The Nicollet Update, Reader Mail: If You Build it, Will They Come?

by Alex Stenback on October 22, 2007

Nicollet_2 hat tip to Ben Ganje @ Your Urban Life for the image. Click for larger. Inspired by this Image, if you don’t get the reference.

A reader, who has reserved a unit at the Nicollet, inquires:

"I really enjoy your website.  Could you please do an update or send me an e-mail personally regarding the current status of The Nicollet.

Do people generally get their reservation/deposit money back if a project and purchase agreement is cancelled by the developer, or should I be getting ready to contact a lawyer for assistance?  I would certainly hold my purchase agreement if I had confidence that something (whether residential or mixed use) was going to get built there, but my doubts are increasing.  What would be the best way to proceed at this point in time, in your opinion, hold tight or attempt to withdraw?"

Our best information on the Nicollet, which is in no way concrete, (and culled from spots like Minnescraper and the semi-reliable insider chatter,) says that the Nicollet will be scaling back to 45 stories, and be a mixed use project.  From the Minnescaper forums:
It will be 45 stories high, with underground parking for 300 cars, 22,000 sf of retail space, 16,500 sf of banquet space, a 20,000 sf health club and spa, 437,000 sf of office space, a 260 room hotel and 177,000 sf of condos….

Right now the project and the preliminary concept design work product are in the hands of the real estate department and their brokers and agents to market the idea to tenants for the office space, a franchise for the hotel and buyers for the condomuniums.

Our guess is that a building will eventually be built on that site, and it will have a residential component to it, but how many units, the exact usage mix, and more importantly when it is finished is another matter.  It is hard to imagine anything completed there before 2010, in our opinion.

As for the earnest money, in the vast, vast majority of cases, earnest money is refunded upon cancellation with few questions asked, and we’ve heard that this developer is treating everyone fairly.  That said, if the developer is foreclosed upon, files BK, or undergoes some other major financial crisis, earnest money can and does get mis-appropriated, and can be sucked into legal battles (see, the Sexton) so it is not a risk free proposition letting someone else hold that dough indefinitely.

Can you wait until 2010, or 2011?  Nothing better to do with that cash?  If so, then let it ride, but there’s probably a better place to park that dough while you wait for the development team to sort things out, so we’d probably advise pulling out, and taking another look once the plans, scope, and timeline are clear – we doubt that it will sell out before you can re-enter.

{ 1 comment… read it below or add one }

Stephen Gross October 22, 2007 at 5:09 pm

There was a very interesting article on this subject a year or so ago. A Las Vegas developer canceled a project for which many buyers had put down deposits. Normally, the deposit contract stipulated that the deposit would be put in escrow, and that the most any depositor could get back would be the initial value plus reasonable interest.

In this case, however, the developer failed to include that clause. Consequently, purchasers sued the developer, claiming lost income. Their argument went this way: their capital investment in the building was tied up for 2 years, earning only a marginal interest rate. If they had been able to invest it properly, they could have gotten a far better return.

Normally, the deposit contract would have made depositors explicitly waive the right to sue on those grounds. In this case, however, the lack of such a clause in the contract exposed the developer to one heck of a lawsuit.

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