The Implosion

The long awaited implosion of the North Korean towers at the Marquee is happening as envisioned. There is a race to the ground, and no floor in prices is in sight.

Today’s featured property is being offered for 53% off its purchase price.

Marquee at Park Place at Night

Asking Price: $349,900

Address: 3131 Michelson #307, Irvine, CA 92612

One more community profile at the Irvine Homes Blog: Quail Hill.

I first wrote about these towers in Equity Inferno and most recently in $16,805 Monthly Equity Burn. In the Equity Inferno post, I ran a rent versus own calculation and estimated rental parity at about $325,000 with a $2,800 rent. With changes in interest rates and rental rates, this number is now about $350,000 which is today’s asking price.

Does that mean I recommend this place? No. Values will likely decline further because the fate of these units is not to be owner occupied–these will mostly be rentals. Cashflow investment levels, even at these very low interest rates are about 25% further down. If you buy these units at rental parity, you need to be prepared to be trapped there for many years as prices drop to cashflow investor levels and stay there indefinitely.

Today’s featured property is being offered for 53% off its purchase price. So what makes me think values will decline even further? Perhaps it is an inventory issue. There are 7 properties for sale under $500,000:

3131 Michelson #306 Irvine, CA 92612, Price: $399,000

3131 Michelson #606 Irvine, CA 92612, Price: $399,000

3131 Michelson Dr #802 Irvine, CA 92612, Price: $430,000

3131 Michelson Dr #1102 Irvine, CA 92612, Price: $449,000

3141 Michelson #804 Irvine, CA 92612, Price: $475,000

3131 MICHELSON #1302 Irvine, CA 92612, Price: $499,000

3141 MICHELSON Dr #404 Irvine, CA 92612, Price: $499,999

I was going to link to the entire inventory in these two buildings, but there are too many. I would not be surprised to see an 80% turnover of these units in foreclosure with a bottoming price near $250,000, perhaps lower if there is overshoot.

Marquee at Park Place at Night

Asking Price: $349,900

Income Requirement: $87,500

Downpayment Needed: $70,000

Monthly Equity Burn: $2,916

Purchase Price: $740,000

Purchase Date: 5/15/2006

Address: 3131 Michelson #307, Irvine, CA 92612

Beds: 2
Baths: 2
Sq. Ft.: 1,293
$/Sq. Ft.: $271
Lot Size:
Property Type: Condominium
Style: Hi-Rise/Mid-Rise Condominimum
Stories: 1
Floor: 3
View: Panoramic, Park or Green Belt, Trees/Woods, Has View
Year Built: 2006
Community: Airport Area
County: Orange
MLS#: S564111
Source: SoCalMLS
Status: Active
On Redfin: 87 days

The ultimate in sophisticated urban living, Marquee’s Towers, Plan (B).
The location of this unit is one of the best in complex, does not back
to any Street or Fwy, larger patio with view of green-belt & trees.
Euro cabinetry, granite counters, stainless steel appliances,rich
cherry wood floors, floor-to-ceiling windows, marble walls, travertine
floors in baths,custom shower & tubs. Wonderfull association
amenities, 24-hour concierge,billiards room,meeting
room,pool,spa,BBQ,play area,fitness center,men’s/women’s change
rooms,24-hour closed-circuit camera building surveillance,impressive


The mortgage records on these properties are difficult to sort through (they unit numbers are not given), so I was unable to locate the mortgage records. With an asking price 53% off, someone is eating a big $hit sandwich. If this property sells for its current asking price, and if a 6% commission is paid, the total loss on the property will be $411,000.

With all of the defaulting owners and crashing prices, I cannot help but wonder what the fate of this place will be. Will the services be cut back and the $1,150 HOA fees reduced? Will this be converted to low-income housing? Will lenders loan on units in places like this? I don’t see the end game here, but I am pretty confident this place will never be what it was advertised to be.

53 thoughts on “The Implosion

  1. winstongator

    What is the total ‘loss’ going to be on these buildings? Say total #units X avg price X ~50% avg loss?

    A new development in FL, most units completed in late ’06 or ’07, has almost 300 properties that sold new for around $1M each. They’re now down 50% off those new prices for a rough $150M total loss to the first wave of buyers. Developer is now bankrupt.

    Lots were speculators as there are 2 or 3 homes on a block owned by the same person. At 1/2 price there may be buyers, but there just weren’t enough people in that area to support that number of million dollar homes. That new construction has almost zero demand, and I think the price curve looks ugly at zero demand.

  2. PhayenK

    Looks like the price is back up to 399,000. Maybe too many interested buyers 🙂


    And who in their right mind would pay a $1,150 monthly HOA? Thats half the mortgage payment.

    This is going downhill fast.

      1. Lee in Irvine

        The HOA can also assess the owners a fee outside their normal monthly fees … it’s called a loss assessment. It’s typically used to capitalize shortfalls in the HOA budget, or pay for loss exposures/gaps that are not covered by insurance.

    1. IrvineRenter

      When I checked last night, I did see the “backup offers accepted,” perhaps they have a bid over the ask, so they raised the price to try to get more. There is still an inability to do basic math among buyers in this market.

      Don’t worry, the realtor will relist the property at a price equal to the close of escrow on the last day so that the selling price/listing price ratio stays at 100%.

      1. thrifty

        HOA of $1150 is absolutely extraordinary. It looks very average to me compared to high rises in Las Vegas, Miami, etc. with substantially lower HOA. Which of the usual monthly costs (pool, landscaping, etc.) has skyrocketed? Or does it reflect the loss assessment due to abandonment by many “owners”?

        1. Geotpf

          Some of that pays for concierge services and other fancy crap. Still, it’s completely ridiculous. If prices drop much farther, the HOA might be larger than the monthly payment. At current interest rates, with 20% down, and buying a couple points, one can get an interest rate of 4.375% now. Using those terms, the payment would be a thousand dollars a month (almost exactly) if it cost $250,000-$150 less than the HOA. I would not be surprised if a unit here sells for that $250k fairly soon.

  3. IrvineRenter

    Are there any lenders out there who have tried to get financing on units in these towers? I would like to hear from you. Can you still get financing through the GSEs on these units? Are banks holding loans in their own portfolios on these units? I suspect financing is tough here.

  4. LW

    “The ultimate in sophisticated urban living”?? I’m not from Orange County; I live in NorCal, but doesn’t urban living generally connote 1. not living in the “airport area” neighborhood and 2. living near other things like grocery stores, banks, shops, etc.? It looks to me like this place is near a freeway and that’s it?

    1. Geotpf

      That’s a very good point. Is there any shopping, restaurants, etc. within easy walking distance of this?

        1. Geotpf

          It’s probably actually worse than that-that website still thinks the Edwards cinemas is still there. I remember reading in the last blog entry about these towers that those theaters were torn down, right?

          I ran my new Riverside house, and I got a 66, which sounds about right. My old apartment got a 43.

          1. chuckconners

            Confucius say ‘better to live in La Habra stucco box than take big leap off high tower (in Irvine).

      1. Walter

        I used to work at Park Place and watched as these were being built.

        There is a shopping center within easy walking distance with a number of shops and restaurants. There is a Mother’s market, a CPK, coffee house, salon, etc.

        I would call it some what urban. Beyond this shopping center, and a nature park close by, you are in for a pretty good walk to get to anything else.

      1. irsx02

        And by “us,” IrvineRenter means people whom lived within their means, whom don’t overspend or HELOC, whom didn’t believe in ‘keeping up with the jones.’

    1. Gemina13

      ::dies laughing::

      Coming soon to a theater near you–watch Harrison Ford survive the thermonuclear implosion of the Irvine luxury condo market by taking shelter in an abandoned Sub-Zero!

  5. OC Progressive

    A question for IR.

    I recall hearing from a somewhat reliable source that one of the major markets for buildings like this was foreign cash buyers – rich entrepreneurs from Taipei, Singapore, Hong Kong, Seoul, and Shanghai who really liked buildings like this, but left them vacant much of the time.

    Do the ownership records reflect this?

    1. IrvineRenter

      It is difficult to tell because there are so many Asian names in Irvine to anyway, but the preponderance of Asian last names doesn’t seem to be any higher percentage than the rest of Irvine that I can detect. From what I have observed–and my sample is biased because I only look at what is for sale–most of the people who bought in there were realtors, mortgage brokers, and other “investors” who thought they would quickly flip these for a million bucks to some rich foreigner from Taipei, Singapore, Hong Kong, Seoul, or Shanghai…

    2. Freetrader

      I believe that it is a reasonably well-documented fact, at least it has appeared in the Asian press, that Chen Shui-bien, the discraced (and jailed) former President of Taiwan, used some of the many millions he skimmed off the public trough to buy two units in the North Korean towers. Chen’s top advisor actually fled to Irvine, but since there is no extradition treaty between Taiwan and the US (Taiwan being sort-of-not-really-a-country) he appears to be living happily unmolested in Irvine. Figuring out the true ownership of the units may be difficult, since it was a cash deal, and the units are probably legally owned by some obscure offshore corporation.

      That’s a double-whammy for the taxpayers of Taiwan, since even if they manage to recover the property (not easy) it will be worth 40% what was paid for it. So, the average, non-rich taxpayers of Taiwan were unwilling participants in the OC housing bubble.

  6. R

    IR – I thought you might find this interesting – my husband and I just found out that the house we were renting last year recently sold for $465K – the previous owners purchased the home for $820K. We moved out last June when they told us they were going to let it foreclose. The home is an area where prices remained strong – or so we thought – Fountain Valley. This home is on an enormous lot which is why we were so shocked it went so low. We were always told that this area would hold its value due to the high number of Asian buyers with large down payments. I wonder what this will do to the comps in the neighborhood. The house next door sold for around 700K last year on a much smaller lot. Ouch. Let me know if you want the address to check it out.

    1. Shannon

      Hi R,

      I would like the address. I am looking to buy in FV and I have been tracking Foreclosures. If you don’t want to give the address will you post the street name. Thanks

      1. Mike7

        I was born and raised in FV then moved to Irvine.
        27 years in FV, 5 in Irvine, 32 years old.
        FV is a very good place to live. If your looking to live next to the older caucasian couple who meticulously maintain there curb appeal, are friendly, and actually talk to there neighbors. You might want to stay south of Warner for sure. Actually past Garfield you get into Huntington Beach, I’d rather buy there. The vietnamese from little saigon are spreading into FV like weeds. You starting to see Pho restaurants along Brookhurst. I eat the food and have Vietnamese friends, but would rather buy and live in a white and or more mixed community like Irvine.

    2. Chris

      Call me racist but there are Asian buyers that are not exactly wealthy or affluent. Most of the Asians and AAs living in FV are not what I’d considered to be affluent.

      If they were, they’d probably “move up” to Irvine.

      It’s the same as other folks who would “move up” to NB from Irvine.

  7. dw

    Why don’t we see the other high rise condos doing the same thing. Whats the deal with the new one at central park west.

    1. beerdude

      From what I understand, although completed, the CPW tower has been mothballed by Lennar until the economy recovers, so there are no units occupied nor have any units technically been “sold” – but I bet many still have deposits put down on them that can’t (or won’t) be refunded.

      1. Bitter Renter

        Interesting — I’d been wondering what was going on with that other ill-timed and out-of-place highrise (Central Park West, my ass…). Thanks for the report, beerdude.

    1. IrvineRenter

      I played with this figure until it matched the cost structure from above. The cost of ownership outside the mortgage payment is extremely high in these towers because of the HOA fees. This number is usually around 20%.

  8. LakeForestRenter

    I love your blog and can’t thank you enough for the free community service that you offer. Before this blog i always assumed i was poor and couldn’t imagine all the great jobs that i obviously wasn’t qualified for that were paying 250-300K to afford to own in Irvine.

    However, as a personal favor can you not use $hit. We all know what you mean so what do you gain by not going full bore? I doubt many children are reading up on home ownership (though they should be, and they all cuss like sailors anyway) And if anyone over the age of 12 is offended by shit and not offended by $hit… i have a teaser rate i’d love to give them on the North Korea towers @ 10% of peak.

      1. Geotpf

        I much perfer the straight forwardness of Lily Allen. (See track eight on her latest album.)

    1. IrvineRenter

      I wasn’t changing the “S” to avoid offending as much as I was trying emphasize that the shit sandwich someone has to eat is made from money. I don’t use many 4 letter words, but there are times that it gets the point across better than other words in the lexicon. I appreciate your concern, and I will keep it in mind for the future.

      1. Mike7

        I don’t think you need to use either one. Profanity is used when someone cannot be articulate. It’s a sign of ignorance. But on the flip side sometime slag helps describe emotion and also emphasizes meaning. I think LakeForestRenter mean either cuss or don’t.

      2. LakeForrestRenter

        Oh i have nothing against cussing. But if you mean god damn, gosh darn just wont cut it, especially when u make it clear god damn is what you meant to say.

        Sorry to hijack the thread with one of my plethora of personal problems, and in that vain this blog should be more Indian fusion cuisine focused? 🙂

  9. bltserv

    I still recall way back when we coined the name “North Korea Towers” to the Marquee.
    Think Morkaos or myself fist used the phrase in the Forums.
    Still looks good as a Rental. They are down to around $ 2000.00 a month now for the smaller units. The poor landlord gets to make the HOA Payment. Yes the Theatre is LONG GONE. So are a few of the restaurants. IE Jack Shrimp.
    We need to post some of the propoganda from when these units first sold to get a real feeling of the complete failure of this project.

    1. Geotpf

      For two grand a month, these are great from a renter’s stand point. You get $1,150 of concierge services and other luxury pampering, so, if you like that stuff and will use it, your net rent is basically $850 a month. Heck, even ignoring that junk, I believe these are pretty nice inside and worth the two grand a month.

  10. squareround

    If you consider the association fee is $1000+, does it mean the bottom price should be 100K?

  11. Dan in FL

    Loss of condo fees are absolutely killing some of these associations. I remember going back to Gainesville, FL for a football game and it seemed like every apartment complex had gone condo. Only a matter to time till they revert back to apartments again. From what I heard, it happened a lot in the college towns of the country.

    What are the odds of that happening in a place like your NK Towers?

    1. IrvineRenter

      It would be much more difficult because it is completely sold out. Reassembling the units into a manageable complex would be tough. It is much easier to go from apartment to condo than the other direction.

    1. irsx02

      To me, this picture is really macabre and just plain wrong. Then a real estate agent said to me, this guy, like real estate, can only go up.

      Of course, I didn’t believe the agent. So he reassured me that this guy has already hit bottom. Just like the any Irvine condo price, it’s only going to bounce up and go higher from this point.

      PS. is it still wrong the the captiva/word image verification is death72?

      1. DarthFerret

        Actually, it’s not that macabre. Zoom in on the jumper to see what he’s wearing. (Or you can cheat and read the image title.) 🙂


  12. newbie2008

    Location, Location, Location.
    Next to the I-405 and the airport.
    I don’t know of any parks in walking distance, not much shops nearby. No quiet footpath.
    HOA >$1000 per month (not tax deductible)
    The HOA is like an extra $130000 loan that’s never paid off. It keeps on taking and taking.

    For a cash flow investor: Rent $1900-2700 for tower living less HOA 1100. Cash in hand $800-1400. $120,000 to $200,000 not including vacancies and declining rents. This is the third floor unit (open the windows if you can and get some I405 noise and exhaust, not the 8th floor or above. Likely not much of a view.

  13. Booom

    As a renter, there is no way in hell I would pay $2800 for this. I can get a 2 bedroom unit in Corona Del Mar for less than that.

  14. LC

    You haven’t seen crazy until you drive by Cenral Park West condo development across the street from these towers. What is it with the crazy rooflines? It is “The Flintstones” meets Douchbag Central.

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