Mar. 21, 2008

Uptown condo boom is fading

'In a bit of a holding pattern'

DOUG SMITH

Uptown's once sizzling high-rise housing market is showing signs of cooling.

Two projects have been postponed, and now work has slowed on another condo tower and stopped temporarily on yet another.

Even more evidence of a shift: Billionaire Donald Trump's planning for a project that could have raised Charlotte's national profile is officially on hold.

Financial market turmoil, building code snags and rising construction costs are factors, but risk-conscious lenders are largely responsible for the delays.

"The lending environment is putting an enormous amount of pressure on the developers and contractors as well," said residential real estate analyst Emma Littlejohn of The Littlejohn Group. "Regardless of the amount of pre-sales and contracts, lenders are limiting their exposure to residential projects."

The two postponed projects -- the One Charlotte condo tower next to the Westin Charlotte and the 300 South Tryon office-condo complex -- were shelved in January.

Work is continuing on four condo high-rises.

But over the past 10 months, no condo towers have been announced in a market that saw plans disclosed for 20 residential towers within about 3 1/2 years.

The latest signs of trouble are at The Park Condominiums at Third and Caldwell streets and the 210 Trade condos in the EpiCentre mixed-use project at Trade and College streets.

Skyline watchers near the 21-story The Park say they haven't noticed any exterior progress since late last year.

Developer Pete Verna of Verna & Associates confirmed, "We are not going full bore, but we have people working every day now."

He said, "We are doing some redesign," but he declined to elaborate on causes for the delay.

"Due to changes in the market we will re-analyze our position and make a positive announcement about May 1," he said.

Verna said the 106-unit tower is about 80 percent complete and potentially could be finished by the fourth quarter.

Both Verna and the 210 Trade developers said they had strong enough sales in advance of construction to secure financing, and that their delays are not tied to a lack of demand.

Indianapolis developer Flaherty & Collins Properties hopes to resume construction of 50-story 210 Trade by the end of the month after losing about two months' time, said David Flaherty, chief executive.

The project's lenders -- U.S. Bancorp and Corus Bankshares -- ordered construction stopped after being informed of the developer's building code issues, he said.

The problem arose with the city's code enforcement department after it discovered the project had been filed as a single-owner building on the EpiCentre site, when ownership actually will be shared by the owners of the condo tower, the office-entertainment complex and a hotel.

To resolve the issue, Flaherty said, the owners are having attorneys draw up a condo agreement to show how each entity will satisfy the city's code requirements.

The situation, discovered after construction started, was unique in Charlotte high-rise construction because of the multiple ownership on the site, said code enforcement's Edward Prince.

Other condo towers proceeded without issue, he said, because they were single-owner.

Flaherty said about 70 percent of the 400-plus units in 210 Trade have been sold and the developer should be able to meet its late 2010 completion timetable.

At the Trump Organization in New York, Donald's son Eric said Wednesday that, "It's the debt market and pretty much everything else. This would not be the time to launch something."

Trump's contract to purchase 2.5 acres at South Tryon and Stonewall streets from Crescent Resources expired late last year, according to real estate sources familiar with the deal. In December, the Trumps said they were hoping to complete the land deal by the end of the year.

The Trumps arrived in Charlotte last March to begin evaluating the site for a potential 60-story or taller office building and possibly a condo tower, five-star hotel and upscale retail.

Now, said Eric Trump, "We are in a bit of a holding pattern. We still love Charlotte. When we do come, it will be in a very significant way."

The South Tryon site might not be available if Crescent Resources finds another buyer or decides later to develop the block itself.

The Trump Organization is willing to look at other site options, Eric Trump said.

Real estate analysts don't believe the slowdown signals an end to the residential surge, which Charlotte Center City Partners estimates could push the uptown population from about 10,000 today to more than 21,000 by 2012.

With the delays and lack of new project announcements, Littlejohn said, the demand for an uptown residence could outstrip the supply.

DEVELOPMENT / Doug Smith

4 projects moving forward

Construction is proceeding on four high-rise residential projects

• The Garrison at Graham was delayed last fall when financing fell through. But the developer, Thomas Barnes, found local replacement investors and resumed construction this month on the 11-story, 41-unit condo building on North Graham Street.

• Catalyst, a 27-story tower being developed by Novare Group, is up to 18 floors at South Church Street and Martin Luther King Boulevard, said Tony Skillbeck, president of the company's Carolinas Division.

"We actually had financed before the credit crunch," he said. "But our lenders are looking at us on a monthly basis. It's a little bit more stringent than it used to be."

Condo sales in the 462-unit project are to begin in six to seven weeks, Skillbeck said. The structure should reach its highest elevation by the first quarter of 2009, he said.

• The Vue is under construction in Fourth Ward, and the first of the 50-story project's 409 units should be ready for occupancy in summer 2010, said developer Dan McLean, president and chief executive officer of Chicago's MCL Cos.

• The Tower, a 15-story, 26-unit condo project, is under construction between the Hampton Inn and Hilton Garden hotels on East Second Street. Developer Lee Curry said a model condo should be ready in about a month.

In an uncertain market, he said, he's being cautious.

"We want people to know what it is going to look like before we start selling," Curry said. "We want them to know it is going to be built."