March 20, 2018

Prices Can Easily Be Reduced

A report from Bisnow on California. “Indicative of the city’s booming landscape, the Los Angeles Planning Commission is considering two high-rise mixed-use developments in downtown LA. There are 25 residential developments under construction and more than 75 mixed-use and/or residential projects are being proposed. ‘The Downtown LA renaissance reached new heights in 2017, showing continued strength across all sectors,’ a recent study by the Downtown Center Business Improvement District. ‘Residential development led the way with a record-breaking 2,831 units coming to market this year at 11 projects. With almost 10,000 more units under construction and almost 30,000 units proposed, more records are likely to fall in the coming years.’”

“How much is too much? How dense can downtown LA get? Kate Bartolo & Associates principal Kate Bartolo, who is assisting with both projects, does not think downtown is being overbuilt. ‘I don’t view it as a market capable of oversaturation,’ she said.”

From the Union Tribune in California. “Q: Is the San Diego County market saturated with luxury new apartment projects? Norm Miller, University of San Diego - NO: Since when have we ever been concerned about excessive supply of any residential product?”

“Austin Neudecker, Rev - NO: Saturation of the luxury apartment market matters little because there is a shortage of housing in general (I acknowledge that the problem is primarily affordable housing) and prices can easily be reduced. Developers may not like it, but they must simply lower prices to sell the units.”

“Lynn Reaser, Point Loma Nazarene University - YES: San Diego appears to be facing an overbuilding of luxury apartments similar to that along much of the West Coast. The more than 2,000 new apartments opening this year will be more than double the number added in each of the prior two years. Downtown luxury properties could see a softening in rents to attract high-income millennials.”

The Dallas Morning News in Texas. “With the future of Frisco’s $2 billion Wade Park up in the air, everyone wants to know: What happens now? Not with just the mixed-use project, but with that huge hole in the ground they’ve dug along Dallas North Tollway. Excavation stopped almost a year ago on the site of what was supposed to be a row of high-rise buildings along the east side of the tollway. With the developer defaulting on more than $130 million in debts, lenders for the 175-acre project are threatening to foreclose. If that happens, what will be done with that football field-sized hole?”

“With Wade Park’s unpaid debts, but you can bet that big hole is going to be there for a while. And it won’t be the first time. When the 1980s real estate boom went bust, the Dallas area was left with a lot of holes to fill.”

From Michigan Live. “Packard Square has rebranded as the much-delayed multi-use development in Ann Arbor approaches competition. Renamed The George Ann Arbor, the apartment and retail complex is nearing completion with many of the 1 to 3-bedroom units now being marketed online, with luxury apartments with prices ranging from around $1,600 to $3,500. The project at 2052 Packard St., first proposed to city officials in January 2011, did not get underway until 2014 on Ann Arbor’s south side.”

“Problems quickly began piling up at the project site about two miles from downtown Ann Arbor, as electrical workers went on strike and the general contractor was fired around the same time the developer first said Packard Square would be complete. Ann Arbor-based real estate management company McKinley, Inc. was placed in control of the property in October 2016 through a court-ordered receivership, prompting further court dates as the original developer Craig Schubiner fought for control of the project and contractors sought payment for services rendered.”

“Tours of the completed apartments can be scheduled through The George’s website. It was unclear whether some or all of the apartment units were complete, and if McKinley will continue to market and lease the apartments as part of its court-ordered receivership.”

From Bisnow on Florida. “Miami’s luxury condo market has been a much larger target of foreign buyers for decades, but Ron Shuffield, CEO of Miami-based EWM Realty International said that has recently begun to decline. Three years ago, he said 42% of $1M-plus Miami condo sales went to international buyers, but this year he said that was down to 32%. He said that drop has pulled down overall demand in the market, and prices have begun to dip sharply.”

“Shuffield attributes the drop in Miami’s international demand in part to federal regulations put in place by the Financial Crimes Enforcement Network that force buyers paying more than $1M in cash, a common practice in Miami, to identify the owner of the LLC making the deal. ‘That makes people who are even legitimate buyers a little bit anxious because they may not want their country to know that they’ve moved $5M out of the country to buy a condo,’ Shuffield said. ‘That has hurt our business in the international sector.’”

From The Real Deal on New York. “Manhattan’s luxury market recorded 26 contracts at $4 million and above last week, according to Olshan Realty’s weekly market report. The six-story townhouse at 46 East 65th Street went into contract with an asking price of $14 million, according to Olshan. That’s roughly 38 percent below the $22.5 million the property had been asking when it first went on the market in February 2016.”

“Extell Development’s Carlton House condop conversion took the No. 2 spot, with apartment 6B going into contract with an asking price of $11.5 million, down from $14 million when it hit the market in April 2013. The week’s luxury contract asking-price volume totaled $184.28 million, with a median asking price of $6.32 million, according to Olshan. Luxury homes spent an average of 409 days on the market with an average discount of 14 percent from the original asking price to the final asking price.”