607 Washington

By Michelle Bruch

The 607 Washington condo project has had 15 foreclosures since 2006

The 30-unit building was renovated into condos two years ago.

“Normally you don’t see that many [foreclosures] in one building,” said Mark Hebert, a Re/Max agent who is selling a unit in the building.

The cause of the foreclosure spike at 607 Washington is something of a mystery, but real estate documents indicate that three condo owners are behind nine of the foreclosures, with more than one foreclosure in some condos due to multiple creditors. Several units in the building remained on the market for two years and sold in the summer of 2005 at hundreds of thousands of dollars more than the original list price, a trend that seemed odd to some Downtown real estate agents.

The developer of the building, Anton Building Systems LLC, said the development team simply adjusted pricing levels when it took over the project.
An official with the company also said they provided seller’s contributions of up to $168,000 to allow new homeowners to make renovations to their condo units.

The nine owners of the foreclosed units could not be reached for comment. Mortgages in default and unpaid condo association dues triggered the foreclosures.
The building’s foreclosure plight is not representative of the rest of Downtown, although Downtown foreclosures doubled in the first quarter of this year compared to the first quarter of last year.

The city’s 7th Ward, which encompasses Downtown, saw 49 foreclosures in all of 2006 and 26 foreclosures in the first quarter of 2007. A survey of completed condo projects Downtown revealed that most buildings have no foreclosures at all, and about a dozen projects have one or two foreclosed units. Downtown buildings with the second-highest number of foreclosures were 1200 on the Mall, a 131-unit building; and 918 Lofts, a 30-unit building in the 5th Ward, each with four foreclosures.

607 Washington originally housed Architectural Antiques, storage space and Sawatdee, a Thai restaurant that continues to operate there today.

Downtown developer Ned Abdul of Swervo Development proposed renovating 607 Washington into 15 units in 2002. Abdul said he later reduced the size of the condo proposal into 30 units and turned over the project to a partnership between Bill Knudson and Anthony Beasley, chief manager of Anton Building Systems LLC.
Beasley said the development team assumed responsibility for the project in the fall of 2003.

In the fall of 2004, the Downtown Journal condo pipeline reported that project completion was slated for November 2004, and the opening date was later pushed back to June 2005.

Sales in the building were slow for most of 2004, according to data from the Multiple Listing Service (MLS). That changed dramatically in the summer of 2005 when the building opened. Some units that had remained on the market for months sold for double their original list price.

Unit 407, advertised to be a 1,560-square-foot space with hardwood floors and a Jacuzzi, was listed as a 1,610-square-foot unit in March 2003 for $399,900 with no takers. Then in July 2005, the unit was relisted for $559,900 for 37 days, and listed again at $600,000 for four days. The unit closed on Sept. 30, 2005 at a price of $600,000 with a seller’s contribution of $98,098.

That unit was foreclosed on twice in 2006, according to the Hennepin County Sheriff’s office.

A second-floor unit listed on MLS at 1,760 square feet started with a list price of $429,900 in March 2003. The price bumped up to $442,900 in October 2003, increased to $469,900 in August 2004 and reached $599,900 in July 2005, according to the MLS. Hennepin County tax records indicate that the unit sold for $675,000 in February 2006, and two creditors later sought foreclosure on the unit in November 2006 and January 2007.

The story varies from unit to unit, but tax records indicate that all of the foreclosed units have sold for $140,100–$449,100 more than the 2003 list price, an average unit price increase of about 77 percent over three years. In addition, three individuals who purchased one or two units apiece now account for nine foreclosures. (Note, in some cases a unit had multiple foreclosures).

Beasley said his development team thought the prior developer’s pricing was too low.
“We restructured a lot of that pricing because we thought it was way under the market,” he said.

The Multiple Listing Service reports that 10 sold units included seller’s contributions that averaged $107,913 per unit. Four of those units later went into foreclosure. Beasley said the seller’s contributions were designed to allow buyers to renovate their units and independently hire people to do the work.

Beasley said he does not know why there are so many foreclosures in the building, but he noted that investors bought several units.

“There were a number of investors that bought and had some grandiose ideas about joining units ... but we didn’t do any of the follow-up construction with any of those folks,” he said. “There were a few of the investors that seemed to be part of a larger group. ... It did seem a little odd to me that a lot of the purchasers seemed to know each other.”

Several real estate agents interviewed for this story said they think the activities at the building raise red flags, and one asked the Attorney General’s office to investigate the situation.

Speculation about the building’s foreclosures first surfaced on the blog Behind the Mortgage in February, in a post written by mortgage banker Alex Stenback with data analysis by Downtown real estate agent Michael Roess.

“607 Washington was a project that had some rumored (and real) problems: Major delays, slow sales, cost overruns, etc.,”

Stenback wrote on the blog. “Then, one day, like Kaiser Soze, they were gone — poof! All units sold out, project finished. This seemed a little strange to us — struggling projects don’t simply turn on a dime and sell out very often, especially in a soft market, and these units sold at huge markups — in some cases more than double the original list price.”

Real estate agent John Wanninger sold several units in 2003, when the units were priced lower. He said there was quite a bit of interest in the building at that time.
“The real estate market was very different back then,” he said.

Dan Theisen of Edina Realty said he attempted to sell a third-floor unit at the developer’s list price of more than $600,000, and decided to leave the project after the listing was canceled. County tax records indicate that the 1,537-square-foot unit was sold in June 2006 for $660,000. Theisen said he was surprised by the sale.
“What they wanted for the square footage was outrageous,” Theisen said. “I didn’t even have one showing.”

A former resident who lived at 607 Washington for a year said the building was an odd place to live in early 2006.

“It was a total zoo,” the resident said, who asked not to be named for the story. “People were in and out at all times of the night. ... For the first couple of months, I didn’t feel safe in the building.”

He said Hummers and other decked-out vehicles would roll in for parties on the 5th floor from 11 p.m. until 4 or 5 a.m. on a regular basis.

“Then things got cleaned up,” he said, noting that the activity stopped after April or May of 2006. “Just like that, most of the people were gone.”

When the resident moved out of the building, another person who had disappeared was the man from whom he was renting the condo. The resident said he later learned from the owner’s acquaintances that he had left the country.

As for the atmosphere in the building today, the former resident said renovation of the lobby is still not completed, but the parking lot is a bit more full. (Beasley said the building renovation is 99.9 percent completed and said he cut a check to the homeowner’s group to complete the lobby work.) Excluding four units owned by one individual, Hennepin County tax records indicate that at least 12 households own units in the building.

Resident Amit Vas said he moved into the building in December and said he doesn’t know much about what is happening there.

“There aren’t very many occupied [units],” he said. “I hardly see anybody.”

On the building’s ground floor, Sawatdee is down to business as usual.

“We have no idea what’s going on; we don’t care,” said one employee.

There are five units in the building currently listed for sale by a variety of different agents, and three of those units were foreclosures.

Angela Larson, a Keller Williams agent selling a unit at 607 Washington, said she is listing it at $200,000 less than it was sold for a year ago.

“As soon as a couple of them start going down it makes it hard to get financing in the building, and it makes people not want to buy and it makes it worse for everybody,” Larson said. “But they are beautiful units, and it will come back.”


Reach Michelle Bruch at mbruch@mnpubs.com or 436-4372.