Downtown Downer

When it comes to real estate, Monty and Marlene Wilson aren't exactly novices. Monty's a builder. Marlene has a broker's license.

But earlier this year, the Wilsons learned something shocking about the $479,000 condominium they purchased two years ago in downtown Phoenix: It came without parking.

Not just without covered parking. But without any parking — and that's for a pricey condo in the Orpheum Lofts, which sits in the busiest part of downtown, at the corner of First Avenue and Adams Street. It's practically impossible to find a meter free for lunch in the neighborhood, much less a spot to park for 24 hours.

In sales brochures, the condominium's developer, TASB LLC, promised buyers not just parking, but valet parking. Residents like the Wilsons say that parking was also promised in conversations with the developer and sales representatives.

For two years, they had it. But that's all about to change — and it's almost certainly going to get expensive.

In February, TASB sold the parking lot used by residents — and sold it without any requirement that the new owner take care of Orpheum residents. Now residents are looking at a minimum of $30,000 to buy a parking space from the new developer, even as the real estate market continues to flatline across the Valley.

The homeowners association is urging caution. A class-action lawsuit, they say, is just going to make things worse. But a vocal group of residents are in open revolt.

"We were told that with a two-bedroom unit, we had two parking spaces," says Marlene Wilson. "That was very important to us. We would have never bought something without parking in downtown Phoenix. And to find out we don't have parking — to me, that's fraud."

Of the half-dozen high-rise, high-end condominium complexes now in various stages of construction in downtown Phoenix, the Orpheum Lofts came first.

A renovation of the 78-year-old Phoenix Title and Trust Building, the project opened in 2005, studded with gorgeous Art Deco details. With its black-and-white tile floor and intricate, gold-accented elevators, the lobby could host a Fred Astaire and Ginger Rogers dance sequence. But the 90 units are strikingly modern, in a good way: brick walls, exposed ductwork, and kitchens worthy of the Food Network. It's easy to see why the spot has been heralded as the beginning of downtown's renaissance.

The place has had its problems. Homeowners association fees have doubled, and residents have been forced to pony up extra cash on top of that to cover costs. Despite hopes of retail and restaurants on the first floor, the only business onsite to date is a little shoeshine shop. The 2,668-square-foot penthouse, too, has yet to sell.

Many residents blame the developer, TASB LLC of Denver, and its local representative, Norm Sheldon. (Sheldon, who owns a home in Scottsdale, declined comment, saying his lawyers advised against it because of the strong possibility of a lawsuit against him.)

"The anger against Norm has been there since Day One," says David Staciokas, president of the homeowners association and one of the few Orpheum residents who doesn't criticize Sheldon. "People have expectations of what a luxury building should be, and because everything's not gilded in gold, they think it's Norm's fault. . . . This is just gasoline on the fire."

If nothing else, though, the developer is responsible for a major communication breakdown about parking. New Times spoke to nearly two dozen Orpheum Lofts owners. Many got the sales pitch from Sheldon at the time of their purchase. And, they all agree, they were told that parking was included.

That's true of the first wave of residents, who bought directly from the developer's sales team. It's also true of the second round of owners, who bought from others — and in many cases, paid more for their units.

Initially, the units were marketed as having 24-hour valet parking, based out of the lot next door. In media reports, TASB talked about doing a second phase, with a five-story parking garage, more retail, and more condo units. Until then, the valet was supposed to stretch the small surface lot to handle all 90 Orpheum owners.

Residents weren't thrilled with the service they were getting, however, so the homeowners association discontinued the valet after one year. That wasn't controversial; most people were happy to self-park in the lot.

But then came the news that TASB wasn't doing a second phase. Instead, the developers were selling off their excess land, including the parking lot, to Chicago-based W Development. (That company, which has no relation to the posh hotel chain, is also developing Summit at Copper Square, next to Chase Field.)

W's president, David Wallach, is planning a 32-story condominium called Omega, complete with retail and a parking garage, which will sit just west of the Orpheum Lofts. He hopes to open by 2009.

Wallach met with Orpheum residents before the land sale went through, in January. While he wasn't sure of the final price per spot, he says he was pleased to offer Orpheum residents a chance to reserve parking spaces within the first phase.

"I thought it went well," Wallach says. "The overwhelming majority of people were excited about having a permanent place for parking, and that they'll have title to it."

But many residents describe their feelings much differently.

"After parking in the lot next door for two years, thinking it was ours, it was shocking to find out differently," says Ty Brown, a mortgage broker who owns a unit in the building. "And now it's a huge issue because a lot of people can't afford it. We were promised one thing and given something else."

"Everybody's upset," says Regan Rhodes, a strategic sourcing manager for a Fortune 500 company. "Ask any person who bought a place: What person in their right mind would be okay with this?"

The heart of the problem is that this isn't Manhattan, or even San Francisco. You can't live in downtown Phoenix without a car. And, to Orpheum residents, it seems impossible that you can buy a condo here with zero disclosure that parking isn't included.

As it turns out, you can.

The Orpheum Lofts' neighborhood is zoned "urban," says the city's downtown development director, John Chan. That zoning, unlike others in the city, requires no parking, whether it's for shops or condos.

And TASB may have covered itself, legally. In one of its disclosures, the developer noted that the surface lot "may be developed in the future for any use" permitted by the city, including a parking garage or a mixed-use development. While the main point of the disclosure seems to be that residents can't sue if they suffer damages during construction of a garage or other development, the developer could surely use the language to argue that it made no promises. (It doesn't help that residents had to initial the bottom of the page.)

But there's also plenty of evidence that TASB was far from upfront about the tentative parking situation. In 2003, the developer asked the city for a variance for valet parking, explaining that "condo units would be a hard sell without convenient parking," according to city records.

There's also the building's "reserve" study. In it, analysts hired by the developer note that the homeowners association will be responsible for seal-coating the parking lot every three years. And real estate listings all show the units as having parking spaces included. So do county assessments.

City officials say they're concerned about the situation and hope to find a way to help the residents. In an e-mail, Scott Phelps, spokesman for Mayor Phil Gordon, says that the mayor's goal is to "work with the developer or a financial institution" on financing options. "We want to find a solution that works," he writes, "and will work hard to get there."

The councilman whose ward includes the Orpheum Lofts, Michael Johnson, was sufficiently concerned to attend its homeowners association meeting last week.

Johnson called the matter a "very serious subject" that has City Hall's attention. "I don't know of any other residential structure in Phoenix that doesn't have parking," he said, suggesting that the neighborhood's "urban" zoning may be an inadequate holdover from the days when downtown had no residents.

"I can't see building residential units without a parking structure," the councilman added. "It's almost impossible to think that would happen."

But it's one thing to express sympathy; it may be another one entirely to find a solution. It's hard to imagine a way out for the building's residents that doesn't include considerable expense — and Johnson certainly didn't have a plan to offer at Wednesday's meeting.

Some residents say they have no choice but to buy a space from Wallach in the parking garage he'll be building next door. It's not ideal, they say, but what choice do they have?

Wallach says that he won't be making money off the deal. Thirty thousand dollars per spot barely covers his costs.

"I will do everything in my power to help the residents make their units more marketable," he says. "I just want to help them."

But Wallach, whose résumé boasts that he's developed more than $100 million of real estate, is in a different place from many Orpheum owners. He suggests that getting a $30,000 loan — $200 a month for 30 years — should be no difficult task.

That may be true for people like Monty and Marlene Wilson, who own a home in Sedona and are in the Orpheum for the long haul. But it's certainly not true for everybody in the building.

Blame the Valley's real estate slump. Units are now selling for much less than some people paid a year ago. Smaller units had soared to more than $389,000 in the heady, early days of 2006. In the last year, they've dropped below $300,000. Residents who paid top price, and now have to add another $30,000 for parking, are almost certainly going to end up owing far more than they can get by selling.

Several residents said they can't keep up with the increase in the Orpheum's association fees. They hope to sell. But without guaranteed parking, and with cheaper options going on the market downtown, they fear it won't be easy.

One worried resident is Tony Pira. A photography student about to graduate from Arizona State, he lives with his partner, a flight attendant, in a 838-square-foot unit that he considered a good investment two years ago. But even with his partner's salary and Pira's stipend from the Air Force, they can't keep up with mounting costs.

"We felt like this would be a very comfortable living situation for us," Pira says. "We wouldn't be rich, but we wouldn't be at the point where we were eating Top Ramen, either."

They're at that point now. And with $305,000 left on their mortgage, it's disconcerting to see a bigger unit, one floor below, selling for $240,000.

There's no way they can add another $30,000 mortgage for a parking space, Pira says. And there's also no way they can sell without guaranteed parking.

"We love this building," Pira says. "But the reality is, we've accepted the fact that we're going to go into foreclosure."

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Sarah Fenske
Contact: Sarah Fenske