Saturday, November 16, 2019

End of an Era: New Construction Sales

Last week, the final developer owned condominium was sold at the Syndicate, which is the last building actively selling inventory built before the great recession in downtown.

In 2006, an article was written in the Post Dispatch about the number of loft projects scheduled to be completed in 2007 at that point.   I was reading it with my wifebosspartner at Flannery's pub, when we saw a loft developer walking down the opposite side of the street.   With abnormal courage, my lunch date left the table and walked across the street to confront said loft developer on the insanity of what we had just read.   

2006 was a great year for loft sales.   The MLS states that 230 lofts were sold, and there were about 100 more that were sold directly through the developers for a total of about 350 total closed units.   In 2007, there were approximately 2,200 slated for completion according to the article.   The loft movement was in full swing, but that was CRAZY!  

Overall, the real estate market started to level off somewhat in
April of 2006, the recession officially started in 2007, and the market overall was steady until the stock market crash of September 29, 2008.     At that point, new loft projects, including the Syndicate, really began to suffer.  Property values all over began to slide, and buyers, planning on selling the big home in the burbs, backed out due to diminishing home equity and 50% drops in their stock portfolios.  Luxury lofts were suddenly not fashionable as the market for real estate became foreclosure happy.   Many developers lost everything and folded.   Some, with no regard for their clients, converted the remander of their inventory to rental units (Ely Walker, Ventana, Bogen).   Many projects just never happened (Chemical Building, Skyhouse, Jewel Lofts, Switzer Lofts, etc.)   

The insanity stopped when developers stopped building condos in favor of apartments.  Banks got wise to the games (aka fraud) taking place on condominium construction loans across the country and started protecting themselves.  

I've always admired the Syndicate developers, both for the product they delivered and how they always kept focus on maintaining their buildings value with their previous buyer's in mind.   Condos at the Syndicate (floors 9-16) remained on the market the entire time.   Despite having 53 out of 102 units remaining, only a portion were rented (23).  Prices had to be lowered, but were never 'fire sale' pricing.  The building virtually sold out of its regular inventory in December 2013 (except 2 penthouse units), and began converting the condos in the rental pool the following year.  

The units that had been converted to rental were two by two, taken out of rental circulation, 'cleaned up', repaired, painted and sold as the market called for them, until last week on Friday, when the 102nd unit was finally sold.   In addition to the Syndicate, the same process just took place at the substantially smaller Packard Lofts in Downtown West. 

This has a major personal twist, since we were
Alive Magazine Ad for the Syndicate --2011
hired in September 2010 as the last of the salaried sales team left for greener pastures.   Having represented 10 buyers in the building previously, we were given another amazing opportunity.   Representing Sherman and Associates for 9 years, caring for and selling 44!   While the building was always more than half full, starting out in a building with 20 listings was a lot to wrap our minds around.   We had represented other builders in the same way, selling out Moon Brothers Carriage Lofts and Westgate Lofts, but those buildings, the process was much smaller and much faster.  

In this case, the era that is ending, though personal, mainly focuses on the last of the "for sale" units described in that article in 2006 finally being sold.  It was unfortunate, after that article, and the ensuing financial crisis, caused a panic about downtown that was never accurate.   I'd hear people talk about the glut of unsold new construction in downtown St. Louis.   There obviously was a fair amount.   It was never as many as the public perception.  The most dramatic sale took place at the Dorsa building when Pyramid shut down, then Premier Bank, the note holder closed.   The FDIC took over and sold the building out quickly and with huge discounts.  Otherwise the number of unsold units was manageable.  

What's been good in regards to downtown, is that:   

  1. Downtown continues to progress with major improvements
  2. Whenever a building becomes 100% owner occupied, values improve.
  3. The downtown market has reached equilibrium, and sanity returned a long time ago.

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