Broken condos: Barracks West complex sold short
The condo-craze bubble is officially popped. Developer Hunter Craig was part of a team that paid $32 million in 2007 to turn student-apartment complex Old Salem into a condo-plex renamed Barracks West. That recently sold for a bottom-scraping $13.3 million. After putting $4.5 million into repairs and renovations, the new owner plans to return it to the rental market.
"We've gotten pretty active in the broken-condo market," says Michael Brodsky with the Bethesda-based Goldstar Group, the new owner of 265 of Barracks West's 364 units.
Craig's Cheetah Investment Company sold only 99 units in Barracks West, most of those to investors. In October 2011, SunTrust Bank, which lent $22 million for the complex, according to a Goldstar release, appointed a special receiver after the loan went into default.
Virginia National Bank, where Craig is a founder and board member, notes the receivership in an April proxy statement. Craig did not return a phone call from a reporter at press time, nor did Virginia National Bank president Glenn Rust.
The unsold units were marketed earlier this year in the $27- to $28-million range. And while Craig's group– which reportedly included Craig's father-in-law Wick McNeely and music mogul Coran Capshaw– paid an average of $87,000 per unit and sold 99 units for an average of $130,000, some buyers were unfortunate enough to pay as much as $175K for a condo in 2007. Goldstar is picking up the remainder for about $50,000 each.
Goldstar has a "value add" philosophy, according to Brodsky. Barracks West fits its "broken condo" model, and the company likes Charlottesville's location and market, he says.
"There's significant deferred maintenance that needs to be done," says Brodsky. "We think we can restore Barracks West to where it should be in the market."
And that means rental units, not condos, says Brodsky, noting that Goldstar may buy back some of the condos. He says he doesn't see any rebound in the condo market for the next 10 years or so.
New tenants to Barracks West can look for upgraded maintenance along with improvements, including a redone clubhouse, larger pool, and children's playground.
"We're bullish on the market and Charlottesville in general," says Brodsky, who hints, "I hope we can do more acquisitions down the line."