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More apartments around Valley being reincarnated as condos

Erica Sagon
Arizona Business Gazette
Nov. 11, 2004 12:00 AM

Hundreds of apartments will be reincarnated as condominiums this year, giving first-time homeowners and other budget-conscious buyers an affordable option to living in prime parts of the Valley.

Industry experts say the trend of converting apartments to condos is back after a 25-year hiatus. More apartment developers are checking out of the rental industry, hurt by the longest home-buying streak in history. Conversions could help tighten the supply of apartments and help Phoenix’s notoriously soft apartment market rebound.

Developers will rebrand nearly 500 apartments as condos this year, and as many as 1,300 could convert in 2005, said apartment broker Sean Cunningham of CB Richard Ellis.

Converting is a national trend, led by rampant activity in cities such as Las Vegas, where 12,000 apartments are marked for conversion.

Condo sales are hot across the board, including luxury high-rise ones, but those that were former apartments have an added bonus: They’re typically cheaper than newly built condos and existing single-family homes.

At Las Brisas Condominiums at 8011 N. Seventh St., Phoenix, units sell for $99,990 to $173,490. This falls below the median single-family home price of $179,500 in metro Phoenix, according to the Arizona Real Estate Center at Arizona State University. The 273-unit development went condo in late October.

And compared with prices of homes in north Scottsdale’s upscale Grayhawk master-planned community, condos at nearby Venu look affordable at $160,000 to $400,000. But don’t expect to find a bargain: Most of the 50 remaining units go for $275,000 and above.

Converting apartments to condos involves a range of alterations. Some older units are gutted and rebuilt. Others are simply given a fresh coat of paint and new carpet, and can look like you are buying, well, an apartment.

But buyers aren’t stuck with that look. Many developers let people choose their upgrades, from designer lighting and granite countertops to Travertine tile and hardwood floors. Buyers can easily add thousands to their base price.

“The majority of our home buyers are upgrading about $15,000,” said developer Ken Losch, who converted Venu this year.

Herbert and Ingrid Marlow recently spent $240,000 on a two-bedroom, 1,200-square-foot condo at Venu.

The couple consulted Venu’s in-house interior design center to add $18,000 worth of “personal touches,” such as stainless-steel appliances and new carpet, to their second home.

“We are happy campers,” said Herbert, 72, of Vancouver, British Columbia.

Venu didn’t undergo dramatic physical changes because the units were built four years ago with a conversion in mind. The development was formerly luxury apartments known as the Enclave. Losch waited for the area to mature, and then made the switch in January. Another of Losch’s conversions is Edge at Grayhawk, formerly known as the Lofts at Grayhawk.

This fresh crop of condos is a welcome addition for younger buyers who want to live in Scottsdale but can’t afford a $300,000 home.

Real estate agents like Penny Kula are happy to have the new inventory, too. She has sold nine conversions in the past few months.

“Condos, for about the last year, have been a really, really hot market,” said Kula, of Coldwell Banker Pinnacle Peak Realty. “Between the time they purchase it and the time they close escrow, they’ve already made good money.”

Reservations were six deep for some units in Scottsdale’s Arcadia Creek community, Kula said. The part-condo, part-apartment development on Scottsdale Road south of Shea Boulevard, sold out on its first release of 100 condos almost immediately. The next round of condos there will be available in early 2005.

“Everything that has been brought to the marketplace for condominium conversion has sold rapidly,” Cunningham said.

Developers are shopping for properties in north Scottsdale and northeast Phoenix. The qualities that make a property prime for conversion are changing.

Three years ago, developers were looking at communities with 150 apartments or less. Now, 300 units and more are acceptable. An abundance of one-bedroom apartments is no longer a turnoff.

Desirable developments average 1,000 square feet per unit. Upper-end amenities like clubhouses, business centers and fitness rooms are a plus.

Losch said Venu’s $3 million clubhouse, known as the Great Room, is especially attractive to buyers with an active lifestyle. Amenities were a big reason the Marlows bought a condo there.

At Venu, tenants are given the chance to buy the units they are renting before they open to the public as condos.

Mike Padgett
The Business Journal

Metropolitan Phoenix has become the nation’s leading new housing market, finally passing perennial high-growth leader Atlanta, according to leading Arizona housing analyst R.L. Brown.

“Using data through July 2004, the feds calculate that Phoenix had 34,190 new home permits while Atlanta had 33,730,” said Brown, publisher of The Phoenix Housing Market Letter.

Brown’s own numbers for metro Phoenix in the first half of 2004 are slightly higher — 35,296 new home permits. That total is 29 percent higher than the 26,510 new home permits issued during the comparable time period in 2003.

Brown, in his newest monthly report, said his tally for the month of September reached 5,504, up nearly 24 percent from the 4,450 issued in September 2003.

Through September, the metro Phoenix total reached 46,559, up more than 29 percent from the 35,958 issued during the same time period a year ago.

Brown added that metro Phoenix’s resale market is experiencing a similar growth rate. Nearly 84,000 resale homes changed owners during the first nine months of this year, up more than 26 percent over last year’s 66,357 total.

Brown said he has counted 51 active residential subdivisions in the Hunt Highway corridor southeast of Queen Creek to Florence and Coolidge. So far this year in that area, he has counted nearly 2,000 closings on new homes and 3,970 lots waiting for building permits.

He added that central Arizona continues gaining interest from the home-building industry.

“The Phoenix builders have discovered Yavapai County, and we expect a virtual explosion of new housing and populations in Yavapai County in the near and mid-terms,” he said.