In the thick of the condo boom, developers became experts at something called the “pre-construction” sale. They’d put together a bunch of glossy materials and drawings for their luxury units. After eyeing the goods, moneyed types from all over would put down a deposit and await “delivery” of their granite countertops and exposed concrete.
The managers of a condo project at the thriving corner of 14th and T Streets NW, however, never even got to that point. A couple of weeks ago, they put a sign in the window of their property at 1840 14th St. seeking commercial tenants. “We’ve reprogrammed it as office and retail, and we’re hoping to begin construction in the near future,” says Steve Cassell, a vice president for Four Points LLC, the building’s owner.
The high-end condos slated for 14th and T were more than just another set of high-end condos. The Washington Post picked the development as a bellwether of a changing District. To make room for the upscale housing, the developers bought the property from the Church of the Rapture for $10 million. The project was to be called the Rapture Lofts. The Post found the upheaval around 14th and T compelling enough to fashion a two-part series in November 2005 around it. The series, in its own words, caught the intersection in “that split-second before the curtain drops on one era and rises on another.”
But now another curtain is rising, and the corner once again finds itself epitomizing the latest trend in District real estate—the condo glut. In 2006, about 14,500 condo units were taken off the market either through cancellation or conversion to rentals, according to William Rich, a vice president of the Alexandria research firm Delta Associates. And condo sales in the past year have dropped by about 50 percent compared with the previous year.
Those numbers put the condo buyer in a lofty position. “There’s now more inventory,” says real estate agent Stephen Oblian of Long & Foster. That means buyers can spend endless hours each weekend actually touring prospective condos, instead of just looking at pictures.
Lenders have taken note of the hard sell that condos have become. A few years back, in the middle of the madness, developers had less trouble getting financing for a sleek new condo project. According to Cassell, some banks would get behind a project even if the builder had as few as 20 percent, or even zero percent, of the units sold under pre-construction contracts.
Now, he says, the requirements have shot up to the point that 50 or 75 percent of the units have to be sold before the financing will be released. “These are $650,000 to $900,000 condos, and you need 20 contracts before you start building. That makes it really difficult to make the project work,” says Cassell.
Another project bummer would be historic preservation. The building sits in the boundaries of the U Street Historic District. “You can’t just go into these buildings and blow them out and make them go 75 feet into the air,” says Jim Abdo, president and CEO of D.C.-based Abdo Development. Preservation imperatives resulted in a wedding-cake design that crimped the developer’s ambitions for the site. And city regulations kept them from gutting the building’s interior. Cassell won’t say what sort of retail may be in store at the site. “We’re at the very beginning of the process. We’re considering different types of retailers,” he says, noting that the space should be occupied by early 2008. Wayne Dickson of Blake Dickson Real Estate Services LLC, the company that’s handling the building’s retail space, declined to comment for this story.
Managing a building populated by a bunch of fussy store owners and lawyers is a big step down from the condo option, which offers a bundle of quick cash and no long-term involvement with the building’s upkeep. If the owner had pounced a year or so earlier, it might have worked in his favor.
“When a market shifts,” says Abdo, “you can find yourself standing when the music stops.”