Wednesday, December 5, 2007

Condo Conversions Out, Condo Reversions In

From the Pittsburgh Post-Gazette:

“At the same time, after years of existing apartment buildings being converted into condominiums, the trend is reversing; according to Real Capital Analytics, a New York-based research company, ‘reversions’ -- condo buildings that were turned back into rentals -- outstripped condo conversions in the second quarter of 2007, the first time that has happened since the 1980s.”

From The Wall Street Journal:

“That is the strategy developers and lenders are aiming to use on billions of dollars of troubled condo complexes. ‘If there's a potential rainbow out there in the clouds, it's that some of these stalled condo projects work as rentals,’ says Roger Winston, an attorney at Ballard Spahr Andrews & Ingersoll LLP in Bethesda, Md., who advised owners on several so-called condo reversions.

And while a few reversions have succeeded, the obstacles to make the switch from condo to rental are high. Among the hurdles: lenders reluctant to lengthen loan terms because rental properties produce income more slowly than condos; irate condo owners who don't want to live with renters; crushing tax assessments based on old condo sales prices; and a rental market that is weak in some of the worst-hit condo markets, such as Florida and Arizona.”

From Apartment Finance Today:

“The supply of half-built and unsold condominiums was described as both a threat and a potential opportunity. Can a developer make money taking over a ‘busted condo’ and retooling it as rental housing? Yes, said Bozzuto, but it’s very difficult, especially on half-completed projects that have some occupancy by buyers.”

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