Luxury developers cut penthouse prices

By Michelle E. Shaw

The Atlanta Journal-Constitution

For a couple of million dollars you can get a spacious luxury condo with a trendy address, a concierge who knows you by name and panoramic views of greater Atlanta.

You might also find something unexpected: isolation.

In what amounts to a bubble inside Atlanta’s residential real estate bubble, scores of condos priced at $1 million and above are about to hit the market or are already there.

They are for sale at a time when the economy and battered local housing market have forced potential buyers to pull back from such high-end move-ups, leaving many units empty. Now some developers are cutting prices to try to move the expensive real estate.

“It got crazy,” Paul Freeman, developer of the St. Regis in Buckhead, said of condo prices. “It needed to be knocked down. We haven’t lowered our prices yet, but we are working with everybody to see what we can do. We can only sell for what the market will bear.”

Atlanta has long had pricey penthouse units for sale, often perched atop projects with more conventional six-figure units like Luxe, Twelve, Terminus and the Atlantic.

The mid-decade real estate boom, however, spawned new developments solely aimed at the million-dollar crowd.

Sales at the St. Regis, like many new condo projects, haven’t been swift. Though it traditionally takes a year or two, if not longer, to sell all the units in a condo project, rumors of the St. Regis being “sold out” swirled through the development community before the building was complete.

The smallest unit, approximately 3,000 square feet, was priced just under $3 million. The 50-unit building was started six years ago, with the condos built atop the St. Regis hotel, which opened earlier this year.

Rumors of sold-out high-end projects led some condo developers to forge ahead with their own, said Steve Palm, president of Smart Numbers, a Marietta-based real estate data company.

“There is no reason there should be this many condos at that price on the market right now,” he said. “But there were developers who thought buyers were out there for these things, and there weren’t. And they’re really not there now.”

Between 2004 and 2007, about two dozen condos in the seven-figure price range were sold, Palm said. But as more were built, those numbers grew and created a market of its own. Since 2007, nearly 80 condos have sold for more than $1 million. That figure may give builders the impression that sales are picking up, but Palm doesn’t read the data that way.

“The market now has more condos for sale at this price than have ever been sold at this price,” he said. “That just doesn’t make any sense in this housing market.”

Freeman said there have been about a dozen closed sales at the St. Regis, but he wouldn’t give a specific number, citing pending contracts that might be days or weeks from closing. Though the building’s structure is complete, most units’ interiors are still under construction.

Plans for many of these pricey condos were put into motion before the economy soured, making it too late to stop them when the housing market started to go south, developers say.

Atlanta-based Post Properties started The Ritz-Carlton Residences in Buckhead in 2006.

“The world has certainly changed,” said Jeffrey W. Harris, an executive vice president at Post. “Our pricing now is a reflection of the economy.”

Post recently cut its asking price by about $100 a square foot, the company said. Condos now start in the high $400s and go up to $3 million. Fewer than 45 of the planned 129 homes are currently priced at $1 million or more, Harris said. Before the adjustment, that number was close to 100.

The Ritz-Carlton Residences, still under construction, expects to begin closing units in April, Harris said. Built primarily for “empty nesters and frequent travelers,” the homes might take longer to sell than originally estimated, he acknowledged.

“Our demographic is still out there and is very predictable,” he said. “They’ve just found themselves in situations they didn’t expect as well, such as being frozen in place because they can’t sell the million-dollar house they are in now.”

A few developers are sticking to their original pricing. Regent Partners, for instance, is developer of Sovereign in Buckhead, an 82-unit building where prices start at $1 million. The homes are built atop commercial space that is bringing in enough money that Regent doesn’t feel pressure to discount the condos, said company spokeswoman Kristi Torgler.

Geoff Anderson, developer of The Aberdeen in Vinings, isn’t changing his plan either, but for different reasons. Built for the 55 and older crowd, the Cobb County high-rise is designed for those who will spend more time in the home than not. Each unit offers unfettered views of the Atlanta skyline.

“The reason our pricing hasn’t changed is because our value proposition hasn’t changed,” said Anderson, president of Taz Anderson Realty Co. “We’re offering people something they can’t get anywhere else: We’re a luxury property that’s not in Buckhead, that’s not in Fulton County, and where seniors get a significant break on property tax once they turn 62. There’s nothing else out there like us.”

Palm thinks such sales bravado is misplaced.

“People just can’t get these jumbo loans like they used to,” he said. “And if they can sell their current house, they’re not getting what they expected, so they’re not paying as much for the new house.”

Anderson and Harris both said there is great interest in their properties, but they declined to be specific about pending contracts. No closing documents are available because both buildings are still under construction.

“No one knows how this recovery is going to shake out,” said Harris of The Ritz-Carlton Residences. “But what remains true is this is a handsome building in a great location. None of that has changed.”

Realtors who market these homes see a rosier picture than many in the industry.

Mike Bugg, senior vice president of SkyRise Group, a division of Atlanta Fine Homes Sotheby’s International Realty, said he thinks international travelers and those who are looking for a second home in the city will purchase homes of this type.

“The interest is picking up,” Bugg said. “And that is the first step.”