HarborView to wait out a slump

June 19, 1994|By Lorraine Mirabella | Lorraine Mirabella,Sun Staff Writer

Nine months after building a condominium high-rise overlooking the Inner Harbor, developers of HarborView lamented the tower's near-empty status. Still, they said last week, it's time to build again.

Announcing the start of a second tower, the project's partners spoke of how, by now, homeowners should have filled a flagship building with tight security and panoramic water views, set amid private boat slips, swimming pools and restaurants. But in planning the proposed six-tower 42-acre waterfront village along Key Highway, officials of HarborView Properties Development Co. and Parkway Holdings Ltd. say they never could have predicted a slowdown in the market.

Their next step: Keep going with new construction, but rent, rather than sell. Within a year, developers will start a 275-unit, $50 million luxury apartment tower, with rents ranging from $1,100 to $3,000 a month, and a 250-space "boatel," for boat storage.

Richard A. Swirnow, president of HarborView Properties, and his partners remain convinced condominiums eventually will sell at prices ranging from $161,000 to $1.7 million, though only 40 sales have been finalized or are pending in the existing tower. The financial backing of Singapore-based investors Parkway, the general partner and half-owner, will allow the project to ride out a weak market, the development team says.

"America will come out of a bad period," Parkway's chairman, Dato Tan Chin Nam, said last week. "The land is there, the infrastructure is completed. We must build to keep things moving. It's a matter of time. After so many years of no building, there must be a huge pent-up demand."

Already, the housing market has begun to recover, with home sales in metropolitan Baltimore up the first five months of the year. But it will take longer for HarborView's target market -- empty-nesters seeking maximum pampering in a low-maintenance home -- to feel confident, real estate experts said.

"The upper-end luxury condo market is going to lag behind the recovery a little bit," said Arthur Davis III, president of Chase Fitzgerald and Co. "It first takes confidence in the upper-end [single-family] housing market. Those people are truly discretionary sellers. If they have a large property but have the idea they want to move to the water, they won't sell until they're convinced it's a good market for resale of the house they're in. Then they will put that house on the market and make the jump."

Luxury condominiums have been a difficult sell for several years, in a city where a good road network has made suburban living popular and high-rise condos still are relatively new. Many luxury condo projects built since the mid-1980s have been forced by lenders to lower sales prices or sell units at auction.

Mary Lou Hearn, an agent with Hill & Co. who wrote contracts for 68 of the 117 condos at The Colonnade on University Parkway in 1989, recalls how condo sales in the city began slacking off after 1990. Two-bedroom condos at the Colonnade sold for nearly $300,000 then. She just sold the last one, she said, for $120,000.

"It's a buyers' market for condos, and it has been for a while," she said. "You combine the [city] taxes with the condo fees, and monthly costs before you hit the mortgage can be astronomical."

"The condo market is a bit different in Baltimore," said Candace Claster, also with Hill & Co. "If you contrast it to New York, historically it hasn't had as much success. The perception is the original asking prices here have been ambitious, and they're seeing a pattern whereby new buildings went to auction. People who are interested in HarborView who feel the prices are ambitious are waiting until the building fills up. You're dealing with conservativeness and understandable cautiousness in today's market."

HarborView officials contend that they priced their units right, as evidenced by early interest from buyers. They say they lost many of the 100 initial reservations and contracts as potential buyers found it too difficult to sell their homes. Others backed out because of construction delays. Yet others felt indecisive about investing in a major lifestyle change, said Mr. Swirnow. But he said many who backed out indicated a desire to rent.

"There is a luxury rental market that has not been met," he said, adding he hopes to draw future condo buyers.

The strategy may make sense in a city where luxury units rent quickly, many in the industry say.

Signature Management, which manages 1,700 apartment units in Baltimore and Baltimore County, has no trouble filling luxury apartments at Tindeco Wharf in Canton, where rents can go for up to $1,500, or at Harbor Hill in Federal Hill, with a $1,600 top rent, said Joe Fonte, company president. Rentals often compete effectively with condos, which require payment of condo fees and property taxes, Mr. Fonte said. But HarborView will be targeting a more exclusive market, he said.

"It's obviously going to be an extremely narrow, narrow market it's going to appeal to in terms of the rent ranges they're looking at," he said.

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