"Both of these are representative of some of the problems the market's investors have been facing for getting overanxious during the condo craze," explains Michael K. Chapman, first vice president with CB Richard Ellis' Tucson office. Though Tierra Vida at 1970 W. Magee Rd. in Northwest Tucson and the Condominiums at Williams Centre at 5400 E. Williams Blvd. near the center of town are in two different submarkets and have different characteristics, they're linked by a single owner from the West Coast who acquired the assets for far more than they were worth in 2005 and 2006.

Chapman tells GlobeSt.com that Tierra Vida, built in 2000, went to the converter for $15.2 million in 2006, despite carrying a $14 million ask. Furthermore, "when they closed the deal, they took a loan of $16.6 million from the State Bank of India. Not only did they pay a whole bunch for the property, they took out more money from the bank than they paid."

However, Tierra Vida was not well suited for conversion and, in fact, was maintained as a rental. "The typical condo conversion target has two and three-bedroom apartments, with a square footage of around 1,000 square feet," Chapman explains. "Tierra Vida is in a good northwest area, but it has 84 one-bedroom units, and they're smaller."

Williams Centre, which was built in the mid-1990s, did have the size, bells and whistles that made it an ideal candidate for conversion potential. Furthermore, it was acquired in 2005, just at the beginning of the conversion craze. The problem here, Chapman remarks, involved the sheer number of units. "344 units is a lot when it comes to conversion," he explains. Furthermore, when the buyer acquired the asset for $22.5 million, only 8.4% in equity was brought to the table. The 105 units eventually sold did nothing to help recover the investor's initial investment.

Chapman says despite the pending foreclosure on these two assets, Tucson's in a lot better shape than most areas. He explains that due to the shortage of zoned multifamily land in the region, not much development has happened. Furthermore, most of the condo conversion projects have sold or have reverted to rentals, he adds.

"This is the tail end of it in terms of buildings bought for high prices for conversion," Chapman says. "Those that are having problems are in the lower end of our market, and were purchased with aggressive prices and highly leveraged during the same period of time."