Category: Announcements

2920 Georgia Avenue Over 50% Sold Before Grand Opening

McWilliams|Ballard and Linde Development commenced sales at 2920 Georgia Avenue NW on November 1st with a ‘soft opening’ and is proud to announce that the building was over 50% sold before they hosted the official Grand Opening in mid-December. The sales pace did not slow down over the holiday season and the building is now 70% sold with residents beginning to move in this month.

Condo Towers Rise From Boston to L.A. in U.S. Rebound

Millennium Partners plans to open a sales center later this year for a 442-unit project in the Downtown Crossing neighborhood called Millennium Tower Boston.

Source: Glodow Nead Communications via Bloomberg
Millennium Partners plans to open a sales center later this year for a 442-unit project in the Downtown Crossing neighborhood called Millennium Tower Boston.

For the first time since the U.S. housing crash, new condominium towers are sprouting in downtown Boston, Seattle and Los Angeles as developers bet on the return of the riskiest type of residential real estate.

Buyers are signing deals to reserve units in two new high-end projects in Boston. A 41-story tower rising in Seattle is the first phase of the largest condo development ever in the city. In Los Angeles, a 22-floor building is slated for construction later this year, the first ground-up high-rise condo project downtown since 2005.

Construction cranes also spike the skylines of Washington, Houston, Miami, New York and San Francisco as financing gradually returns to a real estate class that lenders shunned for years. Condos are regaining favor after a surge in rental demand pushed the U.S. apartment-vacancy rate to the lowest level in a decade, sending urban rents soaring, while the inventory of for-sale housing remains historically low.

“We’re in the very early stages of a long recovery in condos,” Sam Khater, deputy chief economist for Irvine, California-based CoreLogic Inc., said in a telephone interview. “Now you’re seeing rental booming, but today’s renters are going to be tomorrow’s condo buyers.”

Builders broke ground on 22,000 for-sale multifamily residences last year, up 4.8 percent from 2012 and 47 percent from the post-crash nadir in 2010, Census Bureau data show. In the first quarter, 8.5 percent of the 71,000 multifamily units that started construction were built as for-sale properties, up from a 6.9 percent share a year earlier, according to the data.

Apartment Demand

That share is still far from what it was during the housing boom that peaked in 2006, when for-sale units made up 45 percent of multifamily home starts. Developers have since focused more on apartments, catering to former homeowners who lost properties to foreclosure and younger households headed by people who can’t afford to own or want more flexibility.

Condo builders were burned during the market’s collapse because buyers — often investors — were able to cancel purchases once prices started falling. The outlays of money required to build the projects before deals are completed make condos the riskiest form of residential property, said John Burns, an Irvine-based real estate consultant.

High-end condo construction started to perk up three years ago in Manhattan, San Francisco and Miami, which attracted wealthy, international buyers bearing cash. Now smaller markets are catching up as demand increases, inventory shrinks and lenders become more confident in a recovery.

Rising Prices

The median U.S. resale condo price climbed 8.3 percent in April from a year earlier to $205,500, according to the National Association of Realtors. That compared with a 4.7 percent gain for single-family homes to $201,100. Sales of existing condos and co-ops jumped 7.3 percent in April from March, while house sales inched up 0.5 percent.

“The key is being able to jump in with the start of a project and finish it while the cycle is allowing you to sell condos at the number you anticipated,” said Ted Tye, managing partner of National Development, which has presold half of the 83-unit Sepia at Ink Block, scheduled to be finished next year inBoston’s Southend area. “In Boston, the window is open.”

Tye said he moved with his wife to Boston this year because the suburban lifestyle of nearby Newton no longer made sense after their children had grown.

Empty nesters such as Tye and younger first-time homeowners flocking to urban settings are helping to fuel demand. Condo buyers pay a premium to live in higher-cost, higher-density areas, according to David Crowe, chief economist for the Washington-based National Association of Homebuilders.

First Stop

“There’s a lot of pent-up demand from first-time homebuyers and condos are a good first stop,” Crowe said in a telephone interview. “Dense developments like condos give the lifestyle they’re looking for.”

Sepia is one of at least three large luxury-condo projects in the pipeline in Boston. Twenty Two Liberty, a 15-story waterfront tower, is 30 percent presold, said Joseph F. Fallon, president and chief executive officer of developer Fallon Co.

Millennium Partners plans to open a sales center later this year for a 442-unit building in the Downtown Crossing neighborhood called Millennium Tower Boston. Millennium recently sold out of a 256-unit project nearby, Boston’s first large new condo tower since 2009, with prices as high as $3.5 million.

The condo market is “off the charts strong,” said David Bates, an associate broker with William Raveis in Boston. “There is a total lack of inventory in the market.”

Seattle Demand

In Seattle, Bosa Development Corp. expects to complete the first phase of the Insignia condo project in 2015. Since September, the company has presold about 140 of the first 350 units at prices from $400,000 to more than $2 million.

Bosa revived Insignia after originally planning to break ground before the financial crisis deepened in 2008.

“Fortunately, we didn’t start,” said Natale Bosa, president of the Burnaby, British Columbia-based developer. “Otherwise, it would have been disastrous.”

Some of the largest and savviest condo developers fell the hardest during the condo crash. Jorge Perez’s Related Group restructured more than $1.5 billion in debt on mostly vacant Florida condos in 2010. Toll Brothers Inc. (TOL), the biggest U.S. builder of luxury housing, had to slash prices in 2009 to spur sales of Brooklyn, New York, apartments, and recorded more than $60 million of impairment charges tied to condo joint ventures.

Both developers are back.

Toll Expands

Toll Brothers is expanding its City Living line of high-rise condos beyond the New York area to Philadelphia and Washington while exploring deals in Boston, San Francisco and Miami, CEO Douglas Yearley Jr. said on a May 28 conference call with analysts.

The Horsham, Pennsylvania-based company has 1,500 condo units worth about $2 billion in revenue in development. From February through May, it signed contracts on 43 units for $160 million at its Pierhouse at Brooklyn Bridge Park, a joint venture with Starwood Capital Group LLC.

“We could have perhaps sold the entire building already, but since we won’t be delivering condos until 2016, we prefer to meter out the units and raise prices along the way,” Yearley said on the call. “After all, we can’t build it in a few months, so why sell it in a few months.”

Miami Rebound

Perez and other developers in South Florida, where 247 condo projects with more than 33,000 units are in the pipeline east of Interstate 95, have hatched plans for new condos in Palm Beach and Broward counties north of Miami, according to data compiled by CraneSpotters.com, a division of CondoVultures.com.

Miami-area condo prices rebounded to a median $132,000 in April from a post-crash trough of $80,000 in 2011, according to real estate information service DataQuick. Condos, which make up half the existing homes sold in the South Florida area, are still 40 percent below their July 2006 peak of $219,000.

Rather than relying solely on bank financing, Miami-area builders often pay for condo construction with buyer deposits for sometimes more than half the retail price of the units. Unlike the bubble years, buyers probably won’t walk away from these deals because they have so much skin in the game, said Jenny Huertas, the broker for CVR Realty in Miami.

“This time is different,” she said. “We don’t see a bubble happening because the deposits are so big and that means real buyers.”

Lender Reluctance

Banks are still reluctant to lend beyond New York, said Claudio Guincher, head of Continental Properties LLC, a Bellevue, Washington-based company building a 117-unit condo project in Seattle.

“Developers lost their shirts and banks were left with broken condos all over the country,” Guincher said in a telephone interview. “That’s why I think they’re very cautious even though the housing market is coming back strongly. They’re much more open to lending for apartments, where they view it as much lower risk.”

Condos are more dicey than rental projects because they rely on buyers getting mortgages and on opening for sale when the market cycle is still strong, said Burns, CEO of John Burns Real Estate Consulting. Landlords have more flexibility because they can offer concessions when vacancies rise and raise rents when demand is strong, he said.

“I always see a lot of condo construction toward the end of the housing cycle because prices in the market need to be high to support the high construction costs,” Burns said.

Washington Rents

In the nation’s capital, a surge in apartment construction is slowing rent growth, spurring more building of condos, said Chris Ballard, a founder of McWilliams/Ballard, which provides development, sales and marketing services for condo and townhome developers.

The firm has 25 condo projects in the works in the Washington area, including one with 145 units. That’s about twice as many as a year ago, he said.

“For the first time in seven years, guys going into the ground on rental property are saying, ‘Let’s evaluate them as condominiums,’” Ballard said. “We’ll do a handful of condo conversions this year.”

Lenders may not offer mortgages to buyers in condo buildings with large numbers of renters. The Federal Housing Administration, the biggest source of financing for first-time buyers, requires 50 percent owner occupancy to issue home loans in existing condo buildings.

Fannie Mae

Fannie Mae, which bundles mortgages into securities, requires higher scrutiny on loans to new condo projects in Florida, condo conversions and buildings with units smaller than 400 square feet, according to Andrew Wilson, a spokesman for the Washington-based company.

“Mortgages on condominium units can create greater risks for borrowers, lenders and Fannie Mae,” he said in an e-mail.

That hasn’t been a deterrent in high-cost markets with limited housing stock, where cash-bearing buyers often win in bidding wars. Trumark Cos., based in Danville, California, began developing condos in San Francisco in 2011 and now has eight projects worth more than $500 million in the city, said Arden Hearing, managing director of TrumarkUrban, the company’s condo unit.

Trumark’s first Los Angeles project, a 22-floor tower with 151 units at the intersection of Grand Avenue and 11th Street, is expected to break ground in the fourth quarter on a site where a condo development stalled during the recession, he said. Trumark expects to start a second project five blocks away in 2016 in a neighborhood already bristling with hotel and apartment construction cranes.

Downtown “L.A. is all of a sudden a hot, burgeoning urban market,” Hearing said. “Half a million jobs and 50,000 residents, and no new condos.”

To contact the reporters on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net; Prashant Gopal in Boston atpgopal2@bloomberg.net; Hui-yong Yu in Seattle at hyu@bloomberg.net

To contact the editors responsible for this story: Kara Wetzel at kwetzel@bloomberg.net Christine Maurus

Virginia Square Apartments set For Conversion Back to Condos

The Goldstar Group plans to convert a Virginia Square apartment building that was originally built as for-sale residential units back into condos after acquiring the site May 29 for $40 million.

Goldstar and joint venture partner Finmarc Management Inc. bought 3409 Wilson Blvd. for about $469,000 a unit from a joint venture between Korman Communities Inc. and Hunt Properties. The property was initially developed in 2006 as the Joule condos, and Korman and Hunt have since converted the building into extended-stay corporate apartments branded as AKA Luxury Suites Residences.

CBRE Executive Vice President Andrew Boyer said the property has done well as extended-stay corporate apartments but should deliver well into a new market where condos are still in short supply. The building features a rooftop terrace, floor-to-ceiling windows and a resident lounge, among other amenities. Finmarc and Goldstar plan to launch a $6 million renovation of the property, with condo sales expected to start in September. The partners have retained McWilliams | Ballard to market the units.

Korman set a record when it bought the property in 2007 for $43 million, or $505,000 per unit, which was the highest per-unit price for a Class A apartment project in the D.C. area. That record was broken in 2011 by the TIAA-CREFwhich bought the Palatine at auction for $118 million, or more than $540,000 per unit.

The sale comes as the D.C. region’s multifamily market is starting to shift its balance from one heavily weighted toward rentals to one where condos are finding higher demand and a rise in new supply. Irecently wrote about two new condo projects, the Ontario Theatre and the Adamo, both in Adams Morgan. In that article I cited a stat from Alexandria-basedDelta Associates: The number of of condo units planned for sale in the next 26 months is slated to increase to 2,730, the most since early 2011.

96-Unit Condo Project Coming to U Street Corridor

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Early rendering of 96-unit project at 15th and V Street NW.

Developers are taking note of DC’s condo shortage.

Bozzuto Homes will start construction on a 96-unit condo project at the southeast corner of 15th and V Street NW in the coming months, with an anticipated completion date of late 2015.

The nine-story project will have a mix of studios, one- and two- bedroom units. In addition to a roof deck, patio and community lounge, the development will have 37 underground parking spaces as well as bike storage. The building was designed by WDG Architecture, and will be adjacent to the planned redevelopment at Portner Place.

For years, new condo projects of more than 30 or 40 units were few and far between in the DC area for financing reasons. With today’s announcement and the news yesterday of a 130-unit development coming to Navy Yard, it appears that larger projects may be coming back.

Sales Launch For 460NYA Condos

460 NY Ave rendering of north facade

Pre-sales for the 460NYA condos officially kick off today. McWilliams Ballard is having their launch event tonight at 7pm at their 1402 14th Street NW office. You can RSVP to attend the event and get the first look at the finishings and floorplans.

We’ve been hearing about this project from Bozzuto for over 5 years and engaged discussion about the historic preservation worthiness of the site back in 2011. Glad to see it is finally moving fully forward. This development represents the first new construction condominium project in the Mount Vernon Triangle in over 5 years. All the more recent residential projects have been positioned as luxury apartments.

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