DEL.ICIO.USHigh-profile condos add to market glut
The Atlanta Journal-Constitution
Friday, April 03, 2009
Two high-profile condo buildings are nearing completion in a market deflated by plunging sales and prices, and a glut of inventory.
The Brookwood on Peachtree Road in south Buckhead is scheduled to open June 1, and the Atlantic at Atlantic Station in late August.
BRANT SANDERLIN / bsanderlin@ajc.com
Jim Borders, CEO of Novare, looks out at Atlantic Station from a show model of his company’s newest high rise project in Atlantic Station, The Atlantic.
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The developers are offering deep discounts, trading profits for sales.
“None of the highrises that are delivering right now are able to deliver where the developer is able to make a profit,” said Jim Borders, CEO of the Novare Group, Atlanta’s leading condo developer.
Novare and partner AIG Global Real Estate plan to offer price cuts of 25 percent to 30 percent at the Atlantic, a 47-story tower with 400 units. The $200 million project is Novare’s biggest building to date.
“The developer loses and the consumer wins. You just accept that,” Borders said. “You don’t deliver it and mothball for a couple of years. You build it and you start moving people in.” Contracts have been written on 27 percent of the Atlantic units.
Urban Realty Partners and Regent Partners, developers of the 18-story Brookwood, started the Founders Club, which offers price reductions as high as 40 percent. The discounts apply to 50 units on the first 12 floors, and shrink as sales mount.
Brookwood’s sales center opened March 19. Agents have met with 10 serious prospects but so far no one has put money down.
“It is difficult to tell right now whether we’ll make a profit,” said Mark Riley, managing partner at Urban Realty Partners. “At Founders Club pricing we will not. Those people are going to get an exceptional deal.” Riley said he hopes higher future pricing will more than offset today’s discounts.
Exceeding the 50 percent pre-sale mark is key to both projects because then mortgages can be sold in the secondary market. Borrowers will have an easier time obtaining loans if Fannie Mae, for example, is buying them from the lenders.
The Atlantic and the Brookwood have the same architect, Smallwood, Reynolds, Stewart, Stewart; the same builder, R. J. Griffin & Co.; and the same lender, Corus Bank. And their target audiences are similar: affluent singles, empty nesters and young couples.
In other ways, though, the projects are different. The Atlantic is part of a recently built massive redevelopment with plenty of commercial space. The smaller Brookwood sits in a mainly residential neighborhood that dates back to the 1920s.
Corus, a national condo lender based in Chicago, said in regulatory filings last month that it might fail. Since 2004, Corus has loaned $910 million to 16 condo projects in Atlanta, according to the local research firm Haddow & Co. The Atlantic borrowed $164.5 million and the Brookwood $109.5 million.
The developers said that because their projects are nearly finished, they’re not concerned about losing lines of credit with Corus. “We’re almost there,” said Sheldon Taylor, Urban Realty Partners’ CFO.
Novare’s projects include Viewpoint in Midtown, Twelve at Atlantic Station and Centennial Park, and the Ritz-Carlton Residences in Buckhead. Urban Realty Partners developed the Reynolds downtown and Oakland Park near Grant Park, and is a partner in the Capital Gateway project near the state Capitol.
Because big condo projects take years to complete, they’re vulnerable to market swings. “There’s always a possibility when you build one of these you’re going to deliver in a different market,” Borders said. “You can’t call them all.”
When the unexpected happens, he said, success has to be redefined as a building full of satisfied buyers rather than hefty profits.
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