The condominium market is still in the dumps, right?
But if you look at the luxury Evo condo tower in downtown Los Angeles, you might think it’s a bit more nuanced than that.
Despite the tough market, 193 of the South Park building’s 311 units were sold in 2009, making it one of the fastest selling condo buildings in the country. What’s more, 15 more units were sold in January and February.
Of course, prices were chopped by 30 percent from precrash highs. But developer South Group said it has raised prices by as much as 20 percent from lows hit last year, and it is hopeful it can sell the remaining 81 units before the year is out.
While no one is ready to call it a seller’s market, news of the Evo sales is encouraging in the midlevel and high-end condo market that has been decimated over the last few years.
“We aren’t done until we are done, but we are definitely proud of the fact that we’ve sold as many as we did,” said Rhonda Slavik, sales and marketing director for South Group, a partnership based in downtown Los Angeles. “It was scary. People had worked on the project for so long; we knew we had a great project to sell and this was clearly out of anybody’s control.”
The evidence is not just anecdotal that there has been a slight pickup in the market.
Condo sales rose last year as developers slashed prices. The trend continued in February, when 1,393 condos were sold in Los Angeles County, nearly 50 percent more than in February 2009, according to HomeData, a data supplier based in Hicksville, N.Y. The median price of $295,000 is about where it was a year earlier – well off the $460,000 high hit in mid-2007.
At the same time, there has been a documented reduction in inventory as condominium projects have been taken off the market and converted into apartment buildings. And, of course, developers have stayed on the sidelines, with little to no construction expected for the next few years.
As a result, the California Association of Realtors reports that in January there was a 5.4-month supply of condos on the county market at the current sales rate. That compares favorably with a 7.8-month supply one year earlier. A figure of six months generally indicates a balanced market.
“A confluence of factors – namely supply constraints because of very little construction and properties put into the rental pool – has created a bit more pricing pressure,” said Paul Habibi, a lecturer at UCLA’s Ziman Center for Real Estate who has developed several local apartment and condo projects.
Most luxurious
Slavik said the current market is a welcome change from the dark days of late 2008 and early 2009, when the economy teetered on the brink and the project foundered. The 24-story building hit the market in September 2008 – the same weekend Lehman Bros. collapsed, triggering the financial meltdown.
Evo is the tallest and most luxurious of three adjacent projects developed by South Group, a joint venture of two Portland, Ore., developers, Williams & Dame Development Inc. and Gerding/Edlen Development Co.
The others are Elleven, an 11-story project that sold out in 2006, and the 19-story Luma, which sold out in March 2008.
Evo, at 1155 S. Grand Ave., was planned to be a step above its two sisters. It features a 24th-floor open-air lounge, a sixth-floor pool deck and amenities typically reserved for Wilshire Corridor condo properties, such as concierge and bellman services. Units include terraces, oak floors, exposed concrete walls and stainless steel European appliances.
The original plan called for Evo to be nearly sold-out by the September 2008 opening. The worst case envisioned was that perhaps 20 percent of buyers wouldn’t get approved for loans and those units would be sold later. But the reality was far worse. At one point, about 200 units had been presold, but as the economy cratered, people backed away from the deals, despite deposits and executed contracts. Ultimately, no more than a dozen units were sold to original presale buyers.
But unlike other developers – some of which lost projects to their lenders – South Group decided to drop prices in February 2009 so it could establish sales momentum.
The cuts were about 30 percent across the board, consistent with other projects that reduced prices. For example, one unit originally priced at $400,000 was cut to $299,000.
“We needed to get fast absorption, we needed some velocity,” she said. “We released smaller units so that price per square foot would be attractive.”
In the spring, about 20 units were sold each month. By midyear, South Group had strung together several impressive sales months, with two units each selling for more than $3 million. By the end of 2009, the developer was able to begin raising prices. This February alone, three one-bedroom units sold for more than $700,000.
“We are able to hold our ground a bit more (on pricing),” said Slavik.
But all the price cuts have come at a cost. Slavik said she doesn’t believe South Group partners Williams & Dame and Gerding/Edlen will make a profit on the development. However, Westport Capital Partners LLC of Westport, Conn. – an equity investor in the project – may turn one.
‘Trickle-up effect’
Evo wasn’t the only project in the midlevel to high end to sell well last year after cutting prices.
Market Lofts, a 267-unit building atop a Ralphs supermarket in downtown, and a 77-unit, midrise loft building at downtown’s Concerto development sold out their inventory in 2009 at reduced prices.
According to Habibi, success with buildings such as Evo could have a trickle-up effect to the new ultraluxury condo buildings in Los Angeles, such as the Century and the Carlyle in West L.A. Condos at those building are priced well-above $3 million, with some units at more than $10 million.
“You basically have a shift in the buyer pool where more people can get into the market and that has a linkage in all ends of the market,” said Habibi.
The top end of the luxury market could still use a lift.
For example, at the W Hollywood Hotel & Residences in Hollywood, presales were suspended last year after only about 40 out of 143 planned units were presold. Some have price tags that top $5 million.
The hotel opened with a huge fete two months ago and later this month the condos will be complete. At that point, sales will start up again at prices that have been slashed about 30 percent from the original numbers.
Russell Filice, a broker with Sotheby’s International Realty Inc. handling sales there, said one low-end unit that was once marketed at about $800,000 is now priced at $530,000. But he believes pricing has hit bottom.
“I think people waiting for phenomenal buys who didn’t buy in 2009 probably missed those deals,” he said.
