Palisade Palms Auction to Test Galveston Property Values
Houston Business Journal – by Jennifer Dawson
A condominium auction in Houston will test the waters to see how property values on Galveston Island have weathered the economic storm and Hurricane Ike.
The Falcon Group is putting 27 condos in the firm’s Palisade Palms project on the block to move unsold inventory and establish what the units are worth.
The 288-unit property at 801 East Beach Dr. consists of two connected buildings, each with 27 residential floors over 3 levels of garage space.
Starting bids on the high-rise condos have been set much lower than previous asking prices to lure buyers to the June 6 auction in the Omni Houston Galleria hotel at 4 Riverway.
Richard Anderson, vice president of Houston-based Falcon, emphasizes that the auction is not a distressed sale.
“A bank is not forcing this issue,” he says. “It’s a business decision we made.”
Anderson notes Palisade Palms condos have dropped in value by 8 percent to 10 percent as a result of the economic crisis.
Some of the original buyers have re-sold units at a discount, which has kept people from buying brand new units from the developer.
“It created somewhat of a pause of the actual closings,” says Anderson. “People are thinking, ‘Why make a commitment now when the price may drop again?’ ”
Residents began moving into Palisade Palms in May 2008, and 240 units were sold within the first three months. Sales were brisk until the economy went south and Hurricane Ike blew in from the Gulf.
“It threw the market into disarray, then the almighty economy cracked up,” Anderson laments. “Our sales velocity screeched to a halt.”
Falcon had projected the luxury condos would sell out by the end of 2008.
Anderson says these sorts of auctions are more common in other parts of the country where condo living is more prevalent.
He says the auction is meant to get potential buyers off the fence while jump-starting sales, and in the process establish a going rate for the condos.
“We feel like this is the best repositioning to be done,” says Anderson. “We think it will help get this inventory through the pipeline.”
Falcon has attached a minimum sales price to each unit. The reserve amounts are not disclosed.
Units up for auction range in size from several 2-bedroom/2-bath options with 1,044 square feet to a 4-bedroom/4-bath condo with 2,767 square feet.
Starting bids on the condos, — previously priced from $299,000 to $1.35 million — will range from $125,000 to $375,000.
More price transparency
Falcon is a “highly motivated” seller, says Rhett Winchell, president of Kennedy Wilson Group Inc., which is conducting the auction.
“The properties will be selling below previous prices,” says Winchell. “They will be discounting the properties to make sales.”
Bidders must register and be pre-qualified before the event. For those unfamiliar with the process, Kennedy Wilson is holding a practice auction on May 30.
Winning bidders will be escorted to a closing area on the spot and will have 45 days to complete the transaction.
Buyers will be required to pay a 4 percent fee on top of their bid, as well as a monthly maintenance fee of 74 cents per square foot.
Winchell says purchasing a property at auction gives the buyer more transparency.
As a result, everyone will know exactly what the 27 new neighbors are paying for their units at Palisade Palms.
Palisade Palms by the Numbers
• 288: Total number of units in two towers.
• 245: Units that have sold since May 2008.
• 27: Condos up for auction on June 6.
• 16: New units for sale through the standard method.