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Developers versus pre-sale buyers: Round 4 or is it 5?

March 5th, 2009 · 9 Comments

As the Pappajohn brothers desperately look for ways to salvage their Jameson House tower project downtown, they’ve found themselves fighting not just to get financing but also fighting to keep their unhappy pre-sale buyers on board. Derrick Penner’s story in the Sun this morning details the current state of legal affairs among all the parties — an object lesson for other developers about the fate that potentially awaits them if their projects get to the same state.

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  • Joe Just Joe

    I don’t have my own money invested in this project, but it strikes me as a bit odd for purchasers to want out at this point. The deposit structure on this project was pretty favourable (not large). The money is held in trust and is safe (unlike almost any other investment at this point). So unless the purchasers are in need of that deposit right now it doesn’t make sense to want out. The delay has acutally helped them as by late 2010 most experts are calling for the recovery to be in full swing. Also this project wasn’t sold at Ritz/Fairmont prices but at much lower prices and will be worth more then the presale prices at completion.

  • A. G. Tsakumis


    You make some significant leaps in logic.

    1) The “experts” who call the return of the market for 2010 are have vested interests in seeing it return so quickly (and artificially). Either that, or they are delusional. You will not see a real estate market even begin to return, and when it does it will be at a glacial creep, for many years more. Consider the fact that we are in for an extended recessionary period and couple that with a stimulus package that has no bearing on whether someone wants to drop 500K on a condo, in a down economy, and the maths don’t bear out anything you’ve proffered.

    2) Yes, the Pappajohn’s structured their deal as best they could, however, the collective gripe by a significant swath of purchasers, is that they believe that Tony, John and Tom didn’t have the money to do this project from the beginning (go back and re-read the story in today’s Sun). That’s a dramatically different point of contention than the sunny spin you’ve offered.

    I know these guys well enough to appreciate their tenacity and their integrity. They learned from a good man.

    But sometimes it pays to remember stories from your heritage…like to the one about Icarus…

  • MB

    A couple of observations.

    Most economic pundits suffer from short-term vision and are too often susceptible to ideology. One longer-term prognostication is espoused by Harry S. Dent in his book “The Great Depression Ahead” (2008). The title says it all, even if it’s a little alarmist.

    The body of the book appears to be a well-researched treatise into economic systems and trends and theorizes that the bottom will be reached not this year or next, but by mid-decade after several staggering waves of worldwide deflation. He recommends how best to ride it out.

    I don’t know whether to believe it or not, or to what level, but it strikes me as premature to assume the recovery to the current recession, which is primarily caused by fundamental economic flaws and conceits, will not occur anytime soon, at least one that lasts.

    The other observation is that while the rebar in the Jameson project has barely begun to rust, they have two heritage buildings suspended on huge steel trusses above the open excavation, and a heavily-travelled major public arterial and a lane are partially blocked.

    They can’t wait forever.

  • cashisking

    He also said the DJI would be 32,000-40,000 by 2008 back in 1993(it never got above 14,100 and closed today around 6,600). I agree that we are in for a rough ride but these “NUT” jobs all come out of the woodwork when markets are at extremes. Remember oil going to $200-250 predictions getting the headlines last summer?!? RE in Van always going up?!?
    Come on people some perspective please.

  • VanVoter

    I think the pundit you refer to, Harry Dent, has extreme short-term vision. Like many other economic ‘forecasters’, he’s not so much driven by idealogy as he is motivated by the profits he can make from publishing dramatic titles about the state of the economy.

    Yes, he just authored “The Great Depression Ahead”… but this is the same guy who in 2006 published a book called “The Next Great Bubble Boom: How to Profit from the Greatest Boom in History: 2006-2010.”

    I wonder what stunning insights he will offer next…

  • rf

    It’s comical to me how many people have quoted Harry Dent lately as some sort of prophetic prognositicator. Not one person who has mentioned him to me and his “great depression” book has been aware of his earlier work. Lemmings.

  • cashisking

    Brings a new meaning to “talking up your book” … sorry bad pun.

  • MB

    RF, you did not read my post. I said I am undecided whether to believe Dent or not, or how much. Other prognosticators have said that a full economic recovery will arrive this later year, contrasting with Dent’s basement-level pessimism. I have a healthy skeptism about that too.

    What I do believe is that the current economic crisis is not like anything I’ve seen in my half century plus on the planet, making Dent’s thesis a little more plausible, and the solutions so far largely seem to be about propping up the Old Economy with record sums of public money rather than fixing it’s structural problems, like regulating debt-to-asset ratios in banks, and insisting on more sustainable forms of consumerism and developmment.

  • MB

    One last comment, H. S. Dent doesn’t appear to delve very deeply into the supply of the world’s No. 1 commodity: oil. However, organizations like the International Energy Agency, Merril Lynch, the Energy Watch Group, CIBC, Association for the Study of Peak Oil, Toyota and others have all concluded that the supply of cheap oil has started to decline despite record demand.

    ASPO predicted in 2006 that the production of conventional oil will decline a litle over 30% by 2020. This was before the financial crisis, but it could still taper to over 20%.

    No one needs H. S. Dent to predict what this will do to the world economy, even in our little corner.