Anybody Home?

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Anybody Home?

By SHANNON BEHNKEN sbehnken@tampatrib.com

Published: Jan 27, 2006

TAMPA - Lance Ponton Jr. was a condo developer's dream.

In September 2004, he put down 10 percent deposits on five Harbour Island condominiums before they were even built. Ponton, 27, hoped to sell them for a big profit as soon as the building was finished and his deals closed.

"But when it was done, we found that everyone else in the building was doing the same thing," Ponton said.

He ended up having to make thousands of dollars in mortgage payments for 10 months on all five condos in the ParkCrest Harbour Island. Eventually, he sold four units, pocketing $50,000 to $100,000 on each. With one more unit left to sell, Ponton hopes he can slip out of condo investing before he loses money.

"The market was really good, but it has changed, and it's time to move on to the next hot thing," Ponton said.

As Ponton has learned, rising mortgage interest rates, a swelling inventory of new condos and growing skepticism among buyers about prospects for fast profits have triggered a slowdown in the condo resale market downtown.

Indeed, real estate investors such as Ponton are finding that the days of selling units, or "flipping" contracts on pre-construction condos within hours or days, are over, especially downtown. It's taking months, or longer, to find buyers, and some sellers are having to lower their asking prices, according to sales data and real estate agents who specialize in new condo sales.

That could spell trouble not only for condo owners hoping to turn over their units quickly, but also for developers. More than 30 condo projects are in development in and around the city. Most builders are still getting permits, trying to attract buyers and lining up financing, rather than breaking ground.

Many condo developers have relied heavily on investors to raise enough start-up money to persuade lenders to finance their projects. With short-term investors shifting from urban condos, developers now must market more to people who want to live in their buildings or hold units as long-term investments. It's a tougher sell.

Compounding the problem are completed condo towers that sit half-empty, despite strong sales.

Some condo buildings that sold out during construction have few full-time residents. The reason: Many units were purchased by investors looking to resell or by people buying a second home, property records and interviews with owners show.

The dearth of full-time residents has made it difficult to attract shops and other tenants in the buildings. Some potential buyers are turned off by buildings that aren't lively, said Jason O'Neil, of Palermo Real Estate Professionals in Tampa.

"It's more difficult to attract end users right now," O'Neil said, referring to buyers who plan to live in the units full time. "It's not impossible, though, and I think it will level off as investors sell."

Take the 18-story Parkside of One Bayshore, across from Publix Supermarket at Platt Street and Bayshore Boulevard. Its 104 units sold out during construction, but almost nine months after it opened, fewer than 20 percent of the owners have filed for a Florida homestead exemption, a property tax exemption granted on primary residences.

Companies or trustees own a dozen units, property records show. The lack of primary residents and corporate ownership indicate that many owners don't live in the building, said Warren Weathers, chief deputy property appraiser at the Hillsborough County Property Appraiser's Office.

"If you have under 50 percent homestead in a building, it's usually heavily investor-owned," Weathers said. "Only time will tell if those units are sold to end users. In the meantime, we'll probably see a lot of renters."

Retail Not Rushing In

The lack of primary residents appears to be affecting marketing retail space in the Parskide building. None of the 11,500 square feet of retail space has been leased.

Byron Moger, of the commercial real estate firm Cushman & Wakefield, is confident that retail space in the condo high-rises will be leased. "It's just a matter of getting enough people downtown to support it."

Still, the lack of retail is an annoyance to high-rise residents such as Maryanne Piplica, who came downtown for an urban lifestyle. She and her husband bought a corner unit on the 18th floor of Parkside of One Bayshore.

Piplica, who grew up in New York, said she and her husband traded in suburban life in Palm Harbor hoping to find a lively lifestyle. With her children grown, she looks forward to walking to everything she needs.

"I was hoping for a Starbucks, a bistro-type restaurant, a small gourmet shop," she said of the empty retail space in her building. "I want to see museums and galleries and shops downtown ... things to be open after 5 p.m."

Rising mortgage rates and other factors have played a role in cooling the real estate market overall. Pair higher interest rates with escalating home prices, and some parts of Florida are at risk of an oversaturated condo market, said Bill Hudnut, senior resident fellow at the Urban Land Institute in Washington. He thinks Tampa, thanks to expected population and job growth, should fare better than other markets.

O'Neil, the Realtor who specializes in condo sales, said investors will be able to resell their units, but it will take longer and profits will be lower.

"People get conditioned to thinking things are going to sell in days, and that's just not happening anymore," he said. "Prices, too, will level out, but they will still be good."

A look at three recent condo developments - ParkCrest Harbour Island, Parkside of One Bayshore and Victory Lofts - highlights the strong investor activity in Tampa. Each has had high resales since opening, with a number of units for sale now.

Some investors in these and other buildings made a lot of money, but selling isn't as easy as it used to be. One condo in the Parkside tower has been on the market for 275 days. Another at ParkCrest: 260 days.

No one collects data on the average days condominiums are on the market, but real estate agents say that there is a slowdown and that they are no longer are seeing condo contracts flipped before final settlement.

Units that used to sell within days are taking months, said Kristen Myer, an agent with Smith & Associates, which is working with developers to sell units in several condo projects.

"Investors are dropping out, and that changes the way we have to market condos," Myer said.

Just six months ago, developers didn't have to advertise because investors tracked down new projects and were more than willing to buy, she said. Now, developers have to target potential full-time residents and compete with many other developers for buyers, Myer said.

More Plans To Build

Despite signs the downtown condo market is slowing, developers continue to come forward with proposals.

Crescent Resources plans to break ground in March on a 26-story building with 130 units next door to Parkside, which it also built, said Jim Walters, a real estate agent representing the projects. Crescent also has plans for two more condo buildings in the same area, he said.

Some developers of other downtown condos have restricted investor buying at the request of banks and other lenders, Walters said.

Developers such as Ken Stoltenberg, of Mercury Advisors in Tampa, say the company discourages investors from buying units because they end up competing for buyers of unsold new units.

Crescent Resources welcomes investors.

"I don't know why you would want to control the investment markets so much," Walters said. "The developer makes their money, and an end user ends up there anyway."

As far as Parkside's empty feeling, residents should be patient, he said. When the other buildings are built and more people move in, he said, restaurants and shops will follow.

Some investors are worried.

Jason Barrett, a resident in Parkside, said he is on a list of potential buyers for some condo projects. Developers use potential-buyer lists to justify their projects to city officials or banks. Some of the lists are a year or more old, Barrett said, and the names were collected when the market was much different.

He won't be buying any more condos, he said. Barrett had luck with one condo in Parkside and plans to sell his current unit in four to five years. But he had to lower his price to compete with other sellers in his building.

To Barrett, evidence that the condo market is no longer a good investment can be found at Parkside. He notes that about 40 condos were for sale when he sold his unit last summer. Many of his neighbors use their condos a few times a month, and some use it strictly as a place to party on the weekends.

Barrett, who also owns a condo in Sarasota and a condo/hotel unit on Anna Maria Island, hopes to sell those soon.

"I'm spread thin now and that's not a comfortable situation," he said