Condo reversions are nothing new. More than a few would-becondominium developers or converters have opted to rent out atleast some of their unsold units, for the sake of keeping occupancyup at their buildings and seeing some sort of return. A recentarticle from the Wall Street Journal,however, revisited the concept, specifically, as it relates todowntown revitalization projects.

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What struck me about the article, however, is the opportunitysome multifamily investors would have in similar situations. Thesubject property, the Three Sixty Residences in San Jose, CA—partof an overall effort to revitalize the area—was a 23-story condoproject that went over budget and was undersold. A year afterdelivery, the tower sat empty.

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But according to the WSJ, a Beverly Hills-based KennedyWilson has agreed to take over the $119-million construction loanon the asset at a discount from the lender, US Bank. Upon closing,the firm will foreclose on the property and convert it to a rental.Though not what the original developers intended to attract, it’sbelieved that renters would bring life to building that would haveotherwise sat vacant in the middle of Downtown San Jose.

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The same scenario, apparently, is playing out in downtownsacross the country, the report states. This is indeed a greatopportunity for investors, especially as loans backed by condoprojects increasingly go into default and there continues to be alack of product available for sale, particularly in the multifamilysector.

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Broken or failed condo projects would be perfect acquisitiontargets for multifamily investors. Most are located in top-tierlocations, are relatively new or recently renovated and can begotten at decent discounts for those who are willing to go throughthe whole loan-to-own/foreclosure process.

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Do you see this as a major, viable opportunity for apartmentinvestors next year? Or do you think it will be attract only alimited number of players?

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