Uncertainty at another condo tower: The Catalyst uptown halts condo sales as lenders take over and review options. Current residents unaffected, developer says.

Sep 19, 2009 (The Charlotte Observer - McClatchy-Tribune Information Services via COMTEX) -- LEHMQ | Quote | Chart | News | PowerRating -- The lenders of the Catalyst have taken ownership of the uptown residential tower, and condo sales for the 462-unit high rise were on hold as of Friday.

Developer Novare Group said it "restructured its relationship" with an investment fund controlled by affiliates of Lehman Brothers Holdings this summer, the company confirmed with the Observer. As part of the restructuring, Atlanta-based Novare transferred its "economic interest in several assets" to the lenders, the company said.

There have been no foreclosure proceedings started on the Catalyst, Novare Group executive vice president Conor McNally said. The other assets transferred to the lenders include Novare's interest in the 440 S. Church St. office tower in uptown, a retail center in Austin, Texas, and development sites in Atlanta and Nashville.

Novare Group is currently managing the Catalyst on behalf of Lehman, but said new management will take over by the end of the year. McNally declined to elaborate.

"In the meantime, we're keeping our heads down and it's business as usual," McNally said. "It's a great building. It's a great asset. It continues to do well. It's business as usual for residents who live there."

Once slated as a condo high-rise, The Catalyst converted half of its 462 units to apartments in February after condo sales sank in Charlotte. That conversion triggered a loan restructuring, McNally has said.

On Friday, Novare said it has leased more than half of the apartments and that more than 100 residents now live in the 27-story building on South Church Street.

The company has written sales contracts on about 10 percent of the condos, but because it has not pre-sold enough units it is unable to close on them, McNally said. He said Lehman Brothers is evaluating the situation and is expected to decide how to move forward within 30days.

"We wouldn't write a new sales contract until we've been given a decision," he said.

At the end of the second quarter, the Charlotte area had 2,459 condos either under construction or finished but vacant, according to national industry tracker Metrostudy. Of those, three-fourths are in Charlotte's uptown area, according to the firm.

The total condo tally represents more than three years of supply at current sales rates.

Through June, sales of new condos in Mecklenburg County were down 70 percent from a year ago, according to Market Opportunity Research Enterprises. That compares with a decline of 57 percent in new home sales overall.

Center City Partners president Michael Smith said the Catalyst is a "great investment in our city." If the building were to turn to all apartments, the Catalyst still would be a boon for the area because it would bring hundreds of new residents, said Smith, whose group advocates for uptown.

"That's a meaningful change," he said. "The texture of communities is people."

The residential mortgage market meltdown has halted development of all kinds, and real-estate experts are watching commercial real-estate developers closely as debt payment deadlines approach.

Some experts say commercial real estate will be the next to falter in the credit markets, which could further roil the economy.

In Charlotte, Novare beat the bear market when it built the popular Avenue, a 36-story condo tower uptown that sold out before being completed in 2007. Another Novare project, a proposed residential/hotel tower named TWELVE that was to be developed adjacent to the Catalyst, is on hold indefinitely.

Novare, which still owns the land, is currently building a parking lot at the site.

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