Condo craze

When Wendy Jones purchased a condo in The Ridge, an apartment conversion project in Browne’s Addition, she liked the views, location and price.

But before she signed on for a mortgage — and committed nearly $100,000 to adding high-end upgrades that made the unit into a custom home — Jones thought about resale value.

The complex has 136 condos, some which sold “as is” for $160,000 and others that topped out at $255,000. At 850- to 1,400-square feet in size, the units are larger than many converted apartments, with views of Spokane River and Latah Creek. Plus, they’re less than a mile from downtown, where comparably-sized view condos cost substantially more.

“I think it’s a great investment. Browne’s Addition has been transforming for awhile and I think it’s really coming along,” said the 49-year-old.

Condo sales have hit a high in the past few years. According to Multiple Listing Service data assembled for the city of Spokane, nearly 1,000 condos have been sold in the past three years, with the average sale price increasing from $98,000 in 2004 to $145,500 in 2006.

Earlier this week, the MLS posted information about 181 condos for sale, with 42 of those units priced above $300,000.

Fred Houck, branch manager of commercial loans for the north Spokane Bank of Whitman, said a few developers have too high of an inventory of unsold condos, so the bank is being more selective about giving additional project loans.

Two years ago, any reputable developer could get a loan to build condos; today it’s harder, Houck said.

“Obviously with sales slowing down we’re going to be a lot more cautious about when these projects start and where they’re located,” Houck said. “It’s not as much about the strength of the developer as the strength of the marketplace.”

Some developers say that rising construction costs is putting a wrench in their plans to build condos. Sarah Leverett-Main, who is part of a group of partners that includes developer Ron Wells, said their project at the former Joel Inc. building, at 165 S. Post St., may be developed as shells because of rising construction costs.

The former Executive Court portion of the Ridpath Hotel, which was slated to become 56 condos, recently went up for sale for $6.3 million.

Grant Person, vice president of Tomlinson Black and a partner in the project, said the group, that includes developer Dave Black, decided the project was less feasible after overall costs for the development rose by more than 50 percent in 18 months.

“If the costs come down then we may very well proceed. In the meantime we’re going to market it,” Person said.

Rob Brewster wants to build the 32-story Vox Tower, which would include apartments and luxury condominiums, in downtown Spokane, but said he’s frustrated by special taxes that the city wants for the project — including a $200,000 traffic study. While he’s negotiated over some expenses, Brewster said he’s battled to get an accurate appraisal because there aren’t any similar complexes in the area. Although he’s confident he could fund the project, an accurate appraisal is key to determining financing, Brewster said.

“We have to start seeing some projects online because they set the market,” Brewster said.

Despite those setbacks, Houck said the local condominium market is still strong, particularly in the downtown core.

RenCorp is involved in its third condo project. Chris Batten, a partner in the company, believes that Spokane’s condo market is still in its infancy with plenty of room to grow.

“We think this market is pretty deep at that $200,000 to $250,000 price point,” Batten said.

Units in the company’s first condo development, Jefferson Street Auto Lofts, were priced from $154,000 to $250,000 and quickly sold out. The company has sold nine of 14 condos in a project called 1016 Rail Side Center, although Batten said the company hasn’t actively marketed them. RenCorp is general contractor, broker and architect on the Rail Side project.

RenCorp has also started on The Edge, a project that will transform the four-story, 30,000-square-foot Western Soap Building in the University District into 19 condos and two commercial spaces. The project is two-thirds complete and Batten expects units to be finished by August. Condos in both the Rail Side Center and The Edge start below $200,000.

Susie Luby, a Realtor with John L. Scott Real Estate, said when it comes to marketability, there’s plenty of room for projects to succeed, provided they have the right location and price.

“There is a real need for that middle-ground condominium. That’s why The Ridge has been so successful,” Luby said.

Within two years, buyers snatched up 111 units in The Ridge, a former apartment complex with views of the Spokane River and Latah Creek. There are now 25 condos available in the project, developed by HOF Portage Owners LLC, with Richard Wilson as a managing partner.

“I think a lot of people were really surprised,” Luby said of the success.

A number of buyers in The Ridge believe the location is ripe for appreciation, she said. Because they paid less than the cost of many other downtown condos, some owners felt they could afford to spend tens of thousands of dollars adding high-end finishes such as granite tile, eating bars, jetted tubs, French doors and other amenities.

“They are just putting their own signature on them,” Luby said.

Because none of the units have resold she can’t speculate on the project’s potential appreciation. However, she had a firsthand example of appreciation at two other complexes. A second-floor unit at a project developed at 700 West 7th Avenue sold for $159,900 two years ago and now has a pending offer for $230,000, she said.

Five years ago, Luby developed the Blue Chip Lofts — a project that transformed a former warehouse on Railroad Alley into condos that were priced from $120,000 to $200,000. One particular 700-square-foot unit sold for $135,000 in 2003. The owner put in about $40,000 in upgrades, Luby said, and re-sold the same condo for $250,000 two years later — a 43 percent increase.

During that same two-year timeframe the average sales price for a single-family home in Spokane County increased by 26.9 percent, although that figure doesn’t reflect increases specific to given properties.

“I think to some level that mid-range (price) is at least meeting if not exceeding average home appreciation,” Luby said.

When RenCorp built Jefferson Street Auto Lofts, two years ago, the company looked at the Blue Chip Lofts as a guide to help price the project, Batten explained. They set prices in advance of construction and the eight condos sold out two hours after entering the market.

One owner re-sold a unit six months later for $60,000 more, Batten said, adding that the project was likely priced too low but appreciation may have also played a factor.

With construction costs rapidly rising, RenCorp now prices its condos as they’re being built, instead of selling a pre-priced project beforehand.

“It gives us the opportunity to test the water and see what the market is and determine construction costs,” he said.

Developer Ron Wells offered this example of condo appreciation: In 2002 a condo in Riverside Court Townhouses, a project he developed on the 1200 block of West Riverside Avenue, sold for $395,000. The same unit recently sold for $639,000, he said.

Condos at a complex developed by Bob Cooke showed marked appreciation, although the owners had to develop their own units, which were sold as shells. The building was built from the ground up as condos. Joel Crosby, a Tomlinson Black Realtor who specializes in condos, said that a unit inside Cooke’s project, at 2226 W. Riverside Ave, sold for $300,000 in 2003 and recently sold again for $600,000.

Rob Higgins, executive director of the Spokane Association of Realtors, assembled some statistics about how condo sales break down throughout Spokane County and was surprised by some results. Downtown, which was nearly non-existent for condo sales in 2000, made up 27 percent of the sales for 2006. But the north side was even hotter with 97 condos sold there, as opposed to 96 in downtown Spokane last year.

“If you look at those numbers it’s pretty much spread out among the Spokane metropolitan area,” Higgins said.

While some downtown projects were announced more than a year ago, but have yet to break ground, others are doing well. Buyers have purchased all but seven of 28 units in Morgan Lofts, located at 315 W. Riverside Ave. Condos cost from $239,000 to $555,000.

Although people might think of Baby Boomers as the major condo market, the Morgan Lofts have attracted owners in their 20s, and ranging in age up to 70, said Sarah Leverett-Main, who handles marketing and sales for Morgan Lofts.

Of those who purchased condos, 59 percent are men, she said. More than 60 percent of the building’s residents are from Spokane and 38 percent are married, said Leverett-Main.

Greg Hubbard, a 38-year-old loan officer with Washington Mutual, was looking to simplify his life and wanted to walk to work and have easy access to nearby Riverfront Park. He chose Morgan Lofts and is confident that his condo is a good investment. Plus, he was attracted to the 10-year-tax abatement.

The abatement takes costs of renovating historic buildings, or constructing multi-family housing, into account and lowers taxable value for the property for a given period of time, a perk that Leverett-Main said appeals to buyers.

“They are kind of the pioneers” she said, adding that the condo buyers are moving downtown in the absence of a good-sized grocery store.

Crosbyof Tomlinson Black estimates there are currently 24 conversion projects, although some are creating condos from warehouses and other buildings, not just former apartment complexes.

“Most condos that I see on the market today are conversions,” he said.Apartment conversions are popular, Crosby explained, because the projects are cheaper to develop than complexes built from scratch. When developers purchase apartment buildings, they typically pay about $50,000 a unit, he explained, and can spend $30,000 in upgrades before selling the units for $150,000.

Crosby, who sold 87 units in The Ridge, said that project lent itself well to a conversion because floor plans were bigger than typical apartments and the building featured unique views.

He and fellow Realtor Justin Hocking put what they learned showing condos to work when helping Rob Daugherty and City Councilman Al French, who is also an architect, develop plans for Parc two20 Tower, a project planned near Holy Family Hospital with 32 units starting at $399,000.

People looking at other projects routinely expressed a desire for a deck, secure parking for two cars, easy parking for visiting friends, easy access to shops and restaurants, storage space and other amenities, Crosby said. So far, he said, they have potential buyers for six units.

“We’re actually launching a major marketing campaign to the medical community in that area.”