By John Schaffner
As real estate brokers begin to see some uptick in residential sales activity in Buckhead, some of the major condominium projects that came on the market in the past 18 months are still suffering.
Several are going into foreclosure and others are desperately trying to refinance loans.
At the beginning of February, the Mansion on Peachtree, at 3376 Peachtree Road, was sold to New York-based iStar Financial Inc., the primary lender on the project, for $66.1 million. The building’s original owner, Atlanta-based City Centre Properties, said it tried to renegotiate two loans totaling $187 million earlier this year. The 1.62 acres the Mansion was built on was purchased for $10 million in 2004.
The 127-room luxury hotel at the Mansion, run by Rosewood Hotels & Resorts, has continued to operate through the transition.
At the time of the sale, only seven of the 40 high-priced condos had sold at the Mansion. An 8,000-square-foot penthouse unit sold in 2009 for approximately $4 million, but the sale price was 60 percent less than the original $10 million asking price.
It is a story that has played out several times recently in regards to Buckhead condo projects, although there have been some modest bright spots in the market as well.
Cousins Properties’ 32-story 10 Terminus Place, which opened in 2008 at the corner of Peachtree and Piedmont Roads, has sold all but about 50 of its 137 condo units, partially due to the company’s “Easy As 1, 2, 3” program, which Cousins officials confirmed. Launched last August, the program offers savings for qualified buyers of $100,000 on one-bedroom units, $200,000 on two-bedroom units and $300,000 on three-bedroom units off the original listed prices.
The Gallery, a joint venture of the Novare Group and Coro Realty Advisors at 2795 Peachtree Road in Buckhead, has seen a steady flow of potential buyers since the beginning of the year “and improved sales,” said John Lundeen, president of Coro Realty, following what he termed “a modest discount in prices of the units to be competitive in the market.” Ownership of the 205 units at the 26-story Gallery is approaching 60 percent.
Lundeen said there never has been a risk of foreclosure on loans with the Gallery, even when Novare was reportedly having problems with its lenders during 2009.
Since that time, Novare, one of the largest condominium developers in the Atlanta market and the southeastern United States, reported it has been granted a nearly three-year extension from private investors on the payback of some $26 million in debt. Novare Group president and CEO Jim Borders reported that notes that would have matured in January 2010 have been extended until December 2012.
The St. Regis Atlanta Hotel & Residences on East Paces Ferry Road touted having commitments on all but six of its 53 condo units when it opened last year, but by mid-January only 16 sales had closed, a fate suffered by many of the high-end condo projects offering multi-million-dollar units for sale, according to national and local published reports. The Mansion and also the Sovereign condos, which were developed by Regent Partners at 3344 Peachtree Road remain mostly unoccupied.
The question that has been asked is whether the Atlanta market wasn’t still years away from being ready for $1 million condos.
But even condo projects selling units in the high $300,000 to $700,000 range have had trouble closing sales in the past two years and have faced tough times with lenders, in some cases losing out to foreclosure.
Regent Partners and its partner Urban Realty Partners in January lost The Brookwood in foreclosure to an affiliate of Starwood Capital Group. Not one of the 219 luxury condo units had sold in the 20-story LEED-certified building, which was completed mid-2009 on Peachtree Road near Piedmont Hospital.
Atlanta-based developer The Dawson Co. had its 352-unit Eon at Lindbergh condo building, near the MARTA headquarters in Lindbergh City Center off Piedmont Road in Buckhead, was foreclosed upon Jan. 5 for about $43 million, according to real estate research firm Databank, Inc. The original loan value was about $56 million. Eon is part of the residential component of the large mixed-use development that sprang up around the Lindbergh MARTA rail station.
The problem selling Buckhead condo units since the downturn in the economy began in 2008 has been exacerbated by the number of new condo projects and number of new condo units that were completed and came on the market for sale since that time.
Acknowledging that no project or developer has been immune to the downturn, Buckhead Coalition President Sam Massell, the ever-optimistic honorary “mayor of Buckhead,” has said, “Buckhead will come back, as will the city’s best developers.”