Condo market on the edge

Unsold units become another worry for developers

May 29, 2008|By Lorraine Mirabella | Lorraine Mirabella,SUN REPORTER

Valet attendants stand poised at the porte-cochere of the Ritz-Carlton Residences as a doorman ushers visitors toward the marble lobby. A scent called "Icelandic Moon Flower" wafts through the adjacent spa. Pathways wind through the manicured lawn and gardens, just steps from a new stretch of downtown Baltimore's waterfront promenade.

By July, the first buyers are set to move in to the Ritz's first-ever condominium-only project, and, for those first units, every last detail will be in place. The builders can only hope their buyers will be as ready.

At a time when the condo market is acutely feeling the housing slowdown, contract cancellations have become yet another worry for builders. Experts say it could be an especially nerve-racking time for those just finishing construction or with the bulk of their settlements still ahead. In Baltimore, several large new condo projects are trying to balance attracting new buyers with holding on to those they've already got.

"There's a fine line a developer has to walk to get these unsold units off the market," said William Rich, a vice president of Delta Associates and director of the firm's condominium practice.

Rich said builders in the Baltimore-Washington region have taken steps ranging from converting for-sale projects to rentals to offering buyer incentives. But lowering prices could prove risky, spooking buyers under contract at higher prices, he said..

Contract cancellations have begun to show up in the sales numbers in metropolitan Baltimore, which had a net gain of just 13 condo sales in the city and Baltimore, Harford, Howard and Anne Arundel counties in the first three months of the year, Delta said.

"Buyers can't get financing, or buyers think that prices are not going to appreciate, so they decide to forfeit their deposits and move on," Rich said.

Developers of the 414 Water Street condo project completed this spring in downtown Baltimore are in the midst of sorting out as many as 125 contract cancellations, said Andrew A. Viola, vice president and regional manager for developer Bush Construction Corp. As of April, 140 of the 314 units had settled, he said.

The project, where condos range from $219,900 to $502,400, had nearly sold out between the end of 2005 and December 2006, with contracts on all but about 30 units. But some investors backed out, while some other buyers no longer qualified for loans or canceled for other reasons, Viola said. Still, he said, he is hopeful that the building, priced in the mid-range for a downtown location, will be sold out by next spring.

Other projects are reporting slow sales but fewer problems with cancellations.

At 1209 North Charles, a new condo building with first-floor retail in Mount Vernon, 23 of the 88 units have sold. Half of the remaining units either have signed contracts or deposits, said Bob Rubenkonig, a spokesman for developer Struever Bros. Eccles & Rouse. He said only two buyers canceled contracts, because of construction delays, and showings are picking up.

"We've been stunned at the increase in traffic," Rubenkonig said.

Interest also has been strong in a downtown luxury living bus tour Saturday and Sunday, with about 600 people signed up, said Downtown Partnership of Baltimore, the tour organizer. Among the eight apartment, condo and townhouse projects is the Vue condominiums in Harbor East, where prices start at the $300,000 range, and where a three-bedroom condo is listed for $2.5 million.

The Ritz is hoping to spark interest with a grand opening tonight that will unveil the nearly completed $250 million project, which will include the Pearl spa and a gourmet restaurant and offer residents services such as housekeeping, laundry, car cleaning and in-room dining and amenities such as a fitness center, indoor pool, billiards room and private elevators to their homes. The ceremony will be followed by a party with fireworks and a performance by Grammy Award-winning saxophonist David Sanborn.

The project has 113 contracts on 192 condos, priced from the upper $800,000s to $5 million for a penthouse being customized for a buyer, said Gabe Pasquale, director of sales for RexCorp Realty LLC, which has joined Ritz developer Midtown Equities LLC to form RexMidtown LLC. He said settlements will start in July.

Ritz developers have maintained that the high-end condos and catered-to lifestyle they are selling are not as tied to the economy as other segments of the market. But that doesn't mean the project is immune.

"As a developer in today's marketplace, not to have concerns would be irresponsible," Pasquale said. "If we have certain situations that are challenges, we would work with individuals on a case by case" basis.

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