Condo aversion: Craig's Barracks West a cautionary tale

A search of the local multiple listing service (MLS) shows 202 condo sales in the greater Charlottesville area in 2011, a 40 percent increase over the previous year that was noted in November in the market snapshot report released by Nest Realty. While these numbers can't match the soaring figures we saw in 2006, the upward trend seems encouraging, although the backers of the condominium conversion at Barracks West might disagree.

As Hook readers may recall, a spate of condo conversions in 2005 helped contribute to record sales figures the following year. Purchases of converted condos at both Hessian Hills and Carriage Hill were brisk, to say the least, and developer Hunter Craig attempted to replicate the success he enjoyed at Hessian Hills near Barracks Road by undertaking another conversion at the nearby Old Salem apartment complex, which he purchased for $31 million via a firm called Cheetah Investment Company.

Since then, Cheetah has sold only 99 of the 364 units. According to county records, many of those sales were made to other investors, a fact borne out by MLS data, which show a total of five active listings in the Barracks West complex, all investor-owned. 

Over the past three years, Cheetah has moved just 23 units, and resales have been even slower. Since January, 2008, the MLS has recorded only five sales, all bank-owned and none selling for more than $94,900. With one listing clocking in at realtor-rattling 868 days on the market and with resales coming in much lower than original prices, it’s easy to see why the slowdown in the condo market has led to speculation that condo conversions may soon become condo reversions, a situation that has become a reality in other American markets.

Perhaps that’s also why Cheetah recently enlisted the help of a national firm to list and market Barracks West in one big chunk. It's at least the second time Cheetah has tried to unload Barracks West wholesale. Although the firm, the Mid-Atlantic MultiFamily Group of Jones Lang Lasalle, requires that interested parties sign a confidentiality agreement in order to access all the details, managing director Al Cissel did confirm that the asking price for the remaining 265 units lies in the $27-$28 million range.

The marketing materials focus on the strength of Charlottesville’s economy and rental market, but they also suggest that a potential buyer considers interior renovations. It seems that many of the units have not yet been upgraded, perhaps giving credence to the opinion expressed in an earlier Hook article that some conversions are apartments merely spruced up with a fresh coat of paint and new carpet.

Upgrades are well and good for an investment company that intends to use the Barracks West complex as a rental community, but the early buyers seeking to sell their condos are the ones who are really suffering. It’s no secret that lending requirements have grown increasingly restrictive, and this is perhaps more apparent when it comes to condominium financing than any other type.

In order to be eligible for FHA financing, a condo complex has to be FHA approved. Among the criteria: that over 50 percent of units be owner-occupied, a requirement that Barrracks West doesn’t meet. While it’s possible for the FHA to approve certain buildings within a complex, calls to the agents listing the five available units reveal that none of them are approved.

FHA certainly isn’t the only financing option available for condos, but conventional lenders require larger down payments and typically have their own sets of restrictions about the ratio of investor-owned to owner-occupied properties.

Bottom line: it seems likely that the members of Cheetah are poised to lose some money because, unlike Craig's infamous Biscuit Run development, which was bailed out by taxpayers, there's little chance of turning Barracks West into a state park. But the real pain may be felt by the smaller investors, the individuals who bought condos in this project.

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Note: The second photo above originally referenced Pavilions at Pantops as a "condo" community. However, unlike Carriage Hill, Barracks West, or Hessian Hills, Pavilions at Pantops is not a condominium community, as all townhomes are owned fee-simple with the homeowner owning the underlying land. Accordingly, the word has been stricken from the caption. "This is why new home sales at Pavilions at Pantops are brisk," says Charlie Armstrong, one of the developers. "Pavilions does not suffer from 'condo aversion,'" he says, "because it is not a condo."

19 comments

You hatred of Hunter Craig is completely out of control. You should label all of your pieces about him "Opinion" rather than pawning this crap off as news. Hawes, you should know better. Maybe a journalism refresher course is in order for you and your staff.

Wow is this the Hampden Syd-envy Press?

Oh I don't think Hawes hates anyone. He just knows a good story when it is handed to him. The question is who handed him this one? THAT is the person who has some issues with Mr. Craig. Anybody want to take my bet that the secret source for this story is an ex-banker?

Typical case of shoot the messenger- Remember what Kay Peaslee said about her reading public:

"I discovered bad news is always more interesting than good news to people. If I wrote something about someone’s child being involved in a reckless car accident or something, the parents would always criticize me for writing about it, not their children for being involved in the first place. "

http://www.readthehook.com/102649/observer-founder-kay-peaslee-has-died

You can keep you Barracks West another three years (or more) for you reduced but still overpriced $27 Million asking price.

The whole thing will get old and require demolition before you get that price.

Dream on, its over buddy.

Sounds like a Fox- ish hate piece to me too.

I lived there years ago when it was called Old Salem. Even then, it was truly a dump. I used to say that the apartments looked like they had been designed by Salvadore Dali, and built by a blind carpenter, because there wasn't a straight line in the place. The stairs were all crooked, the passthrough from the kitchen into the living room was a trapezoid, not a rectangle, and if you put a ball down on the floor anywhere, it would go rolling off. The dresser upstairs leaned 1" away from the wall near the floor, but 4" away at the top. Really shoddy.

I have nothing positive to write. Just glad that us taxpayers aren't paying him again to lose money.

I've no beef with Craig, other than the folly of the whole Condo Concept which to me has always represented the sale of something as "Real Estate" which is not really Real Estate, but in reality is a sort of sucker's deal sort of like the now infamous time share concept. Condos have always been losers as investments with the exception of a brief time during the days of madness that tapered off 5 years ago. Why pay more in mortgage payments and condo fees, even including the "tax benefits", than you would to rent the same crappy apartment? It's really just renting without the freedom of movement and since you pay less to rent without the simulacrum of "ownership" why do it at all except for being sold a bill of goods appealing to the emotional side of people who want to "own something" instead of "throwing money away of rent". You still throw the money away, only in a different way..
I thought the Hessian Hills thing quite funny at the time when small fry wannabe "investors" were jumping into the game of "buying" totally worn out sixties apartments for prices a few years back that would have got them a nice solid Greenbrier house, then they put in stainless appliances and granite countertops and thought they'd sell for a quarter mil. and make a killing. A very few did, but most didn't.
Always remember folks. Anyone who doesn't pay cash for real estate buys nothing but an option contract and it takes between 13 and 14 years on a 30 year mortgage to pay down just 20% of the original loan amount. You don't "build equity" unless you're riding the big wave of a speculation. If it's to be thought an investment, it must stand to make money from day one without consideration of what might come about through equity gain via "appreciation" due to speculative bubble forces which probably won't come back.

"Hatred" is a strong accusation. What happened to "concerned" Personally I don't sense hate coming from Hawes on any issue. Certainly his recent awards are no indication that the journalistic community senses any emotion of this type.

Thank You to Hawes for running a fair and balanced reporting organization. Mr. Craig and his family evidentially have some challenges in their lives. Everyone should wish them well and may we all learn a lot in the process.

Hey all you Hawes haters. Before you comment look who wrote the piece. Unless Hawes has a new pen name like Samantha Masone. Hello McFly.

The articles in The Hook dont seem to be about Craig personally but about his business problems and developments Biscuit Run and Barrack's West. The Hook seems to be against using taxpayer bailouts of real estate gambles that went bad... in addition to the domino effect on Mr. Craig's bank, his fellow investors and his family, and maybe even beyond. Hey, it's a very bad economy! Especially for real estate. Mr. Craig didn't cause the economy to crash -- government policies did. Mr. Craig didn't write the Conservation Easement Tax Credit law -- Creigh Deeds did. Craig's probably just scrambling to do whatever he can to keep all his business interests from crashing down, which is what anybody would do in his place. Give the guy a break and some sympathy!

Old Salem was, and is cheap student or borderline low income housing..,it was once affordable. The condo conversion was a "clever" money grab. Our country has suffered from this approach to life for decades. I'll take "real" or "hard work" "or useful to the community" over clever, any day. Get rich quick...I think some of the VNB crowd is getting poor quick!

Speaking of this area: does anyone know what is the purpose of all the "red dirt" activity 1) just next to these condos, and 2) then two tenth of a miles or so on Garth (just on the other side of the proposed bypass route)?

Inquiring minds want to know.

Past Barracks West and Montvue (on the left) is Dr. Charles Hurt working on his farm that he wants to leave to his kids some day. He's not making an unauthorized subdivision just putting in the roads so it will be ready for his heirs some day if they want to divide it up. (3rd hand info so take it with salt). The western by pass is proposed to come by near hear and take out the last few houses in Montvue at the back.

Although Mr.Hawes did not write this column I believe with a little more investigation he could find alot more damaging examples of how the rich get richer when it comes to this property.The money borrowed to buy the property was then doubled so that repairs could be made thus pushing the property to its 20 something million price tag of today.However the repairs were never done and the money borrowed against the property is gone.Where did it go?I have lived at BW for 5 or more years and have seen the property in worst conditions(i.e.staff,appearance,and quality of tenants) and I can say an improvement in all of those aspects is evident.However is the hole dug by the former owner's to great for this property to overcome.

Condos on Yellowstone Drive are seeing a lot of foreclosures.

life aint easy on da west side yo...

Children always feel that criticism is hatred. Unfortunately some continue to feel that way into adulthood. From the article and comments I feel I have gotten some valuable information.