Lipman Group to Auction Off 30 Terrazzo Condos in Nashville

Terrazzo Auction flyer

Do you know that sinking feeling you get sometimes? You get a nagging feeling that you just cannot shake and you’re sure that something is about to go wrong, but you have no idea what it is. Well, I got that feeling tonight when I was awakened by our screaming newborn. Of course, at first I thought that my sinking feeling somehow involved our 4 week old, but then I walked over to my computer and downloaded what may be considered the beginning of the end for the Terrazzo and the Gulch.

A little more than a week ago I reported that Canyon Johnson, the money behind the Terrazzo had let Zeitlin Realtors go as the listing company for the project. A day later I also reported that the Lipman Group, a company that had never listed a high-rise condo project, was taking over and questioned that decision thought process. Now, I have come to fully realize the implications of this move and just how horrible it might be for Nashville as a whole. In fact, Larry Lipman’s company could be in danger of becoming the company known as “The real estate company that killed downtown Nashville living” if their risky scheme backfires.

It appears that in conjunction with the Boston-based auction consulting firm, Accelerated Marketing Partners, and locally operated United Country Auctions, the Lipman Group is going to forge into the great unknown of luxury high-rise auctions. By the way, do you know what United Country’s company slogan is? “America’s Rural Real Estate Company”! I am not kidding you, look at the website yourself. Holy crap Batman!

Well, it might not be that bad, Accelerated Marketing Partners has done several of these auctions in the past, but looking at their website, I then realized that these guys are just liquidators. Most of their auctions are in depleted markets like Atlanta and all over Florida, but I did see a few auctions in their home city of Boston and became hopeful once again. That is until I read the recent Boston.com news article about the results of the sale. The article clearly stated that some buyers purchased condos for up to 41% less than asking price. Whoa.

And why in the world are they holding the auction in a hotel ballroom a half mile from the building? It stands to reason they would want bidders to be in the actual building to build excitement on auction day. There’s a ton of space to hold the event in the more than 8,000 square foot vacant restaurant space on the ground floor. Is the building not good enough for these guys?

Let me recap the story so far. Terrazzo condo sales are not going so well and so the financier lets listing company go in favor of a high-rise unknown. High-rise unknown then partners with New England auction consulting firm and local farm auction company and plans to auction off 30 luxury condos in a unrelated hotel. In order to let the local real estate community know of this incredible opportunity, they fire off a mass email in the middle of the night. Maybe it’s me, but this thing seems doomed before they even start bid calling.

Maybe I am being overly hard on these guys, or maybe I am not. Either way, I really cannot wait to hear the reaction from the Bristol Group and MarketStreet Capital. I would hate to be the agent who sold a Terrazzo condo to their best client right now.

It seems to me that the result of this auction will be one of two things: 1) The auction will go well. The uniqueness and buzz creates a lot of awareness and energy that results in the condo buying public jumping off the fence and back into the market. The prices paid are very respectable and now the Terrazzo has effectively jumpstarted the downtown condo market and deserves a little praise. The rest of the condos in downtown don’t receive a price boost, but they all receive an interest boost and things are good, or 2) the auction is either only semi-successful or a flop and now everyone who was on the fence becomes a vocal naysayer. All of a sudden the downtown Nashville condo market becomes a punch line to real estate jokes and all condo projects are hurt from this failed attempt to sell units in just one ill-located building. Crosland, Bill Barkley, the Lipman Group, United Country and all others involved in this effort become a real estate anecdote to the downtown real estate discussion.

This morning the Tennessean came out with a story about the auction and managed to quote the CEO of Accelerated Marketing Partners as saying, “This will have major repercussions in Nashville in terms of value.” He went on to say, “People will look at these auctions to determine what they want to pay for properties in Nashville. Particularly in a market that has declined like this market, where there is a disconnect between buyers and sellers, this event will break the logjam.”

Clearly, this is a prepared statement that this guy has given in lots of other markets and clearly shows that  has not done very much research in Nashville. I don’t see a 6% year over year price decline as a “logjam”. It’s a shame that these guys take such pride in devaluating real estate markets.

See all condos for sale in The Terrazzo

  • Todd

    The massive discounts they are offering is the only way units in that building are ever going to sell. The noice level and exhaust from 120k cars a day negate any perceived LEED certified value this project had, all high end finishes aside.

  • Tamara

    I saw your well thought of postings on the Tennessean website about this very issue. Can you answer this, how was the Adelicia able to sell out all of their units and others in the area are having such a hard time?

  • Name

    Call me old fashioned, but over $160,000 plus over $350/month for association fees still doesn't sound like a good deal to me for 1BR and roughly 1,000 SF. And I am the young professional type they are marketing to (30 yr old atty). I would love to buy downtown, but the prices have been and remain frightening. Trying to decide whether to buy or stay in downtown apartment lease. Any ideas what the next few months will hold for other developments? 5th and Main, Velocity, Icon? Have heard recent rumor(?) that Icon will or has lost FHA funding? Will Velocity lose FHA funding as well?

  • gusrock1414

    The developer obviously needs cash now or it goes to receivership. I am hearing the same thing about the ICON developers. Grant, you always talk optimistically about the condo market in Nashville and here is going to be the true test. If there are buyers coming out and bidding aggressively, everyone can breathe a sigh of relief and we know things are getting better. If the sale flops, get ready for signficant discounts at other places to compete. My personal opinion, I was excited when I saw the email early this morning and if I had the cash and financing, I would consider bidding. Terms look pretty good too. Getting less than $200/sq ft in a brand new downtown condo is a really good deal. I think their larger units will have to continue to be cut in pricing to move.

  • gusrock1414

    If you only have to put down 5-10% for a 160k-200k place, you can get 8k from the first time home buyer credit, its a good deal. HOA fees are a problem but it does offer a lot good amenities that should be factored in. I wouldn't pay over $200k for any of the two bedrooms.

  • Falcon2

    Everything makes sense at a price. Unpleasant as it is for current owners that overpaid or need to sell now, this auction and the others that will follow is the quickest way to stabilize the market. Most of the unsold condo inventory will inevitably go cheap but in 2-3 years we'll see things stabilize. Only then will we know how each of the new projects should be valued. I suspect, these values will eventually suggest that many of the projects built shouldn't have been.

    As with all markets, there is a flight to quality effect that occurs in a steep downturn. Developer mistakes with site selection, siting, floorplan design, quality, amenity mix, HOA docs, etc. all get penalized much more severely in a skeptical market.

  • John_23

    by John_23

    I've noticed when looking at other auctions in other cities that the prices were artificially inflated on the condo units between time sellers agents were taken off the job and when the auction took place. So the discounts listed say 50% off. We need to ask, yeah 50% off what?

  • http://www.granthammond.com/ GrantHammond

    Hi Tamara, I think that these are two completely different situations. The Adelicia was selling off their final 25 units and the Terrazzo is really selling their first 25. If you are a condo buyer, you might be thinking that the next 25 condos sell at even deeper discounts than the 25 that were auctioned. That thought may keep even the most steadfast buyers from pulling the trigger…or maybe it has no effect, but I have a feeling that we are about to find out.

  • http://www.granthammond.com/ GrantHammond

    I have heard rumors about the Icon, but believe them to be wholly untrue. Whereas the 5th & Main project might actually experience a foreclosure before the middle of 2010. The Velocity is currently FHA approved and I cannot see a path where they lose their FHA funding. In fact, with the current Democrat sponsored bill in the Senate it appears that lawmakers are beginning to find ways to extend the reach of the FHA and home buyer's credits.

  • http://www.granthammond.com/ GrantHammond

    I do agree that we are about to find out exactly where we stand in the current condo market. My personal opinion is that many of these Terrazzo condos will end up closer to $225/ft to $250/ft.

  • http://www.granthammond.com/ GrantHammond

    This is perhaps the most accurate comment I have ever read on my blog. Your reasons are precisely why building like the Adelicia will not get hurt as badly as others who shall remain nameless.

  • http://www.granthammond.com/ GrantHammond

    Very true. Nowhere in my brief research did I see on what price the 50% discount was calculated. It is one thing if that price was the inflated peak of the market price and another thing all together if it was the last discounted price of record.

  • Falcon2

    Better location, better views, better amenities, and better timing, all for $25-$35/sf less than Terrazzo. The Adelicia was 90% closed by the time Terrazzo was completed and lowered its prices from about $350 per foot to about $280 per foot in January or February of this year. Having contracted in 2006-2007 at such high prices (more than $350 per foot on most) Crosland chose to take several months starting in March to close as many of those high priced contracts as they could and then adjust to the market. As you can imagine, it would have been harder to get buyers to close at $370/sf while offering units at $275-$300/sf. On the other hand, they might have sold everything by now had they just discounted their existing contracts and not waited. They have plenty of company though: Encore, Icon, Rhythm, Belle Meade Court, The West End and Velocity have all, more or less, adopted the same strategy.

    My sense is that many of these other projects will now follow suit and Crosland is trying to be first to the limited pool of buyers willing to purchase at big discounts. Once that limited demand is tapped, the others will be forced to cut even more to make buyers out of people that are less motivated.

  • Falcon2

    I think it will be less. My sense is they'll sell 20-25 of the 30 units at prices averaging $200/sf, maybe even a little less. Take a look at the results of a similar auction held by Accelerated in Atlanta this summer. I think this project is comparable to Terrazzo in that it presold north of $400/sf and, on average, was priced at an average of about $370/sf before the auction.

    http://www.atlantaskyriseblog.com/index.php/200

    Wherever the pricing shakes out for Terrazzo, I think it will be difficult for Crosland to raise prices much beyond what the market gives them at this auction. And, given the intense focus and attention this auction will receive, I think all the other projects will be forced to reprice themselves relative to this event as well.

  • John_23

    I agree on your comments about noise and exhaust. I recently toured this building. It is almost ON the highway! Had looked at Adelicia earlier. That area is great. I think the gulch will grow into its own at some point, but how many people want luxury units on side of highway??

  • http://www.granthammond.com/ GrantHammond

    I think we can all agree that Nashville is not Atlanta and does not have near the unsold inventory as they do. Aqua in Atlanta was also not the first nor the last multi-unit condo auction in Atlanta. If we are to compare apples to apples, we need to find the results of the very first condo building auction in the midtown area of Atlanta.

    Nashville also have better market fundamentals than does the ATL: http://www.granthammond.com/2009/market-news/na

    But, you are correct on one account, the rest of the buildings will be forced into a reprice no matter what the results are.

  • http://homesinnashville.com/ Mark E. Storolis

    The X05 floorplans will prove to be the most desirable. (And I saw the guy from Carnival Kia, “don't you leave 'til you see me!” shopping around for one.)

  • aynrand2009

    I think you're a bit over the top when you state, “Now, I have come to fully realize the implications of this move and just how horrible it might be for Nashville as a whole” and “Larry Lipman’s company could be in danger of becoming the company known as 'the real estate company that killed downtown Nashville living' if their risky scheme backfires.” These units are being offered for sale at present market values. For the people who bought units at Terrazzo, Icon, and Velocity at the top of the market, it's undoubtedly a bitter pill to swallow. The reason these and other units are not and have not been moving is simple: they are mispriced in today's market. The auction is simply to determine the market price NOW, not when these projects were on the drawing board. Would you rather live in a largely unoccupied building, or have neighbors with whom to share common expenses? For those who bought early, you made a decision that turned out poorly-don't feel bad, we all make poor decisions, especially in hindsight. I, too, bought some property at the top of the market (a Center Hill lot). It was, I thought, a good decision at the time, but turned out not to be so. Suck it up, learn from your experience, and move on. But don't blame anyone else for trying to sell its product at the prevailing market price.

  • Falcon2

    I agree with most of your comments. If history is any guide, Accelerated Marketing will be pulling all the levers leading up to this auction anyway. Lipman will simply be the local shop and help execute the plan and conduct the tours. And I wouldn't get hung up on the auctioneers website. They too are just playing a small role. They'll simpy be conducting the actual auction at the hotel. If Accelerated does a good job setting the reserves and they whip up enough of a frenzy prior to the auction, they may just get buyers to overpay as they have on other projects. Or, as with a few of the Atlanta auctions, there just wasn't enough buzz or excitement to sell the entire offering or lift the prices much higher than the reserves. In any case, I think this event is exactly what we need in Nashville to break the logjam and get buyers buying again.

  • TommyAnderson

    I am Tommy Anderson,3rd Generation Broker/Realtor,& Auctioneer. My father is Tennessee Licensed Auctioneer #1 , Clive Anderson.We are the only firm to successfully market and sell at Absolute Auction the Park Circle Condominiums in 1994 for BancBoston.Our method of gaining the credibility from the buying public in the open competitive atmosphere the Absolute Auction gives is the only real way to have a successful real estate auction. Think about it. If you, prospective buyer, go out on a given Saturday, don't you want to know you are going to be able to buy something. Not going, going, HOLD. I wish these Condo Auctioneers the best. It hurts my industry when NO SALE occurs. And also…If you are a licensed auctioneer in the state of Tennessee, join and attend your Tennessee Auctioneers Association.

  • Anonymous

    I am Tommy Anderson,3rd Generation Broker/Realtor,& Auctioneer. My father is Tennessee Licensed Auctioneer #1 , Clive Anderson.We are the only firm to successfully market and sell at Absolute Auction the Park Circle Condominiums in 1994 for BancBoston.Our method of gaining the credibility from the buying public in the open competitive atmosphere the Absolute Auction gives is the only real way to have a successful real estate auction. Think about it. If you, prospective buyer, go out on a given Saturday, don’t you want to know you are going to be able to buy something. Not going, going, HOLD. I wish these Condo Auctioneers the best. It hurts my industry when NO SALE occurs. And also…If you are a licensed auctioneer in the state of Tennessee, join and attend your Tennessee Auctioneers Association.

  • TommyAnderson

    I am Tommy Anderson,3rd Generation Broker/Realtor,& Auctioneer. My father is Tennessee Licensed Auctioneer #1 , Clive Anderson.We are the only firm to successfully market and sell at Absolute Auction the Park Circle Condominiums in 1994 for BancBoston.Our method of gaining the credibility from the buying public in the open competitive atmosphere the Absolute Auction gives is the only real way to have a successful real estate auction. Think about it. If you, prospective buyer, go out on a given Saturday, don't you want to know you are going to be able to buy something. Not going, going, HOLD. I wish these Condo Auctioneers the best. It hurts my industry when NO SALE occurs. And also…If you are a licensed auctioneer in the state of Tennessee, join and attend your Tennessee Auctioneers Association.

  • Clubhes

    Now that a year has past, since this auction, I would like to hear your opinions on this move.

  • http://www.granthammond.com/ Grant Hammond

    Clubhes – If the seller’s intention was to simply move inventory at below market prices, they succeeded wildly. If the seller’s intention was to spark interest that would lead to more and more sales at higher and higher prices, the auction method failed on the price front in this situation. As I do not know to which end the seller endeavored, I am left wondering what the motivation was for the condo sales.

    In 2009, Terrazzo sold 40 condos, in 2010, that total will most likely be 45 condos. This would leave 32 condos left to sell in 2011, a load that seems manageable. But, looking at prices, 2009 saw an average price of $278.99/ft and my price analysis shows that 2010 will be closer to $237.11/ft. My sense is that Terrazzo is tethered to the prices achieved at auction and will not be able to raise prices in 2011 as a result. (Here are those auction results: http://www.granthammond.com/2009/condos/terrazzo-auction-results/)

    All in all, I do regret predicting that Lipman could cause the failure of downtown living as Lipman had nothing to do with retaining or even recommending Accelerated Marketing Partners. The sales team at Terrazzo has done a good job with creating a sales experience that matches the quality of the building.

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