Canadian real estate markets set records in first-half '06

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Resale housing activity in Canada's major markets in the first half of 2006 set a new record for the first six months of any year, The Canadian Real Estate Association reported this week.

Sales activity is on pace to set a new annual record this year despite expected softening in the second half of the year, the association reported.

Actual unadjusted home sales via the multiple listing service in Canada's major markets totaled 186,177 units in the first half of 2006, a 3.6 percent rise over the previous record for first-half activity set in 2005.

Sales activity was particularly strong in Calgary and Edmonton, the association reported, and new records for resale housing activity in the first six months of the year were set in those cities and Regina, Saskatoon, Winnipeg, London, Sudbury, Ottawa, Montreal and Quebec City. Seasonally adjusted MLS home sales in the second quarter of 2006 numbered 84,391 units - which represents a slight decline from the record levels posted over the past year.

Actual unadjusted sales reached the second highest level on record for the second-quarter period, and were 0.5 percent below activity levels reached during second-quarter 2005. Seasonally adjusted home sales activity eased by about 1 percent from the previous month to 28,185 units in June 2006. Monthly sales activity ebbed in Toronto, Edmonton, Halifax, and a number of other markets, which more than offset monthly gains in Calgary, Ottawa, Vancouver, Winnipeg, Montreal, and London.

Actual unadjusted MLS residential new listings totaled 308,923 units in the first half of 2006 - a new record for the first six months of the year and the highest level on record for any six-month period. New listings were up by 4.6 percent from the first half of last year and were 2.3 percent higher than the previous record set in the first half of 1990, which is the only other six-month period on record in which new listings topped 300,000 units, the association reported.

"There are no signs that new listings have peaked, as seasonally adjusted quarterly and monthly new listings reached their highest levels in more than 15 years," the association also announced. Victoria and Montreal led the increases, with seasonally adjusted new listings in the second quarter reaching the highest level since fourth-quarter 1990. "A rebound in Calgary helped to push major market new listings to the highest monthly level since May 1991."

The major market MLS residential average price at mid-year was up by 11.8 percent compared to December of last year. It was also up by 12.2 percent year-over-year in the second quarter, which tied with the second quarter of 2004 for the highest year-over-year price growth of any quarter in the past 15 years. The 6.8 percent jump in price from the last quarter was also the highest quarterly increase since 1989.

Average price in the second quarter of 2006 set new quarterly records in almost every major market in Canada. The major market MLS residential average price reached $269,000 (in U.S. dollars) in June - up 11.8 percent from the same month last year.

Average price has posted double-digit year-over-year gains in every month during the first half of 2006, the association announced, and reached the highest monthly level on record in June in Calgary, Edmonton, London, Montreal and Quebec City.

The average home price fell from the record levels reached in May 2006 in a number of other markets.

CREA Chief Economist Gregory Klump said in a statement, "The housing market is tightest in Alberta, where a sizzling job market is stoking buyer demand and fueling remarkable price increases. The rise in new listings in Montreal and Toronto gives buyers in those centers a wider selection of homes to choose from, and will keep price increases in those markets below those for major markets in British Columbia and Alberta."

The association noted in the announcement that average price information can be useful in establishing trends over time, but does not indicate actual prices in centers comprised of widely divergent neighborhoods or account for price differential between geographic areas.

The Canadian Real Estate Association represents about 85,000 Realtors.

Web-based marketing integral to real estate industry

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MARILYN BOWDEN

These days, anyone in the market for a new home or a beachfront condo can get a better idea of what's available by browsing the Internet instead of the Sunday paper. According to the National Association of Realtors, there are now some half-million Web sites in cyberspace hawking dream homes.

The Internet has been an important selling tool for the real-estate industry for nearly a decade. But during the recent residential boom, some have taken it to a new level, using the Web as the primary marketing tool to snare buyers for preconstruction projects which exist only in the developer's imagination. For this class of sellers, the Web has replaced the sales center; the virtual tour has nosed out the model unit.

Consumers need to exercise caution before leaping into an investment in a property that, as the market softens and some projects inevitably fall by the wayside, might never be anything more than a computer-generated fantasy.

The rise of virtual marketing

"Historically, the sales office would open before there was a project," says Mark Zilbert of South Florida's Zilbert Realty Group, which specializes in Internet sales. "But with the emergence of the speculator market, which really drove preconstruction sales, we entered the era of the instant sellout. By the time the sales office was built, there was nothing left to sell."

While developers were once leery of Internet listings, Zilbert says, broader outreach at lower cost has converted many to the gospel of virtual marketing.

A well-designed Web site is now a must for large projects, says Liam Sullivan, spokesperson for real-estate marketing firm Cotton & Co. The company currently has more than 60 Web sites up and running for projects all over the United States and the Caribbean.

"It's a tool that people have come to expect," Sullivan says. "People want to shop from their living rooms. Eventually they might visit the project site, but some of them buy just off the Web."

Sullivan says virtual tours using sophisticated technology can convey a much better idea of what a project will look like than a visit to a construction site.

An integrated approach

All this doesn't mean that all developers are ready to forsake tried-and-true methods. Many prefer an integrated approach.

"While we use the Internet to expose our product, we rarely consummate a sale that way. So we're not doing away with bricks and mortar,'' says Pamela Liebman, CEO of The Corcoran Group, a New York City-based residential developer and marketer.

No matter how quickly a project "sells out," a sale isn't really a sale until the unit is delivered and the contract closed, says Edgardo Defortuna, president of Fortune International, a Miami-based real estate and development firm.

"Even if we are mostly sold out, we still build a sales office and models," he says. "There has to be something to keep the buyer excited during the two or three years the project may be under construction."

Another thing the Internet will never be able to replace, Defortuna says, is the relationship between seller and buyer. "There is no substitute for personal contact," he says.

The industry online

Industry statistics make it clear that the real-estate profession is not in danger of losing ground to Internet sales.

Citing a recent survey of 135,000 homebuyers by the National Association of Realtors, NAR spokesman Molony says that though 77 percent used the Internet to search for properties, 81 percent used an agent to consummate the sale.

"The Internet is the norm today," Molony says. "But people still want a Realtor to explain the contract and handle the paperwork."

Statisticians for The National Association of Realtors deal only with resale properties, which are documented on multiple listing services. Tracking the preconstruction market is more difficult because there hasn't been any coordinated catalog of what's available at what price - until recently. Dean Isenberg, a Florida Realtor and entrepreneur, has introduced sell-your-preconstruction.com, a nationwide listing service he hopes will become "the eBay of preconstruction properties."

Let the buyer beware

Seasoned brokers say anyone buying a product that doesn't yet exist needs to be careful.

"It's relatively easy to sell preconstruction over the Internet," says The Corcoran Group's Liebman. "People think they're getting a bargain, and getting it easily. But in exchange, they have to go by the word of the developer and the offering document, without actually seeing what they're getting."

Internet buyers, she says, "need to read those offering documents very carefully, and have an attorney read them as well."

Mortgage rates are headed into hibernation until the next Federal Reserve rate-setting meeting.

The benchmark 30-year fixed-rate mortgage fell 12 basis points to 6.77 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.28 discount and origination points. One year ago, the mortgage index was 5.84 percent; four weeks ago, it was 6.93 percent.

The benchmark 15-year fixed-rate mortgage fell 10 basis points to 6.39 percent. The benchmark 5/1 adjustable-rate mortgage fell 8 basis points to 6.47 percent.

 

65-Unit Condo Project Planned for Milwaukee

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A developer plans to build 65 condominiums overlooking the Milwaukee River on N. Commerce St., creating a new residential project on one of that street's few remaining riverfront sites.

Jim Metz said Monday that he hopes to begin construction by late fall or the spring of 2007 on his six-story development, which will take about a year to complete. It will replace two small industrial buildings, at 2056 and 2070 N. Commerce St., that Metz plans to demolish in September.

Most of the units will have two bedrooms, with around 1,600 to 1,700 square feet, and will be priced at around $290,000, Metz said. The development will include one-bedroom units with prices starting at around $175,000, he said.

The development also will have 10,000 square feet of commercial space, including a 5,000-square-foot restaurant with a patio overlooking the river, Metz said. He said he's close to signing a lease with a restaurant operator.

The project will include two levels of parking, with 160 spaces, Metz said. Development costs will total around $15 million, including $1.45 million that Metz recently paid for the parcels, which total just more than 56,500 square feet, according to assessment records. The parcels were sold by Robert Page of Tampa, Fla.

The riverfront location will allow Metz to include boat slips and a riverwalk. Aside from being along the river, the location has the advantage of being near N. Humboldt Ave., which serves as a connector to the shops, restaurants and night clubs on nearby E. Brady St., Metz said.

"It's a phenomenal site," Metz said.

His other projects include the nearby Kane Place, which has 14 condos just south of E. Kane Place between Humboldt Ave. and Pulaski St. The units are nearly complete, with 13 of them already in the process of being sold, Metz said.

Metz said Kane Place also will have a street-level pizzeria that will be operated by Marc Bianchini, whose family also operates Osteria del Mondo and Cubanitas restaurants.

Metz's latest development marks yet another project for Commerce St., where numerous condo buildings have sprouted in recent years.

The current projects include The Edge, a 133-unit project that Chicago-based Tandem Developers LLC plans to build on 2 acres at 1890 N. Commerce St., just upriver from the Holton St. bridge. Tandem has been marketing those units since spring.

Legacy Real Estate Development LLC's 72-unit Union Point, which is bordered by Commerce St., Riverboat Road and Humboldt Ave., is nearing completion.

Also, the 21-unit Park Terrace row houses were recently developed by Vetter Denk Architects Inc. at 2001-2049 N. Commerce St. Just behind the row houses are 16 additional homes under construction.

Finally, Mandel Group Inc. continues development of the 75-unit Rivercrest project, on Commerce St., east of N. Humboldt Ave.

Tips for Selling in a Changing Market

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Chris Palmeri

No doubt the temperature of the housing market has cooled. Bidding wars, multiple offers over asking, forget about it. If you're thinking it's time to sell, Mark Nash, author of "1001 Tips for Buying and Selling a Home" and a working real estate broker in Chicago, has these words of advice.

-Make sure your properties are listed with a large national brokerage. You need all the Internet and print exposure you can get, locally, regionally, and nationally.

-Don't list with a company that demands you pay a commission, even if you don't sell. Apparently some listing agreements do require you to pay a commission either way. So read the contract carefully.

-Don't list your property with a broker for longer than 120 days. Give them four months. "If they can't do it in 120 days, chances are they can't do it in 180 days," Nash says.

-Demand that your broker does a virtual tour and a minimum of eight still photos on their Web site and on Realtor.com. "This is not negotiable," Nash says. "The buyer of your property might be out-of-town, state or the country, think global."

- When pricing your property, look at comparable sales from the last six months. "That's exactly what the buyer's mortgage lender will use," Nash says.

-If you have multiple properties, sell those in the least desirable locations and models first.

-Pay attention to the absorption rate in your market. This is the number of homes for sale divided by the average number of sales in the most recent month. "Three months is fine, six months is okay, nine months is troublesome and twelve-plus, will not be pretty," Nash says.

Condo, Hotel Project Planned in Vegas

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Mike Kalil and Howard Stutz

The Beach nightclub on Paradise Road would be razed and a 600-room high-rise tower and casino would be squeezed onto its 1.25-acre site under a development plan that won initial approval from county officials this week.

With hotel rooms for tourists and condominiums for homebuyers, the as yet unnamed mixed-use project would meld the traditional Las Vegas gaming resort with the valley's still-expanding Manhattanization housing trend.

"It'll be a true hotel with 300 rooms rented by the night and 300 resort condominiums," said Greg Borgel, the land-use consultant working on the project for Three Sixty Five, the partnership group that owns The Beach.

Documents filed with Clark County show Three Sixty Five principal Rick Tuttle and his partners also plan a 20,000-square-foot casino and an 18,000-square-foot restaurant and lounge area in the 39-story building.

Borgel said the proposed tower is not too large a development to place on less than 2 acres.

"That's the new style," he said. "Up instead of out and big projects on small pads."

Since the condo tower trend began about three years ago, many projects have won municipal approval only to fizzle without adequate financing.

But Borgel said the investment Three Sixty Five has made on architectural planning, consultants and other pre-deveopment costs indicates the group is serious about building.

"This is a real deal," he said.

The Clark County Planning Commission on Monday unanimously approved lifting a height restriction to allow the proposed tower's 490-foot height, but county commissioners must still sign off on the project next month.

In recommending approval, county staff members noted that the project site on the southwest corner of Paradise and Convention Center Drive is near the Strip and seems a sensible area for future extension of the gaming resort corridor.

Although operated as a dance hot spot, The Beach already has a gaming license.

Industry analysts said developing the available locations along Paradise into full-scale casinos seems to be the next, logical step for gaming development.

"When there is a limited amount of space on the Strip, you start looking for the best convenient location just off the Strip," Morgan Joseph gaming analyst Adam Steinberg said. "If done properly, the potential is there."

Steinberg likened Paradise Road to the development on West Flamingo Road, where the Palms, Rio and Gold Coast casinos operate.

Redevelopment on the Strip could also affect Paradise Road. Any remodeling of the Sahara and Riviera, two large Strip casinos that are for sale and have automobile access from Paradise, could affect that location.

The former Wet 'n Wild water theme park is on 27 acres accessible from both the Strip and Paradise. Its owner, Archon Corp., has entered a deal for its sale, but the deal is not expected to close for another year. Plans call for a hotel-casino on the site.

Also, the Las Vegas Hilton, Paradise Road's prime tenant, sits on a 59-acre site. Colony Capital, which owns the Las Vegas Hilton, has said it was exploring a master plan for the location.

The Beach has fewer than 20 slot machines, which are managed by slot machine route operator Herbst Gaming. The nonrestricted gaming license, however, has been in place since before The Beach opened in October 1995, allowing the location to maintain its gaming status.

Owners will have to go through a licensing process to place a full Las Vegas-style casino on the site.

"If the location is grandfathered in, at that point it would suitable for a casino," Gaming Control Board member Mark Clayton said. "Whoever operates the casino would be subject to our general background check for licensing."

Before becoming The Beach, the facility housed two the ill-fated ventures.

The DaVille Casino opened in 1974, but was never operated as a casino with the operators never able to obtain licensing.

The location was sold in 1991 to two British brothers, who spent more than $9 million to open Sport of Kings, a stand-alone race and sports book with an emphasis on horse racing. The facility also included slot machines.

However, a drawn-out battle to win a gaming license kept the facility closed until it eventually opened in October 1992. The Sport of Kings never gained much of a following and the race book closed in December 1993.

Three Sixty Five's Tuttle and his partners bought the site for $3.9 million in March 1995 and remodeled the building into The Beach.

Although Piero's Italian restaurant is adjacent to The Beach, Borgel said the new tower will not physically affect the popular eatery's building.

Downtown Baltimore Tract Sells for $28 Million

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By Lorraine Mirabella

One of the last prime, undeveloped parcels at the Inner Harbor has been sold to developers who plan to build a 50-story condominium and hotel skyscraper, joining other high-profile projects slated to add downtown housing and radically alter Baltimore's skyline.

UrbanAmerica LP, a New York-based real estate private equity firm, and Baltimore developer Doracon LLC have acquired the former site of the News American newspaper at 300 E. Pratt St. for $28 million. The block, now a parking lot between South and Commerce streets, had been controlled by Harvey Schulweis, president of New York-based Schulweis Realty Co. The company had floated proposals over the years for offices, a hotel, apartments and condominiums, but none ever materialized.

The $250 million project would include 300 condos, a 250-room, five-star hotel and 40,000 square feet of shops and restaurants, Richmond McCoy, president and chief executive of UrbanAmerica, said yesterday. A high-end hotel should boost the appeal of the condos because of the shared amenities such as a concierge, room service, swimming pools and spa services, the developers said.

McCoy said UrbanAmerica has sought development sites in the Baltimore area for about three years. "This one obviously stood out above all the rest," he said. "With all the success of downtown and the Inner Harbor, we think it's a fabulous location."

The partners, which will own the site and develop it in a joint venture, are negotiating with several high-end hotel investor operators, McCoy said.

Construction could begin next year, he said.

A cooling of the area's housing market has not dampened the partners' enthusiasm or belief that demand for condos downtown remains strong, he said. The condos would likely be priced in a range of $600 per square foot, which would equate to about $720,000 for a 1,200-square-foot apartment.

Some housing experts surveyed by the Downtown Partnership of Baltimore have cautioned that high-end condos downtown are at risk of being overbuilt, especially those in the $750,000 to $800,000-plus range.

But McCoy said the developers have been encouraged by the early success of condominium projects already under way, such as the Ritz Carlton Residences, now rising on the waterfront at the foot of Federal Hill, where buyers are spending $1 million and up.

Other projects include a condominium tower under construction at 414 Water St., a 34-story tower planned by The Cordish Co. that would rise atop a Metro stop at Market Place, and two 60-story condo and apartment high-rises in the Guilford Avenue corridor downtown planned by Potomac developer Richard W. Naing. Additionally, Philadelphia-based ARC Wheeler is proposing a 59-story glass condo and hotel skyscraper on Light Street.

"We think there's enough demand in the city and the region to support most of these projects, and we'll continue to monitor the strength of the market," McCoy said.

Andrew B. Frank, executive vice president of the Baltimore Development Corp., the city's economic development agency, said the mix of uses being considered suits the East Pratt Street site.

"It is a prime site at the intersection of the Inner Harbor and the central business districts and east of Charles Street, where development is certainly moving," Frank said. "This is at the intersection of three very hot areas."

Developer Harold B. Wheeler, a principal with ARC Wheeler, said having another residential and hotel tower at the Inner Harbor can only boost the downtown market.

"Quality projects like that make Baltimore more of a destination, and people want to live downtown even more," Wheeler said.

Wheeler said he hopes to close on the purchase of the Light Street site, a parking lot that once housed a McCormick & Co. spice factory, by mid-September and to have a deal with a boutique hotel operator by then. That project will also feature shops, restaurants and parking.

The 300 E. Pratt St. site has remained vacant since it was cleared in 1990. Schulweis had proposed building an office tower there in 1989, before the office market suffered a downturn. In 1996, Schulweis proposed an 800-room Westin as a city convention headquarters hotel, a project the city ultimately awarded to H&S Properties Inc. for a hotel that became the Baltimore Marriott Waterfront at Harbor East. Schulweis pushed on with plans to build a hotel on the site, before shifting to plans for an apartment tower, then to a mix of apartments and condominiums.

When Kirby Fowler, president of the Downtown Partnership, heard about the sale, "My reaction was, finally something might happen on this site," he said. "It's such an underutilized property."

The partnership is encouraging the new owners to include a significant amount of shopping along with the hotel and condos, Fowler said.

"We believe there will be more and more demand for retail along Pratt Street as more of it starts to fill in," Fowler said. "We'd like to push for more retail to play off the complementary retail at The Gallery," next door on Pratt Street.

But, Fowler added, "given the location of this property, there's little doubt that many different uses could work effectively here."

McCoy said UrbanAmerica usually works with a local development partner and has confidence in Doracon because of the developer's involvement in numerous city development projects. Doracon President Ronald Lipscomb did not return phone calls yesterday.

RealEstateJournal | What Is Fueling High Condo Prices?

RealEstateJournal | What Is Fueling High Condo Prices?

Inman Real Estate News - Oodle plans big expansion of real estate listings

Inman Real Estate News - Oodle plans big expansion of real estate listings

For-Sale Signs Multiply Across U.S.

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The housing market continues to weaken in much of the country as inventories of unsold homes rise and many sellers cut their asking prices, a quarterly survey by The Wall Street Journal shows.

There is no sign of a broad collapse of housing prices about a year after the once-hot coastal markets entered a long-anticipated cooling phase. But the general level of prices is edging down in some areas and leveling off in others, while the supply of homes for sale keeps rising.

The number of homes on the market in Orlando, Fla., for example, is nearly five times the year-earlier level, while the inventory has quadrupled in Phoenix and Tampa, Fla., and nearly tripled in the Washington, D.C., area.

In another sign of the housing market's growing weakness, the Commerce Department said housing starts fell 5.3% last month from May, to an annual rate of 1.85 million.

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Beacon Closes $275Mln Buy of Rincon Center

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An investment vehicle managed by Beacon Capital Partners has completed its $275 million acquisition of Rincon Center, a mixed-use complex in San Francisco.

The Boston investment manager's Beacon Capital Strategic Partners IV purchased the property from a venture of Glenborough Realty Trust and Blackstone Real Estate Partners II. Beacon Capital IV is a $2 billion investment vehicle that has already made, or committed to making nine acquisitions.

Rincon Center contains 528,000 square feet of office and retail space and 320 apartment units, which could be converted to condominiums. The Glenborough/Blackstone team, which was advised on the sale by Eastdil Secured, acquired the property in 1999 through a foreclosure.

The property was constructed on a full city block bounded by Mission, Howard, Spear and Steuart Streets, in the late-1980s by Perini Group and Pacific Gateway. It consists of a five-story office building at 101 Spear St. and two 22-story buildings, which house additional office space and the property's residential component, at 121 Spear Street and 88 Howard Street. The property's retail component totals roughly 64,000 sf.

The Glenborough/Blackstone team had previously tried selling the property, but offers didn't meet their expectations. That was before Pacific Bell Directory, the property's largest tenant, renewed its lease through 2013.

Glenborough said it generated $9.5 million in gains from the sale, which provided it and its partner with a 20 percent internal rate of return.

Manhattan's Hit Factory Going Condo

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The legendary Manhattan music studio, the Hit Factory, at 421 W. 54^th St. is being converted to residential condominiums. It will have 27 units ranging in price between $1 million and $4 million. The building, where superstars such as John Lennon, Bruce Springsteen and Stevie Wonder all recorded albums, was acquired by Arizona developer Scott Turkington and two other investment teams for $17.5 million. The property will retain the ground-floor retail space rented by Gibson Guitar Baldwin Piano that performing artists can use for rehearsals. The condo complex is to open early next year.

 

Manatee has high hopes for condo project

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BY CHRISTOPHER O'DONNELL

 

ELLENTON -- Manatee County revamped its affordable housing plan in October in response to rocketing house prices that have put home ownership out of reach for many low- and middle-income families.

County officials are hailing a new condo project in Ellenton as the first in the county to combine affordable, "work force" and market-priced housing.

At least 25 percent of the 136 condos developed by the Barrington Group will be offered at about $160,000, a price the county classifies as affordable.

Another quarter will be priced at about $192,000, considered "work force" housing. The rest would be sold at full market prices, about $230,000 to $250,000.

The project will be built on a 15-acre site on Ellenton Gillette Road at 29th Street East.

"They're actually proposing to do all three in the same project, which is wonderful," said Suzie Dobbs, the county's affordable/work force housing coordinator. "Hopefully, there's something for everyone."

Buyers paying full market prices would get more square footage and an attached garage. Each of the 14 proposed condo buildings will include each type of housing.

"We're hoping to avoid that feeling, 'Oh, that's an affordable housing project,'" said Ronda Gallehue, a vice president with the Barrington Group. "That's not really the case. People have to have jobs; they just can't make over a certain amount."

Local governments in Southwest Florida have been trying to draft effective affordable housing programs in the last few years as rocketing house values have priced lower- and middle-income families out of home ownership.

U.S. Department of Housing and Urban Development guidelines consider families that spend more than 30 percent of their gross income on housing to be "cost burdened."

It's a classification that contains more than a quarter of Manatee households, according to recent Florida Housing Data Clearinghouse statistics.

The county's guidelines for affordable and "work force housing" are based on family size and income.

A family of four with an income of $70,080 or less would qualify for "affordable housing" that costs no more than $160,000. A same-size family with an income no higher than $75,000 would pay no more than $192,000 for work force housing.

Developments that include at least 10 percent "work force" or 25 percent affordable housing qualify for a faster approval process.

With construction and labor costs continually rising, the chance to cut down the review time to six months -- a process that normally takes between 18 and 24 months -- can mean big savings for developers, Dobbs said.

The problem of finding and retaining employees in a market where the median home price is about $322,000 is also forcing home builders to include lower-priced housing, Dobbs said.

"We do have certain developers that really want to do this because there's such a lack of housing below the $300,000 range that it's handicapping them," Dobbs said.

New Study Pinpoints Top Places

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Some of the nation's hottest housing markets are cooling, but the strength of the economy is balancing the risk of home-price declines, according to PMI Mortgage Insurance Co., which released its U.S. Market Risk Index on Tuesday.

The average risk score for the country's largest metropolitan statistical areas was 288 in the first quarter, one point up from the last quarter and 70 points up from a year ago. During the quarter, 25 metropolitan areas saw increases in risk, while 20 saw decreases.

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Canadian real estate markets set records in first-half '06

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Resale housing activity in Canada's major markets in the first half of 2006 set a new record for the first six months of any year, The Canadian Real Estate Association reported this week.

Sales activity is on pace to set a new annual record this year despite expected softening in the second half of the year, the association reported.

Actual unadjusted home sales via the multiple listing service in Canada's major markets totaled 186,177 units in the first half of 2006, a 3.6 percent rise over the previous record for first-half activity set in 2005.

Sales activity was particularly strong in Calgary and Edmonton, the association reported, and new records for resale housing activity in the first six months of the year were set in those cities and Regina, Saskatoon, Winnipeg, London, Sudbury, Ottawa, Montreal and Quebec City. Seasonally adjusted MLS home sales in the second quarter of 2006 numbered 84,391 units - which represents a slight decline from the record levels posted over the past year.

Actual unadjusted sales reached the second highest level on record for the second-quarter period, and were 0.5 percent below activity levels reached during second-quarter 2005. Seasonally adjusted home sales activity eased by about 1 percent from the previous month to 28,185 units in June 2006. Monthly sales activity ebbed in Toronto, Edmonton, Halifax, and a number of other markets, which more than offset monthly gains in Calgary, Ottawa, Vancouver, Winnipeg, Montreal, and London.

Actual unadjusted MLS residential new listings totaled 308,923 units in the first half of 2006 - a new record for the first six months of the year and the highest level on record for any six-month period. New listings were up by 4.6 percent from the first half of last year and were 2.3 percent higher than the previous record set in the first half of 1990, which is the only other six-month period on record in which new listings topped 300,000 units, the association reported.

"There are no signs that new listings have peaked, as seasonally adjusted quarterly and monthly new listings reached their highest levels in more than 15 years," the association also announced. Victoria and Montreal led the increases, with seasonally adjusted new listings in the second quarter reaching the highest level since fourth-quarter 1990. "A rebound in Calgary helped to push major market new listings to the highest monthly level since May 1991."

The major market MLS residential average price at mid-year was up by 11.8 percent compared to December of last year. It was also up by 12.2 percent year-over-year in the second quarter, which tied with the second quarter of 2004 for the highest year-over-year price growth of any quarter in the past 15 years. The 6.8 percent jump in price from the last quarter was also the highest quarterly increase since 1989.

Average price in the second quarter of 2006 set new quarterly records in almost every major market in Canada. The major market MLS residential average price reached $269,000 (in U.S. dollars) in June - up 11.8 percent from the same month last year.

Average price has posted double-digit year-over-year gains in every month during the first half of 2006, the association announced, and reached the highest monthly level on record in June in Calgary, Edmonton, London, Montreal and Quebec City.

The average home price fell from the record levels reached in May 2006 in a number of other markets.

CREA Chief Economist Gregory Klump said in a statement, "The housing market is tightest in Alberta, where a sizzling job market is stoking buyer demand and fueling remarkable price increases. The rise in new listings in Montreal and Toronto gives buyers in those centers a wider selection of homes to choose from, and will keep price increases in those markets below those for major markets in British Columbia and Alberta."

The association noted in the announcement that average price information can be useful in establishing trends over time, but does not indicate actual prices in centers comprised of widely divergent neighborhoods or account for price differential between geographic areas.

The Canadian Real Estate Association represents about 85,000 Realtors.

US CONDO EXCHANGE Teams with Largest Irish Property Web Site to Showcase Giant Inventory

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US CONDO EXCHANGE Teams with Largest Irish Property Web Site to Showcase Giant Inventory

 --  Daft.ie Opens Up its 1.3 Million Monthly Visitors to US Condo Exchange, Among Strongest Buying Audiences in European Union --

 

Miami, Fla. -US Condo Exchange, LLC, www.uscondex.com, the global advertising portal and international multiple listing service for condos, continues its wave of powerful international alliances by announcing today that it has teamed with Ireland's largest property web site, www.Daft.ie, to showcase US Condo Exchange's condo listings. Daft is one of Ireland's most recognized Internet brands with over 30,000 properties available for sale and to let (rent) at any one time, and with over 1.3 million monthly visitors. The alliance with US Condo Exchange adds significantly to the Irish web site's listings, and opens up an enormous potential buying base for owners and investors in U.S. condos, with the Irish representing one of the strongest economic audiences in Europe.    

"Ireland represents a demographic base with very strong ties to the U.S. and with very solid buying power," said James Haft, Co-Founder and Chief Financial Officer of US Condo Exchange, www.uscondex.com. "US Condo Exchange is harnessing that buyer power through this very important alliance with Daft."

The "Celtic Tiger", as Ireland is known in financial circles, boasts a vibrant, globalized economy with the second highest Gross Domestic Product per capita in the European Union, topped only by Luxembourg. The U.S. is Ireland's second-largest export destination, and in 2003, there was $9.1 billion worth of new U.S. investment in Ireland, more than twice the U.S. investment flow to China. Currently, there are more than 570 U.S. subsidiaries in Ireland spanning activities from the manufacturing of high-tech electronics, computer products, medical supplies, and pharmaceuticals to retailing, banking and finance, and other services.

 

Daft's property website stands out among successful businesses in Ireland, with www.Daft.ie recognized as one of the 5 best e-Business Websites in the world at the United Nations World Summit on the Information Society, which took place in Tunisia last fall. A panel of 35 international experts evaluated websites from 168 countries to find the best in the world in e-learning, e-culture, e-science, e-health, e-business, e-entertainment and more.

 

Added Richard Swerdlow, CEO of US Condo Exchange, "For Daft to have chosen US Condo Exchange as their North American portal for properties is a huge vote of confidence in our technology and condo e-commerce capabilities."

 

The new pairing is one more step in US Condo Exchange's efforts to globalize the U.S. condo market and comes on the heels of similar listing agreement with Primelocation, www.primelocation.com, the UK's leading online real estate portal, and Germany's largest real estate web site, www.ImmobilienScout24.de. ImmobilienScout24. Additional worldwide strategic alliances are expected to be forthcoming shortly.

 

Daft.ie, Ireland's biggest property site, has been providing low-cost online advertising to the Irish property market since 1997 with a primary focus on first-time-buyer properties, investment properties both home and abroad, and residential property to let. Established by two brothers, Eamonn and Brian Fallon, www.Daft.ie has become the country's biggest property portal with over 30,000 properties available for sale or let at any one time. Daft features properties in countries ranging from Austria, France and Portugal, to Cyprus, Malta, Serbia, Slovakia, Turkey and dozens more. The site currently delivers 24 million pages of properties a month to over one million visitors.

 

US Condo Exchange, www.uscondex.com, is the global advertising portal and international multiple listing service for condos. US Condo Exchange currently has listed on its site over 70,000 condos located in the U.S. and in 37 countries around the world, valued at over $30 billion. The website cost-effectively delivers unparalleled international exposure to developers, brokers and for-sale-by-owners through the seamless distribution of all its listings to a global network of real estate websites visited by over 15 million viewers per month. The US Condo Exchange also features a simple and automated self-listing process, and the website partners with major media companies to automate the listing of for-sale and for-rent condo ads.

 

 

$50 Mln Hotel Project Proposed for Dulles Station in Herndon, Va.

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A South Carolina hospitality company backed by Miami Dolphins owner Wayne Huizenga is vying for a piece of the planned $1.1 billion Dulles Station in Fairfax County.

OTO Development, already building a hotel at National Harbor in Prince George's County, is negotiating to buy 11 acres in Dulles Station for a $50 million hotel project.

The company wants to construct a 182-room Sheraton and a 153-room Hyatt Place, a new boutique line of lodging from Hyatt, at the site in Herndon, says President and CEO Corry Oakes.

OTO is quickly becoming a major player in hotel development in Greater Washington.

Aside from the Dulles Station and National Harbor projects, the company is under contract to build two additional hotels in Fairfax County and one on Route 7 in Loudoun County. It's also in the final stages of negotiations for five more local hotels, Oakes says.

"We're big believers in the D.C. market," he says. "We're pursuing several deals at this time." OTO's proposal to rezone the Dulles Station property off Sunrise Valley Drive is set for a July 27 public hearing with Fairfax County's planning commission. If approved by the commission, the plan would need a final nod from the county's board of supervisors.

"The county has been good to work with so far, but we're not assuming anything until a final approval," Oakes says. "We're also meeting with citizens groups. If everything goes to plan, we'll move ahead as quickly as possible."

OTO (www.otodevelopment.com) was founded in 2004 by Huizenga and George Johnson Jr., the former CEO of Extended Stay America. In its short existence, the company has already developed more than $200 million in hotel projects around the country. It has projected a total of $1 billion worth of projects nationally between 2005 and 2008.

One of OTO's projects is a 151-room Hampton Inn and Suites at National Harbor, a $2 billion development expected to be ready for visitors in the spring of 2008.

At Dulles Station, several projects are starting to come together in a development that will eventually encompass 2.7 million square feet with 1,100 residential units, 1.5 million square feet of office and hotel space and 70,000 square feet of retail space.

The developer's majority landowner, Herndon-based Crimson Partners, is building a 169-unit condominium complex that should be finished by the end of the year, says Kevin Dougherty, Crimson's managing partner. Units are selling from the upper $200,000 range to the mid-$400,000 range.

Trammell Crow Co. meanwhile is progressing with construction on a six-story, 185,000-square-foot office building slated to be finished at Dulles Station in May 2007.

The company (www.trammellcrow.com) has started design work on a companion office building that would be 12 stories and 360,000 square feet, says Steve Shelesky, Trammell Crow's managing director of development and investment in Northern Virginia.

Fremont, Lehman Lend $247Mln for Calif. Condo Project

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Fremont Investment and Loan has provided a $215 million construction loan for Skyline at MacArthur Place, a proposed 349-unit residential condominium complex in Santa Ana, Calif., just outside Los Angeles.

Fremont's loan, as well as a $32 million mezzanine loan from Lehman Brothers, was arranged by Buchanan Street Partners.

The $247 million in financing will allow Nexus Cos. to construct what will be the tallest residential property in Orange County. The property will be comprised of two 25-story buildings and is slated for completion in early 2008. Units are expected to be priced from $500,000 apiece to more than $2 million.

Mixed-Use Project Planned in Milwaukee

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 A local developer is proposing $104 million, 20-story project - including a hotel, condominiums, offices and shops  for an empty block in downtown Milwaukee's Park East redevelopment area

Ruvin Development Inc. wants to build the mixed-use project on a site bordered by N. Old World 3rd St., N. 4th St., W. Juneau Ave. and W. McKinley Ave. The project would be among the largest downtown developments currently proposed.

The block is empty except for the Sydney Hih building, which Ruvin Development bought last year with plans of incorporating it into the development. The project also would include the former Gipfel Brewery, which Ruvin would move to the development site from 423-427 W. Juneau Ave.

Ruvin Development's proposal is the latest to surface for the 16 acres of vacant parcels owned by Milwaukee County in the Park East area. The redevelopment area encompasses 64 acres on downtown's northern edge. The county-owned lots, made available when the Park East Freeway stub was razed, are perhaps the most visible sites.

Bringing it all together

Ruvin Development's offer to buy the block for $2.9 million is being recommended for approval by county officials to the County Board. The board's Committee on Economic and Community Development is scheduled to review the proposal Monday.

That recommendation says the development would include a 175-room hotel, 70 condos, 55,000 square feet of offices and 31,000 square feet of retail space.

The development also would have a 330-car parking structure and a public plaza.

Most of the development would come in the form of new construction, Robert Ruvin, Ruvin Development president, said Thursday.

Ruvin said the Sydney Hih building, 300 W. Juneau Ave., would be converted into street-level retail space and upper-floor offices. The Gipfel building, he said, would be moved to the block and renovated into restaurant or retail space.

Ruvin said the continued strength of the downtown housing market is among the factors that makes the project feasible. He said he's already made preliminary financing arrangements, and said the location is a good one for a mixed-use development.

"The proximity to the Bradley Center really brings all that together," said Ruvin, who declined further comment until Monday's committee meeting.

Ruvin Development's other investments include last year's $21.5 million purchase of the 169-unit Blatz Apartments, 270 E. Highland Ave., which are being converted into condos. Ruvin Development is doing that conversion project in a partnership with Fiduciary Real Estate Development Inc.

The project planned for the Sydney Hih block is among three developments pending for the county-owned parcels in the Park East area. Construction has not yet started on the other two projects.

That lack of construction activity is not surprising, given the complicated nature of what's been proposed, said William Drew, former city development commissioner. The developers are likely going through the process of securing their financing, which usually takes longer than expected, he said.

"People are trying to get their arms around what's going to happen down there," said Drew, who served under former Mayor Henry Maier.

Hotels cropping up downtown

Ruvin Development's project also is among several new downtown hotel proposals that have surfaced recently.

The demand for downtown hotel rooms, especially among business travelers, has been steadily increasing for years, said Greg Hanis, a hotel industry consultant.

But even with that strengthening downtown hotel market, it's likely that perhaps just two or three of the proposed hotels will actually end up getting built, said Hanis, who operates Hospitality Marketers International Inc. of Pewaukee.

The proposed hotels include a 120-room Staybridge Suites extended stay hotel, which would be at the southeast corner of N. Water St. and E. Juneau Ave. The project is being proposed by Development Opportunity Corp. of Fort Myers, Fla.

The city Redevelopment Authority on Thursday granted a purchase option for some city-owned lots at the site that would be combined with a privately owned parcel for the development. That 12-story building would include 30 condos, 10,000 square feet of street-level restaurant and retail space, and two levels of indoor parking.

Other proposed hotels include local developer Doug Weas' plans for a 150-room Renaissance ClubSport by Marriott, part of an 18-story mixed-use project, at the southeast corner of N. Broadway and E. St. Paul Ave., in the Historic Third Ward.

Also, Chicago developer Richard Curto wants to build a 125-room boutique hotel and a 140-room hotel catering to business travelers as part of his mixed-use development east of N. Water St. and north of E. Ogden Ave., in the Park East area. Curto's proposed development, known as Park East Square, would include about 120 apartments, 270 condos and over 215,000 square feet of retail and restaurant space.

Curto's firm, RSC & Associates, would buy four acres of former freeway land from the county.

The other development planned for county-owned land within the Park East area is a 44,000-square-foot office building proposed by Brookfield-based MLG Development Inc. for a small parcel bordered by N. Water, N. Edison and E. Knapp streets.

The Park East area also has projects on privately owned parcels, including the 160-unit Terraces at River Bluff condos under development south of E. Ogden Ave., between N. Broadway and N. Milwaukee St.

Also, Mandel Group Inc. plans to begin construction this fall on the first phase of The North End, a housing development that would replace the former Pfister & Vogel tannery. The North End would eventually have 395 condos, 88 apartments and 20,000 to 25,000 square feet of street-level retail space.

Ritz at Bachelor going condo-hotel

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Julie Dunn

The Ritz-Carlton, Bachelor Gulch is converting 120 of its 237 guest rooms into 50 wholly owned condominiums, making it the latest high-end mountain property to announce a condo-hotel conversion.

"The demand for new ownership opportunities in Bachelor Gulch is just immense, so we felt it was a great time to bring it to market," said Steven Holt, director of public relations at the property, which is at the Beaver Creek ski area.

The Ritz-Carlton Residential Suites will range in size from 430 square feet for a studio unit to 1,383 square feet for a two-bedroom model. The condos will go on sale July 27, with prices from $720,000 to $2.96 million. Slifer Smith & Frampton Real Estate is the listing broker.

Other similar projects are also in the works. Last month, Florida developer SunVest Communities USA announced plans to invest $20 million to turn the Club Med resort in Mount Crested Butte into a condo hotel.

In May, the Park Hyatt Beaver Creek announced it would undergo a $20 million renovation, including the conversion of 54 hotel rooms into 15 fractional-ownership units.

The 1/20-share condominiums range in price from $80,000 to $220,000.

"It's a good way to get some significant dollars out of an existing hotel," said John Montgomery, a hotel consultant with Horwath Horizon in Denver.

The Ritz-Carlton's two-phase conversion project began in April and is expected to be completed by July 2007.

Owners will have access to all of the hotel's amenities, including twice-daily housekeeping service and valet parking. They can place their units in a rental pool when they're not using them.

There is some risk to condo-hotel conversions, said Montgomery, because "some of the units will go into the rental pool, but some will sit empty, which is dead real estate for the community."

He said, "Resort areas like to see new bodies in their beds every night, because those are the people who are out skiing and shopping." Holt expects a majority of the condos to be put into the rental pool.

The AAA Five Diamond-rated Ritz-Carlton, Bachelor Gulch opened in November 2002 and cost $162 million to build. Miami-based Gencom Group bought majority ownership of the property from Vail Resorts Inc. in 2004.

FSBOBOLINKS: Cash from South Korea pouring into U.S. real estate

FSBOBOLINKS: Cash from South Korea pouring into U.S. real estate

Federal Trade Commission - Competition in the Real Estate Marketplace

Federal Trade Commission - Competition in the Real Estate Marketplace

Chicago Condo Towers Proposed

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DAVID ROEDER

The winning bidders for the Scottish Rite block on the Near North Side are showing development plans to the neighbors. The scenario calls for two condo towers on the block's parking lot and preservation of the buildings that occupy the rest of it, including a former cathedral at 929 N. Dearborn.

Mike Skatulski, senior managing director at Mesirow Financial Real Estate, said the towers would be about 30 stories tall and together include 450 to 520 units. Lower floors would be set aside for commercial space and for parking that can't be seen from the street, he said.

The Mesirow division, run by veteran developer Richard Stein, has joined with Enterprise Cos. in agreeing to pay more than $50 million for the block, bounded by Walton, Delaware, State and Dearborn. The seller is the Scottish Rite, a fraternal organization.

Skatulski said the project won't be as tall or dense as others being added to the Near North Side. He hopes the somewhat reduced scale and a commitment to preserve the existing structures, all of which go back to the 19th century, will ease the way politically. The cathedral could be donated to a nonprofit group, and one prospect Skatulski identified is the Newberry Library, which is immediately west of the site.

Representatives of some community groups were briefed about the plans Tuesday night. Skatulski said Chicago's Pappageorge/Haymes Ltd. will provide the architecture.

PITTSFIELD PLAN: Add the landmark Pittsfield Building, 55 E. Washington, to the list of downtown office edifices whose owners are considering new uses. Sources said the building, popular with doctors and dentists, is relocating tenants on seven or eight floors to free space in hopes of landing a hotel. Those floors could be sold while ownership keeps the rest of the building.

Built in 1927, the Pittsfield has undergone recent renovations to its lobby and elevators. It was running about a 25 percent vacancy rate before the hotel idea came along. But one wonders how many boutique hotels downtown can stand. The building owner, Miami Beach-based investor Robert Danial, could not be reached.

LEGAL LEASE: The law firm Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP has leased the top six floors at 200 W. Madison, taking 97,000 square feet in the building owned by Tishman Speyer Properties and Transwestern Investment Co. The firm signed a 15-year lease and is moving from 333 W. Wacker.

LINCOLN LODGE: Spiffier rooms and higher prices are in the offing for the old Days Inn of Lincoln Park, 1816 N. Clark. WexTrust Capital bought it last January for $15.5 million and plans a renovation to take it upscale. The first part of the project is ditching the Days Inn tie. It is being renamed, inaccurately, the Gold Coast Hotel and management has been turned over to Portfolio Hotels and Resorts. WexTrust is looking for a prestigious restaurant to take the ground-floor space.

LOCATION, LOCATION: Duke Realty Corp. is starting construction on an 88,000-square-foot industrial building at 11501 W. Irving Park in Chicago. It's just outside O'Hare Airport's south cargo entrance, and Duke believes it won't be long before its first building inside city limits will have tenants.

"With more than 1 million square feet of industrial product being condemned in the O'Hare Modernization Program, demand for first-generation space near the airport is increasing," said Andy James, senior vice president at Duke. Completion is due in the spring. Colliers Bennett & Kahnweiler Inc. is the leasing agent.

EAST LOOP LIFE: The British-style pub and grub chain Elephant & Castle is taking ground-floor space in Village Green Cos.' renovated apartment building at 185 N. Wabash. It will be the chain's third Chicago location and expands the drinking and dining options for the growing residential district of the East Loop.

DOING THE DEALS: Maurice Fisher, known for his involvement with major malls in the Chicago area, heads a partnership that has purchased the old Ethan Allen Furniture building at 820 E. Roosevelt, Wheaton. The 20,000-square-foot building will be converted into a retail and office center. Champion Realty Advisors LLC brokered the sale. . . . TCB Development Co. acquired a 21-acre business park at 600 Territorial Drive, Bolingbrook, for $7.2 million. The deal includes a 97,000-square-foot building and two 7-acre sites suitable for development. The campus, formerly owned by Molex Inc., can accommodate up to 300,000 square feet. . . . CB Richard Ellis Inc. represented Kester, a supplier of electronic connectors, in its relocation from Des Plaines to 64,000 square feet at 800 W. Thorndale in Itasca, where the company signed a 10-year lease. . . . Owners of the Inn of Chicago, 162 E. Ohio, will re-light the hotel's rooftop sign July 20 as part of a party heralding a planned renovation.

Hotel, Condo Building Planned for Downtown Chicago

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By TOM DAYKIN

A Florida-based hotel developer is proposing a nine-story building with 120 extended-stay hotel rooms and 18 residential condominiums in downtown Milwaukee's largest night life area.

The $20 million development, which would include 10,000 square feet of street-level restaurant and retail space and one level of underground parking, is planned for the southeast corner of N. Water St. and E. Juneau Ave. The site, now a parking lot, is just north of the former Brew City Bar-B-Q building, 1114 N. Water St., which is being converted into a Bar Louie restaurant and tavern.

The project is being proposed by Development Opportunity Corp. of Fort Myers, Fla.

"We feel there is a demand for additional extended-stay rooms," said Phil Hugh, president of Development Opportunity and its affiliated hotel management firm, DOC Hospitality.

The hotel's rooms would be marketed to people staying in Milwaukee during corporate training assignments, those needing a place to stay while relocating to the Milwaukee area, and vacationers looking for larger rooms, Hugh said. All the rooms will be suites, with stoves, microwaves and refrigerators, he said.

The hotel might use the Staybridge Suites brand, Hugh said. That brand is owned by Intercontinental Hotels Group, which also owns Holiday Inn, Hotel Indigo, Candlewood Suites and other brands.

Development Opportunity is discussing financing options with various lenders, Hugh said. He hopes to begin construction by October and complete the project by January 2008.

Hugh's firm is working on the project with a local investors group, Market Street Partners II LLP, which owns lots at 1124 N. Water St. and 223 E. Juneau Ave.

Market Street wants to buy adjacent lots, totaling about 9,200 square feet, from the city's Redevelopment Authority to create a 30,200-square-foot development parcel. The authority will review that $443,340 purchase offer at its Thursday meeting, said Andrea Rowe Richards, spokeswoman for the Department of City Development.

Hugh is a former senior vice president at New York-based Cendant Corp., which owns several hotel brands, including Ramada, Howard Johnson and Super 8.

Development Opportunity, which Hugh started nearly three years ago, is renovating a 123-room hotel in Fort Myers, which is scheduled to reopen in August as a Holiday Inn. Development Opportunity also is developing a 62-room Hotel Indigo in Fort Myers, a 24-room boutique hotel in Pittsburgh and an 86-room Candlewood Suites in the Pittsburgh area.

The Staybridge Suites plan is the latest of several downtown hotel proposals that have surfaced recently as business travel has increased.

Others include developer Doug Weas' plans for a 150-room Renaissance ClubSport by Marriott, part of an 18-story mixed use project, at the southeast corner of N. Broadway and E. St. Paul Ave., in the Historic Third Ward.

Also, Chicago developer Richard Curto wants to build a 125-room boutique hotel and a 140-room hotel catering to business travelers as part of his mixed-use developments east of N. Water St. and north of E. Ogden Ave., in the Park East area.

Condo Market Freeze Causes Multifamily Sales to Hit Brakes

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By Jillian S. Ambroz The multifamily investment sales market is slowing down after a fierce run-up that was fueled largely by condominium converters. But interest in rental properties remains strong and is expected to strengthen. The month of May marked the first time in five years that the sector saw a decline in sales deals for two consecutive months. About $3.8 billion in apartment sales closed in May - a 30 percent drop from a year ago, according to Real Capital Analytics. For the year so far, the market has seen a 14 percent increase in sales. But that can be attributed to several REIT mergers and portfolio acquisitions. The condo-conversion market has become downright frigid. The number of units selling for conversions is off by more than 90 percent from the peak in September 2005 when 111 properties totaling 27,784 units sold for a total of just over $4 billion, according to Real Capital, a New York research firm. By comparison, May saw 19 properties with 2,706 units slated for conversion trade for a total of $334.3 million. That's a nearly 50 percent plummet from April, when 25 properties sold for a combined $655.8 million. "The condo craze has quietly come to a virtual halt," Jay Massirman, a vice chairman with CB Richard Ellis' multifamily group in Miami, said. "There are some projects that are still viable, but many of the investors and speculators have backed off the market." There are a lot of reasons for the sea change. Perhaps the biggest is lackluster consumer demand for units. Other reasons include higher interest rates, which have had a big impact on converters' ability to go through with their proposed projects as well as consumers' ability to finance the purchase of units; higher insurance and construction costs. The condo craze in Florida began about five years ago. The drop-off started about five months ago in cities like Miami and Ft. Lauderdale, Rosendo Caveiro, a director with Cushman & Wakefield's Miami office, said. The Florida market is looking at some 60,000 units statewide that are in some mode of condo conversion, Massirman said. Some of those could end up becoming for-rent apartments. Others simply won't be completed. Lenders have become far more stringent in providing debt. "If they do loan money for building new luxury condos, the developer will not have to just provide reservations, they'll want contracts with real money," Caveiro said. Meanwhile, high construction costs have put a damper on the development of new rental projects, in Florida and elsewehere. In the first quarter, 11,221 units were completed, according to Reis, down from 21,637 a year ago. Meanwhile, 14,351 units were converted to condos. That compares with 25,770 units that were converted a year ago. The result is that the nationwide inventory has stayed flat at 8.9 million units. So the national vacancy rate has improved, to 5.6 percent in the second quarter from 6.4 percent last year, according to Reis. The average national effective rent grew to $936/unit in the second quarter, a roughly 4.5 percent increase from a year ago, according to Reis Inc. So investors remain hot for rental properties. Take San Francisco, which is still in recovery mode. Not too long ago, properties with condo maps in place were a hot commodity. That's no longer the case. "The yield threshold for the converter has gone up substantially," said Phil Saglimbeni, a broker with Marcus & Millichap's Palo Alto, Calif., office. "The apartment guys are getting the deals. There's more perceived risk in selling to converters," he said. Archstone-Smith, for example, has been among those actively pursuing rental properties. It just acquired a 322-unit complex in Fremont, Calif., for $79.6 million. It also paid $120 million for the Key West apartments in Manhattan and $165 million for the Marlborough House in Manhattan. Both New York deals were brokered by Douglas Harmon of Eastdil Secured. "Any drift apparent in cap rates since the beginning of the year for solid conversion candidates has been almost entirely offset by increasing rental rates, and a broader and deeper worldwide appetite for large, stable, rental properties or portfolios," Harmon said. He added that high-end condo opportunities "have not lost any of their luster," while the "the condominium bloom fades from the rose of more pedestrian rental properties." In New York, rents are higher and have increased even more than elsewhere in the country. Rents stood at $2,370/unit in the first quarter, up 6.2 percent from the same period a year earlier, according to Reis. "New York rents have exploded," said Richard Bassuk, president of The Singer & Bassuk Organization, a Manhattan mortgage broker. So lenders, which have become conservative when it comes to financing condo deals, are aggressive when courting rental transactions. "Lenders are willing to finance a much broader spectrum of developers doing residential rental development," Bassuk said. "This willingness to provide financing for rental projects has caused many developers to re-evaluate their plans to see whether once again residential rental development is attractive."

Condo-office conversion planned

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BY MATTHEW HAGGMAN

A Brickell Avenue office building hit hard by Hurricane Wilma will be sold and converted into office-condominiums, adding to a growing trend in South Florida's commercial real estate market.

Developer Edgardo Defortuna, who made his name building and selling residential condos, has agreed to pay $68.5 million for the 20-story, 235,532-square-foot Colonial Bank Centre building at 1200 Brickell Ave. in Miami.

The deal, expected to close within the next two months, would be Defortuna's second office-condo conversion and the third on Brickell Avenue in three years. The others are 1000 Brickell and Defortuna's 1110 Brickell.

''I am positive the demand is there [for office-condos],'' from users and investors, said Defortuna, who heads Fortune International in Miami. He said 1110 Brickell is sold out.

``The buyer who used to buy a residential condo as an investment to rent is now switching to office or commercial space because they are concerned about overbuilding in the residential market.''

In recent years developers increasingly have bought office buildings and divided them into individual condo units for sale, primarily targeting small and medium-sized businesses whose space needs are largely fixed and business owners from Latin America, where it is more common to own office space.

Their pitch: It's better to build equity -- particularly when interest rates are relatively low and property values may increase -- than pay rent. They also argue buying eliminates the risk of rising lease costs.

But the concept remains untested in South Florida over the long haul. Many companies -- especially large ones -- prefer paying rent because it allows them to expand and contract as business needs dictate.

For now, planned or already completed office-condo conversions account for about 11 percent of the market, according to commercial real estate brokerage CB Richard Ellis. The firm notes many of the planned conversions may never happen.

The largest office-condo conversion announced to date -- the 21-story, 295,000-square-foot SBS Tower in Coconut Grove.

''I don't think it will be a flash in the pan,'' said Hank Bush, principal with Miami's Bush Development, an active office-condo converter in South Florida. ``It will never be 60 percent of the market, but I think it will be a significant component.''

Colonial Bank Centre, meanwhile, suffered extensive damage following Hurricane Wilma last year. The high winds punched out numerous windows in the tower that has Morton's Restaurant on its ground floor.

Defortuna said the windows are being fixed, and all repairs must be finished before closing.

Tenants include Kroll, an international investigations firm, and real estate development company Terra Group.

''1110 Brickell was a tremendous success for us,'' said Defortuna, referring to his first office-condo conversion. ``We are finished with that building, and now this one is double its size.''

 

Construction Costs Stall Many Las Vegas Condo Projects

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By HUBBLE SMITH

Rising land and construction costs have created major barriers for entry into the Las Vegas high-rise luxury condominium market, giving early projects such as SoHo Lofts, Panorama and Sky Las Vegas a clear advantage over newcomers, executives of two projects under construction said.

Anything built on or around the Strip is going to sell for $1,300 to $1,500 a square foot, said David Pourbaba, president of Sky Las Vegas, which recently topped out construction of its 45-story tower next to Circus Circus.

"They will be priced to make the land and construction cost work," he said. "It's all relative. People pay $2,000 and $3,000 a foot in New York and London."

At the end of the second quarter, there were 246 existing luxury condo units on the market for resale at an average price of $1.1 million, or $631 a square foot, local research firm Applied Analysis reported. Units sold during the quarter averaged $787,000, or $459 a foot.

A market snapshot shows 135 projects with 91,934 units proposed for Las Vegas, including 2,321 existing units, 1,379 canceled units and 6,888 suspended units. About 13,500 are under construction and 16,286 are planned and pre-selling.

"From our perspective, it's nice to be on the front end of that wave," said Dusty Allen, managing member of the 275-unit Streamline tower being built by Martin-Harris Construction at Las Vegas Boulevard and Ogden Avenue.

Of the 15,811 units proposed for downtown Las Vegas, about 900 are under construction, he estimated. They include Streamline, SoHo Lofts, Newport Lofts and Juhl.

Among the projects that have been announced for downtown but have yet to break ground are Club Renaissance, Sandhurst, Cielo Vista, Liberty Tower and Gateway Las Vegas.

"The price per square foot to build has gone up significantly," Allen said. "Fortunately, we were able to lock in our construction prices early and provide a price-per-square-foot basis lower than $600. We still have some units priced under $500 a square foot."

Pourbaba estimated that hard costs for construction of Sky Las Vegas, with M.J. Dean as general contractor, have risen 8 percent to 10 percent to about $200 million. "What do they say? It ain't over till the fat lady sings," he said.

A lot of predevelopment planning went into the project, including purchasing steel and concrete at prices from two years ago, Pourbaba said. As a result, few changes were made to the plan.

Most of the projects canceled in Las Vegas were due to lack of construction companies capable of doing the job, not lack of buyers, he said.

Certainly, there is insufficient demand to absorb all of the luxury condo units in the pipeline, Applied Analysis principal Brian Gordon said. Observers have predicted that 25 percent to 50 percent of the proposed units will get built.

"While projects that are currently under construction have reached the critical mass in terms of sales to provide sufficient financing, the remaining 16,300 units vying for potential buyers will either prove their ability to move forward in the next 12 months or not," Gordon said. "Construction cost dynamics and consumer perceptions about extended sales periods decrease the likelihood for success for many of these projects."

Location, branding and experience remain keys to success, Gordon said. Projects announced by major operators and development companies are likely to enter the market with greater success.

Nearly 40,000 units in the pipeline are categorized as the hybrid condo-hotel and maintain some sort of rental program. About 70 percent are located around the Strip, including The Residences at MGM, Platinum, Project CityCenter and Cosmopolitan.

2-tower plan surfaces for Scottish Rite block

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BY DAVID ROEDER

The winning bidders for the Scottish Rite block on the Near North Side are showing development plans to the neighbors. The scenario calls for two condo towers on the block's parking lot and preservation of the buildings that occupy the rest of it, including a former cathedral at 929 N. Dearborn.

Mike Skatulski, senior managing director at Mesirow Financial Real Estate, said the towers would be about 30 stories tall and together include 450 to 520 units. Lower floors would be set aside for commercial space and for parking that can't be seen from the street, he said.

The Mesirow division, run by veteran developer Richard Stein, has joined with Enterprise Cos. in agreeing to pay more than $50 million for the block, bounded by Walton, Delaware, State and Dearborn. The seller is the Scottish Rite, a fraternal organization.

Skatulski said the project won't be as tall or dense as others being added to the Near North Side. He hopes the somewhat reduced scale and a commitment to preserve the existing structures, all of which go back to the 19th century, will ease the way politically. The cathedral could be donated to a nonprofit group, and one prospect Skatulski identified is the Newberry Library, which is immediately west of the site.

Representatives of some community groups were briefed about the plans Tuesday night. Skatulski said Chicago's Pappageorge/Haymes Ltd. will provide the architecture.

PITTSFIELD PLAN: Add the landmark Pittsfield Building, 55 E. Washington, to the list of downtown office edifices whose owners are considering new uses. Sources said the building, popular with doctors and dentists, is relocating tenants on seven or eight floors to free space in hopes of landing a hotel. Those floors could be sold while ownership keeps the rest of the building.

Built in 1927, the Pittsfield has undergone recent renovations to its lobby and elevators. It was running about a 25 percent vacancy rate before the hotel idea came along. But one wonders how many boutique hotels downtown can stand. The building owner, Miami Beach-based investor Robert Danial, could not be reached.

LEGAL LEASE: The law firm Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP has leased the top six floors at 200 W. Madison, taking 97,000 square feet in the building owned by Tishman Speyer Properties and Transwestern Investment Co. The firm signed a 15-year lease and is moving from 333 W. Wacker.

LINCOLN LODGE: Spiffier rooms and higher prices are in the offing for the old Days Inn of Lincoln Park, 1816 N. Clark. WexTrust Capital bought it last January for $15.5 million and plans a renovation to take it upscale. The first part of the project is ditching the Days Inn tie. It is being renamed, inaccurately, the Gold Coast Hotel and management has been turned over to Portfolio Hotels and Resorts. WexTrust is looking for a prestigious restaurant to take the ground-floor space.

LOCATION, LOCATION: Duke Realty Corp. is starting construction on an 88,000-square-foot industrial building at 11501 W. Irving Park in Chicago. It's just outside O'Hare Airport's south cargo entrance, and Duke believes it won't be long before its first building inside city limits will have tenants.

"With more than 1 million square feet of industrial product being condemned in the O'Hare Modernization Program, demand for first-generation space near the airport is increasing," said Andy James, senior vice president at Duke. Completion is due in the spring. Colliers Bennett & Kahnweiler Inc. is the leasing agent.

EAST LOOP LIFE: The British-style pub and grub chain Elephant & Castle is taking ground-floor space in Village Green Cos.' renovated apartment building at 185 N. Wabash. It will be the chain's third Chicago location and expands the drinking and dining options for the growing residential district of the East Loop.

DOING THE DEALS: Maurice Fisher, known for his involvement with major malls in the Chicago area, heads a partnership that has purchased the old Ethan Allen Furniture building at 820 E. Roosevelt, Wheaton. The 20,000-square-foot building will be converted into a retail and office center. Champion Realty Advisors LLC brokered the sale. . . . TCB Development Co. acquired a 21-acre business park at 600 Territorial Drive, Bolingbrook, for $7.2 million. The deal includes a 97,000-square-foot building and two 7-acre sites suitable for development. The campus, formerly owned by Molex Inc., can accommodate up to 300,000 square feet. . . . CB Richard Ellis Inc. represented Kester, a supplier of electronic connectors, in its relocation from Des Plaines to 64,000 square feet at 800 W. Thorndale in Itasca, where the company signed a 10-year lease. . . . Owners of the Inn of Chicago, 162 E. Ohio, will re-light the hotel's rooftop sign July 20 as part of a party heralding a planned renovation.