AUCTION ARTICLES

02.12.09
Rockville Condos on Auction Block
Washington Business Journal - by Mara Lee Staff Reporter

At the peak of the real estate market, Elad National Properties LLC promoted its condo conversion project in downtown Rockville, by naming it “The Fitz,” after F. Scott Fitzgerald. “His books, particularly ‘The Great
Gatsby,’ chronicled the history of the Roaring Twenties, a time of luxurious living and exuberant fun in America,” the condominum Web site read.

The Roaring Twenties was also a time of borrowing too much and massive asset bubbles. Now The Fitz’s name is unintentionally ironic.

The southern Florida developer, which bought the apartment complex at 501 Hungerford Drive in 2004, would not say how much it spent installing hardwood floors, granite countertops and stainless-steel appliances.
According to Montgomery County records, the purchase cost the company $49 million, and it borrowed another $12.25 million from Merrill Lynch for renovation.

It had sold almost 130 units by July 2006, when the one-bedroom units cost from $300,000 to $350,000. Since then, the developer sold another 30 to 40 or so since then, even though prices had ultimately dropped to $261,000 for the not-quite 700-square-foot one bedrooms.

On Feb. 28, Velocity Marketing will auction off 40 remaining condos, with an opening bid of $159,000 for a one-bedroom, $219,000 for a two-bedroom and $239,000 for a three-bedroom.

Rami Rosen, vice president of marketing and sales for Elad, said they were not forced to do an auction. “We don’t have a problem with the interest on the loan,” he said. “We’re not at a problem with our lender.” But he said at a sales pace of three or four a month, it would take another year to close out the project. “It’s not worth our time.”

Elad also has another local condo project in the Kentlands, which is more than 30 percent sold, Rosen said, which will not be going to auction.

Rosen said the auction announcement has garnered inquiries from more than 600 potential bidders. He said based on recent auctions handled by Velocity, he expects sale prices to be between 20 and 30 percent above starting bids.

Buyers must be pre-approved by JP Morgan Chase, have a $5,000 certified or cashier’s check and have a personal check that day for the remainder of the down payment.

“Apparently there is a real estate market, you just have to know how to work it,” Rosen said. Or how to price it.

Elad was founded in 2004 to expand from Florida to the rest of the country. It’s a subsidiary of the Delek Group, an Israeli conglomerate with interests in oil, natural gas, biochemicals, real estate, autos and financial services around the globe.

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