Wednesday, March 4, 2009

The impact of half-finished projects in California

One primary reason I've been banging the drum that there just wasn't enough proper due diligence done on new home projects during the boom (or what was done could be considered fraudulent due to the manipulating of data leading to patently false conclusions) was the impact on these half-finished projects to surrounding neighborhoods.

Whether in Hollywood, Oakland or out the suburbs of the Inland Empire, everyone suffers for the actions of relatively few people. And while many projects were ceased simply because of a lack of funding, some should never have been built in the first place due to lack of demand at the price points required to buy the land. From an L.A. Times story:

Nearly 250 residential developments with a combined total of 9,389 houses and condominiums have been halted in California, according to research firm Hanley Wood Market Intelligence. The units, worth close to $3.5 billion, were in various stages of development.

Now, many are in bankruptcy or have been foreclosed by lenders. Developers have halted sales on an additional 370 new-home developments -- about 30,000 units worth $11.9 billion...

In Hollywood, a chain secures a seven-story building still sheathed in yellow insulation panels and surrounded by steel scaffolding.

The Madrone condominium and retail complex at Hollywood Boulevard and La Brea Avenue had been scheduled for completion this spring.

But the developer, John Laing Homes, stopped answering its phones weeks ago and on Feb. 19 filed for Chapter 11 bankruptcy protection.

Across the street, Tony Boon worried about the effect on Pink Pepper, a Thai restaurant he manages. He had hoped that residents, shoppers and employees at the complex would stop in for meals. Now his customers gaze out on the stagnant site.

"It should have been a beautiful building, but it's just kind of an eyesore," he said...

On the edge of Old Pasadena, the Pasadena Athletic Club and an office building on Fair Oaks Avenue were demolished to prepare for a six-story hotel, condominium and retail project. Work halted last year when financing fell through, the developer's attorney said.

The dirt lot sits empty, surrounded by a chain link fence and green plastic netting.

In the Lincoln Heights neighborhood of Los Angeles, the contractor stopped work more than a year ago on Fuller Lofts, a $20-million transformation of a 1920s-era Fuller Paint warehouse into condos on San Fernando Road.

The developer, Livable Places, has gone out of business and blames high construction costs, tightening credit for home buyers and a glut of competition...

Of course no one ever says, "We really didn't know what we were doing. Our timing, prices and sales assumptions were all 100% guesswork." Such honesty would be refreshing!

Click here for full story
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