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Ibiza Condos Turning into Apartments

Walker Evans Walker Evans
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The Ibiza condo project in the Short North has faced numerous delays since its announcement in 2006, and the lack of communication over the course of the past year have left many wondering if that dirt lot at High & Hubbard would ever see progress on construction.

The veil of silence has just been lifted, and condo pre-buyers were informed via email that the project will now be moving forward as an apartment building instead. The developers are saying that there will be minimal design changes to the project, and that buyers would receive refunds on their investment in due time.

The full email can be found below:

As you know, we have spent a year and tens of thousands of dollars to procure financing for the construction of IBIZA. The meltdown of the mortgage market has placed our primary lender in the position of being unable to take on new real estate loans at this time. (We had already begun construction with the assurance that our loan from that lender was in place.) Other lenders have reviewed the project and have even tentatively agreed to proceed, only to find out that they, too, were restrained by their liquidity and other issues unrelated to the economic viability of the project. (One of the reasons the lenders were so interested was that the loan-to-value ratio of the project would be 61%.) On the other hand, a number of lenders have indicated to us that they are ready and willing to proceed promptly with the necessary funding of the project as an apartment project. (Ironically, the rules for individual condominium unit loans have also changed, making it problematic for our buyers to obtain loans which, just a short while ago, were readily available.)

The probable impossibility of proceeding as a condominium is forcing us, reluctantly, to shift our focus to obtain financing for the construction of IBIZA as an apartment project. Millions have been spent through and including the commencement of construction, and only minor changes in layout and design will be required to make the project appropriate for apartments. (We will try to maintain the flexibility of keeping the option open for conversion at a later date when the market and lending rules permit.) We will be working with each buyer to refund their deposit. This will require a period of time to accomplish. We truly regret this complication.

We are diligently working with our lenders, architect, and legal team to accomplish this end. Once the project is funded, we will refund all of your deposits and statutorily required interest.

We are truly sorry for this turn of events, but it has been out of our control.

Thanks for understanding and working with us to make this a successful transition.

Sincerely,

APEX Realty Enterprises, LLC

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  • We will be working with each buyer to refund their deposit. This will require a period of time to accomplish. We truly regret this complication.

    How long have they been holding on to other’s money?

  • cc

    I like the concept of apartments for this area better anyway. I like the Short North a lot but there is something to the flexibility of renting in a trendy hotspot with the ability to move on when your needs change. I am glad to see something being built.

  • dru

    “Millions have been spent through and including the commencement of construction…”

    does demolition of the AAA renting building count as ‘construction.’  because otherwise, there is just a weed filled whole in the ground. 

    hope this goes through.  Victorian Gate and some other projects show that you can move rental to ownership over time should the market be there to sustain it.

  • Will there be a shift in ownership or financial responsibility that is tied to the previous concept?

  • gramarye

    While I understand that the developer would rather just sell, get his money, and get out, I think this will end up being a successful apartment development.  It’s going to have top-flight amenities and a fantastic location, and there are actually already a surprising number of condos compared with the number of apartments that are right on High itself.  The demographics of the Short North should hopefully be fairly rental-friendly, too.

  • cc

    I think they will have to cut back on some of the amenities. I don’t think the rental market will bear much more then $900 – $1600 for 1 and 2 bedrooms even in the Short North. ARMS will be paying interest on tens of millions of dollars on construction loans.

    Actually, unless they make some drastic cutbacks I don’t see it being solvent.

  • jpizzow

    I have no problem with seeing these built as apartments. I think the Short North is lacking in available apartments anyway. I’m glad to finally here something on this. I do wish they would have said when groundbreaking was going to be. It sounds like it would be soon but who knows.

  • swinzo1010

    Wonder what their timeline is for building? The sooner the better for that vacant lot and people who had made deposits

  • “Actually, unless they make some drastic cutbacks I don’t see it being solvent.”

    Which amenities do you think they should cut out to make it solvent?

  • cc

    I am not sure but I think an 11 floor, $45 million apartment building is a pretty risky venture in a city that ranks in the top 10 lowest rents. The interest payments would cut heavily into the rent proceeds and there would be no condo fees to subsidize upkeep.

    Basically, I think they need to redesign.

  • monadnock

    Give it up.  Ain’t gonna happen.  Just another excuse.  They’re just stalling again.  They spent a lot of other people’s monies and now they’re looking for someone elses’ money So they can pay everybody back. 

    How is this NOT a panzi scheme? Or, in this case, should we simply call it a pansy scheme?

  • cc

    nm

  • jpunkster

    I always thought this was being developed by ARMS Properties – who is this new Apex player that signed the email?

  • CbusIslander

    I am glad this project is moving forward one way or another.

    More information at business first
    http://columbus.bizjournals.com/columbus/stories/2010/01/25/daily10.html

  • seanguy

    This is a strange move.  I am sure that they are going to be cutting some costs (to make the project solvent.)  They may keep the overall design, but I bet that some of the materials used, and wall thickness will be cheaper. On the other hand, if they do cheapen some costs it would make it harder to turn them into quality condos later. I hope they keep that in mind when they look at the redesign.

    Last, I’m very surprised that they are not going to keep a portion of the units as condos.  However, it is interesting that they claim it is easier to get financing as a 100 percent rental building than relying on available loans for mortgages.

  • shortnorthfan

    Okay, I know this will bring up a whole lot of attacks, but as a community, we need to think of the following:

    1. These are the same guys who told one of our fellow-bloggers that they were “Really close” to making the condo project happen.

    2.) Okay, so let’s think about reality. I’m making an assumption that if banks aren’t willing to loan them money on a condo project, we would be fools to believe this farce that all of a sudden banks are willing to loan money on an apartment building.

    3.) So let’s say a miracle happens and a bank is dumb enough to loan these guys money, I’m seriously doubting that they will be able to build what is on that rotting buildboard. Which means, and correct me if I’m wrong, but it’ll have to go through a whole redesign and then get approval from whoever approves it for the Short North. I mean, we’ll be looking at a dirt hole for years.

    4.) And considering the way they mishandled this whole project, I shudder to think how these guys would manage a rental property of this size. I believe these guys about as far as I could throw them.
    Fool me once, shame on you. Fool me twice, shame on me.
     What millions of dollars have they spent? Buying the property and knocking down a building isn’t construction.What a mess! Shame on you Ibiza! Shame!!

  • buckeyecpa

    It’s hard to question how much something has cost if you’ve never taken part in such a thing. I bet for starters you wouldn’t even be close to the demolition cost of the old building alone. Those millions went to purchasing a property, demolishing it, paying an architect, paying the taxes, paying the fees, paying the employees involved, purchasing the demo equipment for the office, fencing, and billboards along with the rest of the marketing. This is a small list of what goes into a project like this. It’s not cheap to get to where they currently are.

    They have to be optimistic when talking to the project. Up until the press release today they were most likely trying to get this thing going. There’s no way they wanted to see it fail like they did. I’m sure the works been done. Sometimes it takes one wrong turn to trash a project of this size.

    It honestly does not take too long to push something through the neighborhood reviews and get it moving. They have their original plan approved. Now they’ll just alter a few things and go before the board again. It’s a very small step at this point since the dirty work is done on that end.

    Again, say what you want about this project but don’t forget the other projects they’ve taken part in within the short north area. Some of their other projects had minor flaws too but they still pulled it off and helped shape the neighborhood.

  • Rick Carraway

    Will the pool still be on the roof? Because if not, I’m going to make lots of loud angry noises.

  • Jergarr27

    At least there’s a time line set.. we’ll see if it actually sticks though..

    He said the project should get under construction within 90 days with a completion expected in late 2011 or early 2012.
     
    I’m more interested in seeing what businesses get added to the SN with this project since i’m pretty sure I won’t be able to afford to rent there…………………………

  • jpizzow

    Okay, well they have until April 25th.

  • Urbanboi

    Lets at least accept the fact that someone is trying to build urban housing…With a city this size we should be seeing alot more large projects proposed or under construction. Apartments or condos it will still bring more people into the inner city.

  • columbusdreamer

    Why anyone but the people who paid the money for the condos is upset about this is ridiculous.  As people have said before be glad that the project is moving forward.  There was an article in the NY times the other day about how 2010 is the year of the renter because prices are falling on rents and mortgage loans are like unicorns and pots of gold.  I just started got a RE salesperson license and started with a company that does mostly rentals. I’d love to come back and start a franchise in Columbus.  This project being a rental and more projects like it will give me even more incentive to open.  Rentals aren’t bad. Not in these times.

  • cc

    I don’t think anyone is saying that rentals are bad. It is more of whether  this is still a feasible project as a rental? Especially in a city known for low rents and available housing. i think a lot of people want them to build something on that lot and be successful. Apex has not been good with communitcation.

    There is a strong fear that this may be a song and dance where they prop up a dying horse with more promises. Apartments take a very long time to return an investment and require support staff etc – so more money upfront. I think they are a company dying of thirst and this ‘urban oasis’ they are talking about may be a mirage.

  • HeySquare

    Can anyone say “boutique hotel”? It would be a way better site for the hotel plan… wouldn’t have to straddle High Street for parking. The height issue has been resolved. Demolition has been resolved. Land is essentially ready for construction. Ibiza-hotel. Ibiza-hotel. Why do I suddenly feel like Melanie Griffith in “Working Girl”? (“Trask-radio, Trask-radio”) And where is Harrison Ford?

  • mstimple

    I hope their latest idea is successful.  This plot of land is embarrassing to the neighborhood.  The project on 4th by the Wonderbread factory seems to be doing ok after originally being planned as condos.  As long as they have the rooftop pool they will be ok!

  • wouldn’t be a hotel.
    Hotels are experiancing their lowet occupany rates since the early 80’s

  • columbusdreamer

    As long as the build something like what the renderings show it won’t matter if its successful. There will be someone with enough money and or resources to take over. I’m not saying build just to build but after this is done there will be major interest in the building for a very long time.  The upside to the investment would be to great to pass up.

  • cc

    @columbusdreamer

    Please look at the history of the leveque tower. I doubt investors want to get involved in something like that.

    http://en.wikipedia.org/wiki/LeVeque_Tower

  • BUSH

    Rent returns for investors are pretty good in Columbus. It could be viable.

  • could there be NSP money available for apts? after all they had finance fund money secured.

  • goldenidea

    I never lived there, but Victorian Gate worked fine as apartments and hasn’t been a bad addition to the neighborhood.  I think the apartment market in the SN is basically solid.  I think these will rent pretty easily and that it’s likely the developers have someone advising them on what to spend on the buildout to get the rents the need to make it work.  So I see no reason to not look at this favorably, unless you’re one of the unfortunate ones that made a condo deposit.  They’ll make good on the refunds.  

    A boutique hotel is a nice idea.  I can’t say why they aren’t going that way instead.  Perhaps becaue the site it too far from the convention center.  Or perhaps Puzutti has that initative nailed down.  A hotel is probably more risky from an investor standpoint and perhaps harder to finance.

    If this gets built, an injection of 100-150 moderate to upscale rental units onto High Street will be a plus.  It seems like a workable solution to an difficult problem.  As long as they put up an attractive building this is good.

  • Mez

    OK, Lets look at this from a financial standpoint. 
    From what I read there was going to be 150 units? ( let me know if I am way off)
    If so and the project is $45 million dollars and the banks will lend no more than 70% on commercial developments otherwise the rates are high. This means the developer will have to kick in over $13 million dollars and they will have a loan of about $31 million.
    Debt service on a loan of this type would run over $2,000,000./year on an interest only note, or over $!60K a month.  This means that just to cover debt service they would have an avg rent rate of $1100/unit.
    (I am trying to even be generous on an interest only baloon note, with a lower than market rate.)
    This does not add in the operational costs, up keep, property taxes will be in excess of $60k a month.  I dont think they will get tax abatement for a rental building. 

    So add this into the equation and the avg rents will jump to over $1400/month but most likley have to be be at $2,000 month to even be close to profitable, especially when you calculate in vacancy and repairs when someone moves.

    It just does not have the numbers to support this scale of a rental complex without the developer coming to the table with alot more money.

    My suggestion would to gather everyone that has a deposit and hire an attorney to protect your money and interests. 

  • InTowner

    I’m actually really happy that this is going to be apartments.  The Short North needs to keep its eclectic mix of ages and income levels to remain viable.  Diversity leads to the urban energy which feeds the SN.

    As for the design, I doubt that the current design will be viable for a rental building.  However, simplicity can be quite virtuous.  They should forgo the glass, the pool and maybe even the workout facilities.  Remember, there already is a municipal pool and several gyms nearby, not to mention Goodale park.  I’d rather have people use these amenities and be out on the street. 

    What people really want is a clean, modern space.  Too often individual buildings attempt to combine too many styles and concepts.  I think this building was towing that line.  It is at the neighborhood level that such diversity needs to occur, not within individual structures.  A simple, well-designed brick building will fill in the street wall, provide urban enclosure, perhaps a chance for flagship retail and a whole lot of energy.

  • Mod-dude

    I am surprised to see so many construction/ rental experts on here! Nobody knows what the finances truly are and nobody really knows the details of this rental situation just yet. These are the same people who built the Dakota, so this is not a new endeavor for them. I am sure they know what they are getting into.

    In addition, did you every think that perhaps they are stating it will be rentals, and once it is built, they refinance and start selling them off as condos? Whatever it takes to get there (the path of least resistance)!

    I too am happy it is being built, and I welcome it either way. And for those who say the empty lot is an embarassment to the neighborhood, just take a look at some of the other urban neighborhoods around town that are still trying to make a go of it and then consider yourselves very lucky! When did we become such urban snobs?

  • jpizzow

    Please no InTowner, not another brick building!!! This isn’t the Arena District.

  • Mez

    Mod-Dude,

    I don’t claim to be an expert at anything but I have seen deals that were in the millions of dollars and the financing structures that are available are not plentiful.  There are a few private companies and investment pools etc., but the LTV under 70% , they want to protect their investment is what the market is at. 
    Common sense questions to ask>>>
    1) Where are they going to come up with the Millions needed as their investment if they can’t pay back deposits right away?
    2) Payments on this are relatively easy to determine with them stating it is a $45 million dollar project do the math based on market rates of other commercial deals. Google can give you some examples of recently closed transactions and financing.
    3) If they take out a note and try to convert them to condos I guarantee there will be a hefty penalty for paying off early.
    4) Condo conversions under the Ohio Revised Code are actually trickier to do and a longer process and harder to finance currently than new build condos.
    5) The financing stated they could not get 61% ltv with the pre construction contracts???
    6) How forthright has the developer been through the process so far?

    Don’t get me wrong I want this site developed responsibily and with a long term vision for the area.
    I would just have to say that they will have to scale it back alot to make the numbers work.  Maybe they will forego the Green Building Features, Maybe they will take out the pool and lower the finish grades on the inside?  At the disclosed price of $45 Million it does not pass the smell test with me….or probably with alot of others.
    I can see this site doing well as a rental building but on a much more conservative scale.

  • goldenidea

    I agree with Mez.  Looking at it simply, with rounded numbers, if it were to cost $50M to build and there’s 150 units, that’s $333K per unit.  They’d need rent @ $2K per unit to simply cover financing, if their cost of capital were 6%.  These numbers are a bit inflated, but OTOH they probably won’t be building as many as 150 units.

    So the cost of the building will probably need to be lower.

  • columbusdreamer

    @columbusdreamer Please look at the history of the leveque tower. I doubt investors want to get involved in something like that.

    thats a commercial space. Not a mixed use space. Commercial is totally different than residential

  • columbusdreamer

    @columbusdreamer Please look at the history of the leveque tower. I doubt investors want to get involved in something like that.

    thats a commercial space. Not a mixed use space. Commercial is totally different than residential

    and i dont claim to be a rental expert . However i just got my realestate sales person license and will be working in the NYC rental market

  • cc

    My comments were based on your proposition that as a signature piece of architecture the ibiza project didn’t matter if it was successful and that some investor would take over eventually. That happened at the Leveque, a lot of initial investors lost their shirts. You do not need to have a realestate license to see a potentially bad investment.

    btw the NYC rental market and the Columbus rental market could not be further apart. Being from Columbus, I have absolutely no idea why you would need a realestate license for a rental….

  • urbanadvocate

    It is clear that the developer no longer has my deposit.  I am not optimistic about ever having it returned to me since the developer has a reputation (one they have earned) for not paying their bills and for always taking care of themselves first.  I am a fool to have ever believed the ending would be different.

    What responsibility did my Realtor have in this situation?  I am represented by the Realtor who also represents the developer/seller.  A member of that Realtor group is married to one of the developers.  They must have all known what was going on all this time.  Don’t you think my Realtor had a responsibility to inform me?  I think there is a serious ethical issue with all of this.  Perhaps my best chance at getting my deposit back is to seek legal action against the Realtors who were inside this deal all along.

  • columbusdreamer Says: thats a commercial space. Not a mixed use space. Commercial is totally different than residential

    Most of it is commercial… but there is one two-story residential penthouse for rent on the 43rd and 44th floors. And it could be yours for only $3,300 per month! ;)

    http://www.metro-rental.com/TheLeVequeTower/default.htm

  • InTowner

    @jpizzow Please no InTowner, not another brick building!!! This isn’t the Arena District.

    While I agree with you that the Arena District is at times a bit bland, I don’t think it’s because it’s mostly brick. Brick is an amazingly versatile material. It comes in various colors, sizes and textures. Beyond the diversity of the material itself, the possible patterns are virtually limitless. Most of the houses in the Victorian Village are brick and no two are quite alike. Also, look at the block of brick buildings from 1st to 2nd Avenues on the east side of High St. All of these buildings are brick, yet each has its own unique personality.

    I like stone, tile, steel and glass as much as the next person, but brick is both cheap and versatile. In the right hands, it can be used to create a truly profound architectural effect. If this developer wants to create a lovely, unique addition to the streetscape without breaking the bank, I think he’ll do well to consider using brick creatively.

  • buckeyecpa

    urbanadvocate, It’s easy to want to blame someone. Seeking legal action or even internal action through the board will not get you far unless you have proof. Everyone believed in this project at one point or another. There was never intentions on stealing the good peoples hard earned money.
    The realtor ultimately had nothing to do with your loss. If you were working with a broker representing both parties that is a risk you are taking. This is why you should always get an outside agent to work with you on any deal. So then you have no reason to question this agent. I hope you don’t plan to ever slander this agent because of this project. They didn’t receive any commission for it since the sale was never finalized. The agents time and effort on the deal screwed her too.

  • Mod-dude

    Not to beat a dead horse here, but I thought the project included a pretty sizable parking garage too which would generate additional income. On top of that, the commercial spaces should fetch a pretty sizable rent. Doesn’t a bank look at these numbers before loaning this kind of money to make sure it holds true and will be viable, including an appraiser who would verify the information? Again, no one really knows what the finances are truly going to be, even if you think you can figure it out on the surface. They sort of have to prove their numbers before getting that kind of money lent to them.

    And I agree with cc, if it doesn’t pan out in the long run, someone will swoop in and get it for a steal, at a price that it will be successful for the new owners. The only people who will be out then are the developers and the bank. Us everyday citizens might not even notice much of a hiccup if that were to happen. :-)

  • Mez

    Buckeyecpa- Being a Licensed agent and a member of NAR, I have to somewhat disagree with your statement.  The agent involved would have liabilty if they knew that the project was dead and did not pass this information on to ALL buyers.  This is part of the code of ethics that we must treat all parties fairly and honestly.  Also, we must disclose any Material fact about a property that may have an adverse impact on a buyer’s decision even if a developer/seller wanted us to conceal or not tell people about it. This is like a seller telling you a racetrack is proposed in their backyard and and then the agent not telling prospective buyers about it. 
    I have not seen the contract but I would hope that the money was put into a trust account of some sort. 
    I do agreee that the Agent also lost out since they potentially worked for nothing.  But they may have been paid differently based on reservations amd then again when it actually closed.  we just don’t know and probably will never know.

    Back to the project….I hope that they come up with a development that will work along with the parking.  As I remember the whole rezoning for the denisity required that there be a garage for public parking.

  • buckeyecpa

    If the agent knew the project was going to unfold and held that back then yes the agent is liable. I never said they were free on that. I said proving any knowledge (up until the announcement most involved were still scrambling to pull this off) would be very hard. I’m also a licensed agent (really who isn’t these days, right?). I’m an accountant that works in the real estate/development industry. I have nothing to do with this project or the Jackson but I’m very familiar with developments of this nature.

    Simply speculating that the agent had knowledge is not fair at all. Also, we don’t even know the story with this agent. Often times as you should know people believe the agent holding the listing is the agent that helps the buyer.

    This project was a developers project. That’s why you see the different names; ARMS/APEX. A developer isn’t required to handle deposits as earnest deposits. The contract is not a standard purchase contract. The same if you were to go to Harrison Park. You go in, sign the papers and your agent really has no room to work with and sometimes isn’t even entitled to compensation from the developer.

    The agent has fiduciary duties but we don’t know the whole background on this deal. Even as a buyers agent, everyone knew this project was struggling but not telling a buyer that doesn’t put you in a legal bind. Developer’s projects are buyers beware type deals unfortunately.

  • monadnock

    Read the contract.  They spent the money illegally.  Get a lawyer sheeple!

  • cc

    Wow….if that is the contract then I hope they get what is coming to them.

  • AJMAC25

    Nothing to see here. Move along. Lets make a real use of the property and turn it into a nice dog park.

  • DawonHawkins

    Wasn’t there supposed to be a partnership with this development and the city to co-build a parking garage? Just curious where that landed.

  • I would assume that’s still part of the development plan.

  • From the Columbus Dispatch…

    Condo depositors file suit


    Project’s failure muddies waters

    by Jim Weiker

    The developers of the planned Ibiza condominium complex in the Short North are facing the first of what could be several lawsuits over the project’s failure.

    Read more:

    http://www.dispatch.com/live/content/business/stories/2010/02/13/Ibiza_Suit.ART_ART_02-13-10_A10_DSGIVCC.html

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