not allow them to do so. I have no idea how prevalent this was, and how many buyers were pushing them to be released from their contract. But that is the one potential area where I can blame MCL for the predicament we are all now in. If they had a sizeable number of buyers that wanted out, that could have been probably the one and only sign that I know of that the building of the Vue was not a good idea.

You may have read in the paper that MCL felt like the units would appraise. This would lead me to believe that MCL truly felt like by the time the Vue Charlotte was finally constructed, the market would be turning back up and the investment would work out. This turns out to have been wishful thinking, and it may have horrendous consequences for them and us.

There is no doubt that had the market been booming as it was in mid-2000, we wouldn’t have this blog and we wouldn’t be digging into every nook and cranny of MCL and the Vue Charlotte construction. I fully admit that. But there is one talking point that I have heard from the Vue Charlotte that I find completely unpersuasive.

What has been reported to me is that they are telling some customers in loose translation: “Well, if prices had gone up instead of down, would you have let us cancel your contract so we could re-sell your unit at a higher price?”

We bought at pre-construction prices. We bought on the EXPECTATION that prices would rise and we were getting in on the ground floor of a rising investment opportunity. That was actually one of their selling points: ‘buy now before prices go up. Get in on the ground floor.’

If we hadn’t thought that prices would continue their climb upward most would never have bought. I know I wouldn’t have. Why take the risk on a pre-construction project otherwise? If you didn’t think prices would rise, it would clearly be more prudent to wait and buy once the project was done. So this talking point holds no credence with me.

Having said all this, I do not blame MCL or us for this predicament. It is just terrible bad luck for all of us. How do we dig ourselves out of this financial hole we are in…MCL and the pre-sales buyers? I am looking for ideas. I simply hope that we don’t resort to bringing out the worst in all of us: lawsuits and counter-lawsuits. I beg MCL and their lenders if they can find a way to do it to not take us there.

Do you have an opinion on this? Do you think MCL could have known this was a risky project and could have decided not to build? Please share it in a comment or send an email to vuebuyer10@yahoo.com.

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3 Responses to If Only MCL Didn’t Build the Vue Charlotte?

  1. Vue Buyer says:

    We all have an option to file a complaint with the attorney general’s office. If MCl is trying to manipulate the appraisal price (and they are) it is under this departments jurisdiction. Might be worth tipping them off sooner than later about what is in process.

  2. CharlotteJW says:

    Let’s not confuse MCL with the other stakeholders in the Project. In 2008 it is lamost certain that anyone who was involved in Real Estate knew that there could have been issues with the view. What happened is the case of the developer of the project having different incentives than the lenders or depostitors. McLean may very well have know that he was likely toast on the Vue, however, if he stopped construction or reworked the project at that point he would have almost 100% been flushing his equity. However, there was a chance, whether he thought it was 50% or 5% that the market would turn around or Charlotte would hold up much better. McLean was guarenteed $0 with option #1, but had a chance to make some money on option #2 without putting any more at risk. He was just trying to preserve his option value, which is what he did, unfortunately for everyone involved the market didnt turn around.

  3. CharlotteJW says:

    Another potential option that I have not heard mentioned yet on the blog is interesting albeit unlikely: seller financing.

    In a very different case of unsold condos (CityCenter owned by MGM resorts in Las Vegas) they had 20% deposits down on 60% of their condos, when it came time to close no one wanted to close, so they dropped prices 30% across the board and are offering some seller financing. Still having a hard time getting people to close, but it addresses some of the mortgage availability issues.

    The ability for this to happen on the Vue depends on a number of things:
    1.) Who is the main holder of the 1st lien mortgage, if it is a bank such as Bank of America and not widely held it makes this scenario more likely
    2.) When will MCL get pushed out, the sooner MCL is out the sooner people can start negotiating with parties that are concerned with overall loss mitigation and minimzing the decline in the value of the Vue and not just trying to hit a home run to get their equity back in the money
    3.) How many people that put down deposits still want to move into the Vue, the more it is an issue of cannot close vs. don’t want to close (obviously price is a factor) the more likely something could happen

    How this works, the owner of the construction mortgage, say for example BofA is willing to be the indivdual mortgage holder on units and wait out the project instead of putting it to auction. They offer something like a 10-20% reduction from contract prices, you bring an extra 5-10% of the closing price in cash at closing and they underwrite a mortgage for the rest at ~5% interest 30 year mortgage. It allows them to delay the losses that they take and prevent a fire sale, they get more people into the Vue immediately limiting carrying costs. People that want to close can close at somewhat of a discount without having to bring a pile of cash to closing. I think a ton of things would have to happen to make it work and it is unlikely, but its an interesting possibility, any one else have thoughts or experience with this?

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