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August 10, 2018

Hot market leads development group to switch 133 apartments to condos

  • The new units are in three projects on Capitol Hill and Wallingford. Prices will range from under $400,000 to over $800,000
    Journal Staff Reporter

    Rendering by B9 Architects/Neighborhood Collection [enlarge]
    Edison is at 121 12th Ave. E. on Capitol Hill, with 51 units.

    Atrium has 34 units at 750 11th Ave. E. on Capitol Hill.

    Rendering by B9 Architects/Neighborhood Collection [enlarge]
    Wallingford 45 will have 48 units at 1601 N. 45th St.

    A new venture called The Neighborhood Collection has announced that three new multifamily buildings will be offered for sale as condominiums, not apartments.

    Realogics Sotheby's International Realty is marketing the properties. They are:

    • Atrium, with 34 units at 750 11th Ave. E. on Capitol Hill

    • Edison, with 51 units at 121 12th Ave. E., also on Capitol Hill

    • Wallingford 45, with 48 units at 1601 N. 45th St.

    All three are expected to be ready for occupancy this fall. They were developed by Robert Hardy and Elliott Severson, who often work together.

    The team also includes investor Greg Walton, Bradley Khouri of B9 Architects, which designed all three buildings, Carlene Pride and Dean Jones of Realogics, and Brandon Ehrlich of HomeStreet Home Loans, the preferred lender.

    Severson said in a statement, “Our prospective buyers will enjoy this new-construction inventory at attractive price points.” Realogics says prices will range from under $400,000 to over $800,000 — not cheap, but not luxury.

    Jones told the DJC that Hardy and Severson preserved their flexibility on whether the units would be apartments or condos during the past few years of planning and development. They started in one market, then finished in another.

    “They can deliver it more quickly,” says Jones of the condominium product. “Late to announce, but first to deliver.”

    He expects to see more late switches to condos from Hardy and Severson, and other developers. “People are leaning toward condos. The condo market has overcorrected for too long.”

    That nimble approach depends on lower land costs outside the downtown core, often on small lots where underground parking would be prohibitively expensive — and which are served by transit.

    “These are great infill locations,” says Jones. “Those light rail stations are very much key to those locations.”

    In addition to the luxury high-rise condos Jones markets downtown, often to baby boomers who are downsizing, he foresees “more boutique-style buildings” that can be developed relatively quickly.

    High-rise condos can take a half-decade or more to plan, entitle, finance and build. And those premium towers are being marketed more to the parents of the millennial buyers that the Neighborhood Collection may attract.

    Millennial buyers, Jones argues, don't want or need cars and car payments. “They can get further in life without those overhead items. They're migrating out of apartments.”

    Some may also benefit from the asset growth of their boomer parents, who can loan or gift them down payments. Jones jokingly calls this “basement liberation” — parents can rid themselves of their employed adult children, then sell the house and move into a condo.

    Another point to consider is that the two Capitol Hill projects lack parking. Wallingford 45 has 20 parking stalls for 48 units. Potential millennial buyers, Jones argues, don't want the obligations and hassle of cars. Also many also have more pressing student loans to pay.

    Jones also said in a statement, “The market needs new construction and more inventory, especially homes priced below $700,000.” He also cited an “approaching condo pipeline [that] will generally be in excess of $1,200 per square foot, or about 20 percent more than the current inventory, not to mention delivery dates that are two years out or more.”

    Realogics also quotes O'Connor Consulting Group, whose Brian O'Connor said the apartment market is softening — and creating an opportunity for condo developers and buyers. “We believe this is evidence of a pivot,” he said. “There's definitely been a shift of focus towards homeownership, and developers are attempting to play catch up—it can take several years to entitle, build and sell new condominium inventory.”

    “In the last cycle, condos were king,” says Jones. “Condos were flying off the shelf. You saw a lot of conversions” from apartments to condos. Since the recession and Amazon rebound, new apartments have been king — delivering the best return for developers and investors.

    But Jones and others believe the market is at a new inflection point. A prominent example is Laconia Development's 352-condo Spire at 600 Wall St., a high rise being marketed by Realogics, which announced in June that it will go the condo route. That project has been in planning for over a decade, since before the recession, and went from condos to apartments and now back again.

    The Capitol Hill sales center for The Neighborhood Collection will open next month at 1420 E. Madison St., Suite 113. The website is NeighborhoodCollection.com.

    Jones says he expects the venture to add new condominium buildings after the initial trio.

    Meanwhile, Hardy and Severson have 22 units underway at 223 12th Ave. E. on Capitol Hill; and 54 units at 743 N. 35th St. in Fremont. B9 Architects is designing them both.