Slow Sales in Long Branch
We could see that sales were slowing in Long Branch this time last year. The Asbury Park Press apparently just noticed. Although its encouraging to see local coverage, it's too bad that the only experts the APP can find are local Realtors, who are practically required to paint a sunny as picture as possible when talking about local market conditions. I believe at least one Realtor in the article has a property that he/she is trying to flip. What else are they going to say? Now is the worst time to buy.
"BY DAVID P. WILLIS
BUSINESS WRITER
LONG BRANCH — A boom in townhouse and condominium construction has been a vital part of oceanfront redevelopment in the city, but the market here is not immune from the slowdown affecting the rest of the real estate industry.
Attracted by Pier Village, the oceanfront Victorian-style complex of shops and restaurants, builders rushed to put up 225 townhouses and 530 owner-occupied condominiums and rental units in the past five years, according to city Planning Director Carl Turner.
Full article...
posted by Little_Silvered at 7:05 PM
12 Comments:
I can't wait to see what excuses are going to made for dead the market of 2007. Maybe this time next year reality will finally hit them in the face. As far as Long Branch is concerned,they are throwing 90 year old people out of their homes to build all these condos that will probably sit empty for a long time. Typical NJ -it's disgusting.
Error in previous post-meant to say the dead market of 2007.
Is this OPTION ARMS or INTEREST-ONLY LOAN ????
RE:
Kara Homes wants to borrow $1 million 'to keep the lights on'
Posted by the Asbury Park Press on 10/19/06
BY DAVID P. WILLIS
TRENTON — Kara Homes this morning asked a U. S. Bankruptcy Court judge for permission to spend about $1 million, money that will be used to pay employees and hire security guards for its uncompleted housing developments.
"If we don't get it, the debtor doesn't have any way to keep the lights on,'' said David Bruck of Woodbridge, the lawyer for Kara Homes.
One of the largest home builders in Monmouth and Ocean counties, Kara Homes filed for Chapter 11 bankruptcy protection on Oct. 5. The filing has left many prospective homeowners who had contracts with Kara wondering if their homes will ever be completed or if they'll get their downpayments and deposits back.
A hearing on Kara's request to borrow $5 million to start finishing those uncompleted homes, which was scheduled for today, has been postponed.
At 18% interest it sounds like a "you no-a pay-a we break-a your legs-a" kind of loan :)
yes long branch is a sad story. they threw out people who were there for a few generations to put up the "luxury" everything. they should have compromised a bit. i think that prices will eventually really tank there. and they should concentrate more on the commercial for now. there are enough condos and town homes.
Since some idiot seems intent on blocking information on this Blog relating to KARA Homes (by posting long comments that contain unrelated stuff simply to make it so it takes forever to download), figured I'd post my comment here.
The problem with KARA's "seed money, finish a home, get more money" plan is the rate of consumption vs. available funding. The $1 million dollars is suppose to last until the end of the month with $4 million to follow. Now it doesn't take a rocket scientist to figure at this burn rate they will be out of money by the end of the year and must start closing on homes by then to fill up the kitty again with additional funding to keep the process going. Problem I suspect they will find is (1) a reluctant construction lender who will demand all of the sales proceeds, (2) a reluctant buyer who will have obvious concerns about future warranty work, and (3) reluctant mechanics lien claimants who will want to get paid before they release their liens.
So, with these difficulties it is going to take time to sort out the mess and the passage of time, in terms of Debtor survival, is KARA's enemy. Things like that 18% interest on their debitor-in-possession (DIP) financing, coupled with the interest on the construction loan and interest on the monies due mechanics lien claimants will quickly kill off any potential profit. Additionally purchasers will want credit for any deposit they made for the home, further sandwiching out any potential remaining proceeds that are designed under the "plan" to fund KARA's DIP operations.
I've said it before and I'll say it again. The fact that Amboy Bank and other heavily invested construction lenders remain on the sidelines during this proceeding is telling. It says that just as they wouldn't trust a fox to guard a hen house, they don’t trust Zudi Karagjozi to follow through and complete his promised plan of making everyone whole. My sense of things is that the merciful thing to do at this point in the proceedings is to pull this Debtor off life support.
These circumstances remind me of a situation a number of years ago when I visited a friend in the hospital who was in a coma, dying of a terminal disease. When I walked into the room a nurse was giving him a blood transfusion. Now in my brash manner I asked why were they giving him blood given his terminal condition and the fact he was in a coma? The nurse responded that it was so he would rest easier. I shook my head and responded that the blood must be near its expiration date.
Keeping KARA on life support at 18% per annum simply to put paychecks in the hands of a few “key” employees makes about as much sense as providing my deceased friend with a unit of blood. It will simply provide an income to Zudi and other KARA insiders during the waning period of this Debtor’s life.
Also remember that 1.8 million of the proposed $5 million loan is for refunds to buyers who bailed before the filing. That leaves only 3.2 million with which Kara is supposedly going to use to rebuild itself.
The plan they seem to have does not really differ from what they were doing all along. If it didn't work while homes were selling briskly, what makes anyone believe it'll work now? It's a rather fanciful, best case scenario that, to me, seems simplistic and not very feasible or practical.
I ignored the $1.8 million simply because I didn't see a practical way for it to fit into the picture. No bankruptcy judge in his/her right mind is going to approve post-petition loan proceeds to pay pre-petition obligations like this. And besides, do you really believe Zudi, when facing a decision to use the money for payroll or return a buyer's deposit, electing to return the buyer's deposit. It simply isn't going to happen.
The more I follow this case from a distance, the more I am convinced that we are seeing an abuse of the bankruptcy process. Problem is, even with the recent changes in the Bankruptcy Code, appointed judges still seem to ignore the practicalities, allowing debtors-in-possession to loot the estates until nothing is left that provides a distribution to unsecured creditors. It is a sad state of affairs.
Passed through Long Branch today (WLB) and saw a lot of homes for sale as well as buliding going on.
In my town, condos are going up and are being advertised as "drastically reduced". I do not know if this will bring the SFH market to a lower price expectation too.
There are 5 houses on my own street for sale. 2 are old ranches one is brand new, and the other is in need of coplete upgrading. They are all overpriced by 150k easily. I am hoping that they will lower and learn to accept low offers, which would still be giving them a good chunk of money.
OK now Zudi has done it. Hiding behind his mother Rose who claims the failure of KARA Homes wasn't his fault but caused by "a lot of people they hired weren't doing what they should have... They were getting paid high salaries and sitting on their rear ends." See http://tinyurl.com/vahas
So Anonymous and Disgruntled Goat, it looks like you are to blame for the downfall or this bankrupt company. In knew it couldn't be Zudi's fault.
Yeah, Rose obviously has an impartial, objective view of the whole thing (chortle). Funny, the piece never mentioned how she was on the payroll, too. Guess what valuable function she served (hint: involves her behind & sitting).
Someone was responsible for hiring all of those useless seat-moisteners. Guess what? She's still there, collecting a check every week! Guess everyone really fooled her during those interviews. Dozens of times. Good thing he's has such competent folks running the business during its "re-organizing" phase, huh?
Hiding behind one's mother when the heat is on, such a courageous & admirable businessman. He is clueless, cowardly and has no idea what to do or how to proceed. His idea of negotiating is convincing people to wait, wait and wait some more for their money and in the end they never get it. Giving his company more funds to squander is not just stupid, it is downright unjust.
anyone out there have any idea what that dike makes
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