"You couldn't beat it"
Villalta paid $19,800 for a landlocked lot that NRPI had bought nine months earlier for $5,000. She is a single mother who supports three children by working as a certified nursing assistant in a nursing home.
Teacher Mary Glasgow of Sacramento also bought land, and like Villalta, is thrilled.
"To be honest, the price of the property, you couldn't beat it," Glasgow said.
The 7,700-square-foot interior lot Glasgow bought had been sold several times, each time for less. In May 1998, it sold for $10,000. Two years later, it was resold for $8,500. NRPI paid $6,000 for it in late February 2003. A little more than six months later, Glasgow paid $17,900 for it.
The lot was priced at $19,900, but Glasgow was thrilled to get it for $2,000 less because she was paying cash. She said she compared prices of the land with those in California and thinks she got a good deal.
"It was an excellent price compared to what I could've gotten down here," she said. "But I probably could have checked a little more."
According to the Grays Harbor County Assessor's Office, NRPI has bought more than 350 parcels (a parcel can contain more than one lot). Despite NRPI's considerable markup — the cheapest is now $29,900 — the lots have been selling briskly.
"What made Ocean Shores attractive to us was the incredible intrinsic value that we gained as a result of previous developers who have expensed all these costs [of putting in a golf course, lakes, roads and other amenities]," NRPI co-founder Robert Friedman said. "We could therefore take advantage of it, and with our unique way of marketing and selling the property, we should be able to make this a good success story — not only for us, but for the community as well."
"It's primed the pump"
Friedman says the Ocean Shores properties were underpriced to begin with and that NRPI is helping them catch up by spending millions on a promotional campaign to attract out-of-state buyers.
Still, compared with other recent sales, NRPI's properties are selling for more than similar Ocean Shores lots are selling for, says Grays Harbor County appraisal supervisor Gerry Lillibridge.
But such a markup doesn't automatically mean the company has priced the lots too high, and the markup isn't illegal. NRPI's Web site (www.landoceanshores.com) says "no Federal or State agency has judged the merits or value, if any, of this property" and says people should obtain a property report before they buy.
From his John L. Scott office in Ocean Shores, Thorn Ward is amazed that California buyers aren't more questioning.
"You'd think they'd say something like, 'You guys paid $8,000 for a lot, and you want me to spend $19,000 for it?' " Ward said. "You think they'd be disturbed by that, but they haven't been. They think it's underpriced.
"What NRPI did was bring in people from outside the area who thought lots were inexpensive — versus people from Western Washington who didn't think about it either way. It's primed the pump of appreciation."
As a result, the "plain vanilla" lots in town have seen their value go up 50 to 70 percent, Ward says. An oceanfront lot that brought $70,000 two years ago now commands $200,000.
Is this good or bad?
Ocean Shores City Manager Dave Weiser says there's been little local comment about NRPI's sales blitz, but he suspects that may change if the next round of valuations boosts property taxes, which he expects will happen.
Grand plans fall apart
As conceived in the late 1950s by its original developers, Ocean Shores was to be a grand resort community that would easily attract buyers from Seattle, 130 miles away. Some 12,000 lots were platted from what had been an old cattle ranch. The least expensive lot went for $1,700.
But in 1970 the development company went bankrupt, and soon after owners began to default. Ward estimates that three-fourths of the lots remain vacant, and over the years, some have been resold multiple times.
Some Ocean Shores owners "frankly were trying to sell for a long time," Ward said, so they were thrilled when NRPI offered them cash.
That's exactly what Bob Waite, an owner of South Sound Realty, says has happened on Anderson Island where NRPI has bought more than 100 vacant lots, most in the Riviera Community Club development.
As in Ocean Shores, Riviera's 3,112 quarter-acre lots were platted years ago in hopes that the area would become a vacation destination. Instead, the developers went bankrupt, 80 percent of the lots remain undeveloped, and Riviera has struggled since.
"After 9/11, Mom and Dad weren't sitting around the table saying, 'Oh gosh, I'm going to lose my job, we've got weapons of mass destruction, let's go buy a vacation house,' " Waite said.
Suddenly NRPI appeared, offering cash to sellers who hadn't had a nibble in a decade. Most got $4,000 to $7,000.
The company also is buying property on Ketron Island, which is served by the same small ferry that goes to Anderson Island. Waite says locals are speculating that Riviera's viewless interior lots will probably be marketed for about $25,000 each.
Double-digit financing
At auction, NRPI also bought 63 one-acre home sites in a platted subdivision overlooking Lake Roosevelt in Eastern Washington. The owner had the property for sale "for a couple of years and had no luck selling until this company came in," said Lincoln County appraiser Mark Hammond. NRPI paid $1,747,000 for the whole parcel, or $27,730 per building site.
The company has sold three, again to Californians who came on a free trip, for $69,900 each. Sherie Wardian, owner of United Country Lake Roosevelt Realty, considers that price "a little steep for nonwaterfront."
"They'd be more in the $45,000 to $50,000 range," Wardian said.
NRPI offers financing, at an annual-percentage rate of 13.9 percent.
Bob Clark, a loan officer at Anchor Savings Bank in Ocean Shores, says land loans are available from local banks at better rates.
"Nobody is in double digits, let's put it that way," Clark said.
No current complaints here
National Recreational Properties is the brainchild of Friedman and Jeffrey Frieden, who, according to The Associated Press, are Orange County, Calif., developers and entrepreneurs who once sold stereos and backrubs before striking gold in the distressed-land business.
They're using the same infomercial and fly-then-buy business model to sell vacation-type lots in Florida, California, Arkansas and Tennessee.
"We're riding the coattails of developers from the '50s and '60s," Friedman told The Associated Press. "We identify these things. We re-expose them to the world, and our clients in the long run get incredible values."
The privately held company doesn't have to release its earnings, but a statement Frieden filed in an Orange County lawsuit stated profits of more than $560,000 a month from January to June 2002.
Property records show that Frieden bought an oceanfront house in Laguna Beach, Calif., for $4.3 million last November, The Associated Press reported.
NRPI and other land-disposition companies operated by Frieden and Friedman have been the target of consumer complaints from buyers elsewhere who said they were misled, The Associated Press reported. They've also been sued by California county prosecutors who claimed their advertising was misleading because some lots were unbuildable. The company denied the allegations but offered refunds to unhappy buyers.
"We're not looking to fight with anybody," Friedman told The Associated Press. "If we make a mistake — and we do every now and again; we're not perfect — if we make a mistake, our goal is to make it right."
Locally they've generated no complaints with the Attorney General's office or the Better Business Bureau and one with the Department of Licensing. No wrongdoing was found on NRPI's part, Department spokeswoman Allison Chase said.
And no one is alleging they're doing anything illegal here. Indeed, Waite says that when NRPI arrived on Anderson Island, "they told everyone the same story, and it hasn't changed a word."
"These are serious business people," Waite said.
"A hostage situation"
However, some are wondering whether California buyers, blinded by the high prices of their own real estate and strictly controlled by NRPI during their visits here, are getting the full picture.
Villalta, the nursing-home employee, says she wasn't pressured to buy, but she wasn't allowed to rent a car and explore the area on her own either.
"I didn't get to see the city, Ocean Shores," she said.
Dan Braun, a California real-estate investor, says the trips are orchestrated.
"If you read between the lines, it's a hostage situation because they don't want you out there driving around and being exposed to other than what they have," Braun said.
But he nonetheless praises NRPI.
"It's actually doing a service and benefit for these places by getting people to buy in," Braun said. "But if people get disgruntled by buying a lot for $14,000 that they could have bought for $7,000, that was their own fault that they didn't do the research."
Will values hold up?
That brings up the final issue. After NRPI sells all its Ocean Shores properties, will the prices hold or will they deflate as they've done before?
"That's a good question," said Pope, the appraiser. "They haven't been able to sell in that neighborhood before, but maybe the Realtors will learn more from this about marketing Ocean Shores."
Villalta, for one, is eager to buy again, but not from NRPI.
"I've been searching on the Internet in Ocean Shores, and I've seen lower prices. I'm sure if I go on my own and look for a real-estate agent I'll find something cheaper."
But a major obstacle, Villalta says, is the travel costs involved. She can't afford to visit Ocean Shores again. Not even to see the lot she's already bought. |
