TURLOCK -- A 133-unit condominium project across the street from California State University, Stanislaus, is in danger of falling through, leaving investors in the lurch and the future of the high-traffic corner lot shrouded in mystery.
While Rite Aid and two small retailers are ready to build on the 9-acre lot at the southeast corner of Monte Vista Avenue and Crowell Road, the housing component is up in the air.
Several years ago, there was discussion of student housing on the property, which borders a small community park, some new homes and a retirement village, but the university never formally endorsed the plan and ultimately went in a different direction.
The landowner, Modesto attorney Ralph Ogden III, said low-income apartments are one of five or six options being discussed. Plans have been approved for the condominiums, but unless construction starts in the next 10 months, those plans will expire. With the amount of work still needed to break ground, that is almost guaranteed, said Planning Commission Chairman Amos Reyes.
"I think that's right," Ogden said earlier this month. "In the end, (condos) aren't economically viable."
That leaves investor Michael Chadd of Milpitas very, very unhappy.
Chadd bought a $100,000 stake in the condo plan. For the last nine months, he's watched his money slowly drain away. Members of Strategic Investment Group, a Danville-based real estate investment firm, had a strong pitch when Chadd met them last year at a wealth expo in San Jose. What Chadd didn't see and Strategic Investments didn't mention was the sour state of the residential building market.
"We were all pretty stupid," Chadd said.
Strategic Investments paid Alabama-based builder Capstone, which spearheaded the student housing plan, $850,000 to go away in December 2005 and changed the tack to condos, according to records Chadd provided. In April 2006, Chadd and other investors got on board.
Strategic Investment hired engineers, conducted surveys, drafted rough plans and spent nearly $500,000 in city permitting. Investors, meanwhile, thought their pooled $3.5 million was for buying the land.
As the market slumped, Strategic Investment sent out rosy newsletters such as this from December 2006: "Does all the news about the declining housing market concern you? Maybe it scares you? ... We have a strong job market, healthy stock market, and a lot of opportunity. I believe that the media tends to make things seem worse then they really are. I am not delusional."
Asked about the group and the failed condo plan, Ogden shrugged his shoulders.
"We were supposed to go to escrow a year ago," he said. "They never got a loan. They just couldn't do it."
Strategic Investment Group wouldn't comment for this story. One of the managers reached by phone, Sean Simon, said he'd have something to talk about in four weeks.
"So many things can go wrong," said Neil Weese, sales manager for Coldwell Banker Endsley & Associates in Turlock. "It's a gamble to see where the market is at when you're finally ready to build."
Lenders have grown more conservative since subprime loan-induced disasters, which has affected even the most reliable buyers, Weese said.
Craig Lewis, president of Prudential Commercial Real Estate in Modesto, said the old risk vs. reward adage applies to the Turlock project. Development is inherently more risky than traditional stock and bond packages, but with that can come large rewards, he said.
Without a lender lined up and needing city approval, "they did the riskiest investment in all development," Lewis said.
Good counsel, before you make any kind of investment, is crucial, he said.
With $2.9 million of the shareholders' $3.5 million spent, Strategic Investment has tried to dissolve the condo project, but last week the shareholders voted that down, trying instead to come up with a lender.
Chadd, 47, who borrowed to invest with Strategic Investment, has sent hundreds of e-mails, driven to Turlock for Planning Commission meetings and attacked the Strategic Investment managers and their attorney on everything from misuse of his money to not telling the truth.
"There were a lot of nondisclosures. They didn't give us the figures correctly," Chadd said. "The wording wasn't concrete. Everyone was really surprised they never acquired the land."
Bee staff writer Michael R. Shea can be reached at email@example.com or 578-2391.