Condos delayed

Four Seasons project holds off on building residences as consumer demand wanes with the struggling economy

January 13, 2009|By Lorraine Mirabella and Edward Gunts | Lorraine Mirabella and Edward Gunts and,lorraine.mirabella@baltsun.com and ed.gunts@baltsun.com

Developers of the luxury Four Seasons Hotel and Residences under construction on Baltimore's waterfront said they will delay building the residential portion of the tower - half the 44-story high-rise - until at least next year due to the slumping housing market.

Plans remain on track for Four Seasons to open the hotel in the Harbor East neighborhood by late 2010, the developer and a hotel spokeswoman said. The hotel was originally expected to include condominiums when it opened next year. The project is part of a $600 million plan that also includes a 24-story office tower, more than three quarters finished, which will house Legg Mason's world headquarters.

But with the national economy deteriorating, the developers have decided to build the 485-foot Four Seasons in two phases, said Michael S. Beatty, president of H&S Properties Development Corp., the developer of Harbor East and majority owner of the Legg Mason/Four Seasons project. At the originally planned height, it would have been the city's tallest building. H&S is building the project with Struever Bros. Eccles & Rouse Inc.

Revised plans call for building 21 stories, which will include the 256-room Four Seasons hotel on levels one to 18 and three additional floors. One of the top three will be temporarily developed as a $4.5 million "preview gallery" for the residences, with a sales office and model homes designed to show off harbor views. At that point, the developers intend to gauge the housing market and then determine the number of condominiums and pricing.

The current slowdown has made it harder to secure mortgages on high-end properties and has eroded buyer confidence.

But "I'm very bullish," about the longer-term prospects, Beatty said. "If there's ever a place to build condos, that's the place to do it. My intention is that's what will be built."

Developers say they're convinced the demand for high-end housing will rebound and the tower will be built as originally envisioned. Harbor East, which now offers condos, shops, offices, hotels, restaurants and a cinema complex, will be well-positioned, they believe, to attract upscale buyers.

The shift in construction strategy for the Four Seasons comes after a tumultuous few months in the nation's housing and financial markets and as new condominium development in the city has nearly ground to a halt. In three of four quarters of 2008, Baltimore had more condo buyers cancel contracts than go through with settlement, according to statistics from Delta Associates, which tracks the market.

The Ritz Carlton, a competing 192-unit luxury condo project that opened last year with 113 contracts, has had just 14 buyers go to settlement, state property records show. Prices ranged from about $900,000 to $2.7 million.

"It seems to make good business sense to adopt a wait-and-see attitude on condo development," said J. Kirby Fowler, president of the Downtown Partnership of Baltimore.

But long-term, he believes demand will pick up for both apartments, which are currently in high demand, and condos as baby boomers retire and young adults seek an urban lifestyle. Baltimore should fare well because it does not have a glut of condominiums, he said.

"We don't see any reason to think condos will never thrive in the future of downtown," Fowler said.

The big question is one of timing, said John McIlwain, a senior fellow for housing at Washington-based Urban Land Institute. When or if developers build condos will depend partly on when they can sell the homes for more than the cost of building them.

"Nobody frankly knows when that will be," McIlwain said. "The question is when will banks start making mortgage loans for upper-end properties and when interest rates [on such loans] will come down to make them affordable."

The developer's decision to hold off on the condominium portion means a significant change to the planned Harbor East skyline. The developers had sought a change in the city's urban renewal plan to permit a 44-story building to rise on the water's edge, and the tower's top was tapered to accentuate its height.

When construction began more than a year ago, the Four Seasons was expected to be the city's tallest building. No other building downtown rises more than 40 stories, the approximate height of the Legg Mason tower at Charles and Pratt streets.

Although the development team originally intended to build the hotel and residences all at once, Beatty said, it always had the ability to construct them in two phases. City officials so far have issued permits only for the 18-story hotel, the adjacent Legg Mason tower and a base structure, including five levels of underground parking. Construction of the hotel's frame was up to the 17th floor as of last week.

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