Market watcher is joining those caught in the bubble

by Peter Corbett The Arizona Republic May. 9, 2010 12:00 AM

Terry McDonnell has enjoyed success in publishing and real estate.

With both those business sectors struggling, the Scottsdale publisher of Business Real Estate Weekly has taken a hit.

A decline in advertising has cut the page count from 16 in the boom years to eight in the depressed real-estate market.

It hasn't helped that McDonnell is underwater on his largest real-estate investment, a seven-figure home in Silverleaf that will go to public auction next month unless a short sale comes through first.

"People say to me, 'You know real estate. How did you get caught?' " McDonnell said. "I knew that what goes up must come down. But I didn't see it happening to this extent."

Like many others, McDonnell, 49, got hurt even though he has been tracking Valley real estate for more than two decades, including 15 years with his weekly tip sheet, commonly called BREW.

"There was no place to hide," said Jim Keeley, founding partner of Colliers International's Scottsdale office.

Keeley said he and others in commercial real estate rely on McDonnell's weekly newsletter to follow the latest deals.

Lately, McDonnell has far fewer deals to write about and far more reports on distressed properties.

To take advantage of the market, he is planning another newsletter called Distressed Real Estate, or DIRE. As the name implies, it will focus on foreclosures, short sales and other aspects of the current business cycle. McDonnell expects it will be two or three years before the market recovers.

His own real-estate struggles are tied to residential investment properties.

That included one of the first Camelot homes in DC Ranch that he bought in 1998 for $365,000.

McDonnell said he had $450,000 invested in it after adding a pool and other improvements. The value grew to an estimated $1.2 million a decade later before falling to about $600,000, he said.

Two years ago, McDonnell said real-estate developer Larry Yount warned him to sell his investments because the market was turning. McDonnell said he sold three of his four condominiums in DC Ranch but still has the Camelot home he now lives in. McDonnell downsized from the 6,100-foot home he built two years ago in Silverleaf.

That property is up for auction in a June 1 trustee sale. McDonnell said he invested $3.3 million in the Silverleaf home.

He said he is trying to arrange a short sale of $1.79 million but no offers have come in that high.

"I built it thinking I could make $1 million on it," McDonnell said. "It's very humbling."

Market watcher is joining those caught in the bubble