Seattle Bubble Forum Archive

by **TJ_98370** » Sat Jul 28, 2007 9:12 am

..
As credit tightens, are we going to see more of this kind of thing? For those of you who might not know, Bainbridge Island is the affluent part of Kitsap County, sometimes referred to as a bedroom community of Seattle.

The sign at the side of the highway called to Glenn Huff and Jean Schanen during one of their trips from their West Bremerton home to Central Market in Poulsbo.

"Earn 8 percent APR, 12 Month Maturity, Fully Secured," it beckoned from outside a small business park at Highway 305 near Bond Road.

Eager for funds to fuel their passion for growing local produce, they pulled in.

Now two years later, the retired couple -– she's 69 and he's 77 –- are trying to recover $50,000 they lost by investing in an alleged pyramid scheme involving a luxury condominium project on Bainbridge Island called the Meridian.

They are among as many as 57 investors from Kitsap County and elsewhere who plunked down $1,200 to $200,000 each for a total of $2.8 million toward the project, according to government documents. Some were older and financially unsophisticated.....

.....The state in June issued a cease-and-desist order against companies and individuals allegedly involved in attracting investors to the project.

This week, one of the companies, Meridian LLC, filed for bankruptcy to avoid foreclosure....

....The cease-and-desist order and lawsuit paint a scenario where investors attracted by generous interest rates went along with advisers they liked and trusted. But those trusted persons couldn't keep promises they made when the Bainbridge Island condo market softened, construction slowed and the Meridian units didn't sell fast enough.

Among the respondents in the order are Meridian LLC; Malibu Development Corp.; John M. Erickson and Bruce McCurdy, both Poulsbo residents and players in Malibu and Meridian LLC; and businessman Christopher M. Heins of Poulsbo.

In 2003, Malibu obtained a $4.5 million construction loan from a Kitsap credit union to build the Meridian. Two other big chunks of early money came from a $1.5 million private loan and $1 million line of credit, according to the papers.....

....Documents also alleged that appraiser Lauren Ellis of Edmonds had a financial interest in the project, but his appraisal of the Meridian was presented to the smaller investors as the work of an independent appraiser.

Contacted by the Kitsap Sun, Ellis denied he had a stake in the Meridan. "The only funds I received (were) for appraisal fees."....
..

by **Nell Plotts** » Sat Jul 28, 2007 10:30 am

Yipes. A look at their asking prices will explain why they are in trouble. This is not view property or water front by any stretch of the imagination!

http://www.themeridian.net/

The appraiser and the initial marketing analysis for the lender missed by a continent. The Bainbridge buyer may be able to pay more than many, but the reason why they are able to do so is that they aren't fools.

by **EconE** » Sat Jul 28, 2007 12:41 pm

look at the mls listing prices now vs. their original website asking prices.

Unit 301...originally 850k...currently on MLS for 629k
Unit 208...originally 737k...currently on MLS for 599k
Unit 304...originally 730k...currently on MLS for 529k
Unit 306...originally 670k...currently on MLS for 499k
Unit 205...originally 615k...currently on MLS for 449k*
Unit 206...listed as sold..... now STI on MLS for 427.5k

*=double listed on MLS...currently STI at 398k

is this a sign of things to come elsewhere?

anybody able to track down what the original few sold for? (such as 201, 204 and 308)

by **Nell Plotts** » Sat Jul 28, 2007 1:10 pm

I don't think anyone can generalize from this project.

First the marketing approach is that of a 'spa' with a private athletic club. The Island has two nice fitness facilities not far from this site. Projects with this type of marketing have high monthly fees, which tends to suppress values because mortgage companies include those fees when calculating what they will lend.

The units were offered at a price point that isn't justified by the site (Bainbridge is 'special', but not THAT special). There are new condo projects closer to the ferry for the commuter crowd, and a large project that is beautifully sited on the other side of 305.

The units sold may be owned by the former property owner. I have known developers buy land by giving the former property owner title to a unit or two. Years ago I saw the same kind of horse-trading for professional fees (architect). If the developer had cash-flow problems that wouldn't surprise me in the least.

Lastly, once a project is in trouble I wouldn't buy because you never know how far down the project prices will drop before it sells out. Who wants to catch a falling knife?

by **rose-colored-coolaid** » Sat Jul 28, 2007 5:42 pm

I don't think you can generalize from any one project. There is no clear way to grade housing projects or sales, because it is not clear how to methodically determine the quality or desirability of any home. The only valid generalization is to take a statistically significant sample.

by **Jazen** » Sat Jul 28, 2007 6:09 pm

by **Nell Plotts** » Sat Jul 28, 2007 8:06 pm

by **biliruben** » Sun Jul 29, 2007 1:23 pm

by **Nell Plotts** » Sun Jul 29, 2007 2:48 pm

by **biliruben** » Mon Jul 30, 2007 7:18 am

by **TJ_98370** » Mon Jul 30, 2007 9:34 am

...
Big full page ad in todays Kitsap Sun for the Meridian Condos:

"...1,400 - 1,700 sf 2 Bed / 2 Bath from $449,900 - BEST VALUE ON THE ISLAND..."
...

by **Lake Hills Renter** » Mon Jul 30, 2007 10:04 am

Seems to me there's a whole lot of people with all their eggs in the "empty nester" basket, quite possibly way more than there actually are.

by **Nell Plotts** » Tue Jul 31, 2007 5:04 am

by **Jazen** » Tue Jul 31, 2007 6:04 am

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