Real estate a trap for metro Atlanta couple

When housing was hot and credit easy, Nadege Adam and Jude Valles gorged.

Together and separately, the couple bought a five-bedroom house in Smyrna, a condominium in Smyrna for his mother and another condo at an intown development that was creating a lot of buzz at the time — Atlantic Station.

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Alison Church/Special

Once completed, Atlanta’s Skyline at Lindbergh is supposed to have 220 condos priced from the $190,000s to more than $1 million. However, construction on the building has been due to financing problems.

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Alison Church/Special

Nadege Adam bought a condo at Twelve at Atlantic Station, but she and her husband, Jude Valles, are facing financial problems in part because they can’t afford all the real estate they own.

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Atlantic Station was so popular in 2005 and 2006 that a lottery was used to sell homes. Adam got lucky, she thought, and purchased a two-bedroom condo at Twelve for $387,700.

The couple’s gung-ho approach to real estate turned out to be an enormous mistake.

Adam, a real estate agent, now collects unemployment because home sales have nose-dived. Valles, a chiropractor, couldn’t make a go of it locally, so he travels to Florida to work.

Buried under three mortgages, two education loans and private school bills for their two children, “we don’t sleep at night,” Adam said, sitting with her husband outside a Starbucks at Atlantic Station.

Their struggles typify what’s happened in many locales, with the result being a crippled housing market that has led to the economic downturn.

The couple’s Smyrna house, which cost $419,000, is probably worth $100,000 less today, Adam said. The condo at Twelve? Similar ones are now priced $150,000 lower. The couple won’t consider selling at such losses.

Adam’s cousin in New York often calls, worried that Adam will default on the Twelve condo. The cousin co-signed on the loan as a favor but doesn’t make payments.

Adam said she won’t ruin her cousin’s credit rating. Instead, she and Valles have decided to quit making payments on their Smyrna house after failing to convince the lender to adjust the mortgage.

During their conversation the clatter of construction punctuated the air — the sounds of boom and bust on 17th Street. Across the way, men in hard hats were working on a 47-story luxury condo tower called The Atlantic, which is scheduled to open in the summer.

That activity aside, residential construction and homes sales have plummeted. Two years ago 2,109 condos were under construction in intown Atlanta, the local research firm Haddow & Co. said in its midyear report. This year that number is half as large and unsold inventory is at a record high.

Similarly, construction of standalone single-family homes fell 60 percent from September 2007 to September this year, and sale closings dropped 40 percent, according to Metrostudy, a real estate research company.

Atlanta’s 55 percent plunge in residential building permits over a year’s time was the highest among 15 metro areas, the Atlanta Regional Commission reported.

“The pace of new-home starts has not been this slow in more than a decade,” said Eugene James, director of Metrostudy’s Atlanta division. “Some builders and developers have either left the Atlanta market, shut down projects or closed their doors for good, which means less future competition for those who remain in the industry.”

Foreclosures have skyrocketed. Properties scheduled for courthouse sales this month were 75 percent higher than in 2006, research by Notivus/Equity Depot showed.

More homeowners are simply walking away from properties. Curtis Bratton abandoned two condos at Twelve he bought as investments.

“I don’t like to give up on anything that I have,” said Bratton, who is self-employed. “At the same time, it’s easy in the sense of I’m not going to keep spending money there. I don’t care about my credit rating. I’m just a cash person.”

The downturn has led to unusual sights and events.

Construction began on a 21-story condo tower near Lindbergh Plaza, then stopped with only a few floors partially built when additional funding couldn’t be found. Once completed, Skyline at Lindbergh is supposed to have 220 condos priced from the $190,000s to more than $1 million.

Auctions have sprung up as a popular way to dispose of condos, with bids starting one-third below the normal price. The latest auction, on Dec. 7, will be of 26 units in Sandy Springs developed by the Providence Group, which also is developing the Ivy Hall condos at North and Piedmont avenues.

The pain housing has suffered for more than a year is spreading to commercial real estate.

“Activity levels in the commercial real estate sector have nearly reached a standstill … and experts now fear the impending rise of commercial foreclosures,” a recent report from Jones Lang LaSalle stated.

“Our economy moves on consumer confidence,” said Clark Gore, market director for JLL’s Atlanta office. “Because there’s just so much uncertainty, there’s no light at the end of the tunnel right this second.”

But Gore added that Atlanta, unlike some cities, has a diverse economy that can hasten a rebound. “We spread our risk and that helps us,” he said.

The Urban Land Institute caused a stir locally when its Emerging Trends in Real Estate report quoted an unnamed Atlanta developer as saying all the office development in Buckhead is “goofy.” The report further said, “2009 promises tough times as an overbuilding hangover and slipping demand roil investors.”

Skittish companies are taking a defensive position.

“We are very cautious about starting any new developments in today’s environment and as a result we’ve pushed back our start dates in 2009 or later, and will continue to evaluate these projects as we move into next year,” Tom Bell, CEO and chairman of Cousins Properties, told analysts this month. Cousins is one of the companies building all that office space in Buckhead.

Cousins’ project with Gables Residential, Emory Point, is delayed because Gables can’t get financing.

Holding down costs, leasing space and possibly buying distressed properties from banks are Cousins’ goals for the coming year.

“We’ve seen developments — good developments and good locations — that have stalled out at 50 percent leasing,” Bell said in the earnings call. “And we expect that financing institutions will give those assets back.”

Another Atlanta-based company, the apartment developer Post Properties, is slimming down, having sold three communities so far this year.

“Given the current state of the capital markets and the economy, we have deferred all of our remaining planned development starts until such time as conditions improve,” Post CEO and President David Stockert recently announced.

One company that appears to be taking a more aggressive stance is Tivoli Properties, which unveiled this month a $285 million project in Midtown. The plan is to build a 53-story tower with a Mandarin Oriental Hotel and 71 condos that start at $1.8 million.

“Now is a great time to be in the planning stage,” said Scott Leventhal, Tivoli’s CEO and president.

Earlier this year a Tivoli condo project called Mezzo opened in Buckhead; but when buyers showed little interest it was converted to luxury rentals.

While sounding an alarm about overbuilding, ULI, an educational group for real estate professionals, praised Atlanta’s increased focus on infill development.

“Hope for the future lies in greater density,” the report said. “Rescuing downtown and recreating an urban center extending to Midtown and uptown Buckhead now takes precedence.”

At the Starbucks, Valles eyed the tall buildings and said his dream is to retire to Atlantic Station. He and his wife, natives of Haiti, came to America as teenagers with nothing.

“Nobody wants to not make payments,” Valles said about the couple’s dilemma. “As good Americans we must make our payments.”

But when you’ve bought more real estate than you can afford, what can you do?

“You must learn to adapt and overcome,” Valles said. “We can only go back up.”