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In the face of stricter lending practices for both buyers and developers, the downtown multifamily housing market is making adjustments.
Some proposed condominium projects are shifting to apartment rentals. Others are trying to wait out the recession. Those sticking with condo sales are working around new lending standards.
Speaking at the Downtown Alliance of San Antonio's State of Downtown Luncheon Monday in the Hyatt Regency, part of the organization's Urban Renaissance series, real estate agent and Centro Properties President Debra Maltz said a March change in lending requirements made purchasing a condo in a new development very difficult.
The new lending standards require, among other things, that 70 percent of units be sold before a new sale in a project can be financed.
“For now, it makes the condo sales market pretty challenging,” Maltz said.
Developers of projects such as St. Benedict's on South Alamo Street have ditched their original condo model and will be leasing out apartment units. The changing marketplace also has affected the proposed Clay Street Flats on Probandt Street and Steel House Lofts on South Flores Street.
“A creditworthy buyer with a 20 percent down payment would have an almost impossible time financing a condominium that was built in a new project,” said Chad Carey, the acquisitions manager with Regent Living, the San Antonio development company behind the Clay Street Flats.
The project is indefinitely on hold until Regent can secure financing, Carey said.
Dennis McDaniel, one of the developers of the Steel House Lofts, said the decision to switch from condos to apartments was made last year, before lending practices changed, because it became clear selling would be more challenging than renting. He's in the process of securing financing for the 71-unit development in the former Peden Iron & Steel Co. warehouse, McDaniel said, with construction scheduled to begin early next year.
“You know, when the crisis started a little over a year ago, it just looked like it was going to be tougher for condos,” McDaniel said. “And I don't have any condo experience; I have apartment experience.”
There is demand for downtown apartments, Maltz said. The 247-unit Vistana, which opened in spring, is more than 70 percent leased and the first two phases of the 66-unit St. Benedict's project are 50 percent leased, she said. The last phase is scheduled for completion by the end of the year.
New developments that stick with the condo model have found ways to get around the tightened lending standards. Scott Nisson, sales director for the Alteza condos on top of the Grand Hyatt hotel, said Alteza worked with lenders to secure financing for qualified buyers.
Loans have been made for more than 30 of the 146 condos for sale, Nisson said, and the first residents will be able to move in next month.
Other higher-end condo projects near downtown are being spared the effects of the changing lending standards, too.
Mike Reddell, president of Ironstone Marketing Group, the company handling marketing for The Broadway at Hildebrand Avenue and Broadway, said the condo development hasn't had to deal with buyer-financing problems.
“Our buyer already comes with their private banker,” Reddell said. “We don't have a lot of problems with financing because they have their own private banker or qualify for a private banker.”
Also speaking at the State of Downtown Luncheon was Don Thomas, a principal at Reata Real Estate Services, who said the downtown retail and office markets already are beginning to recover. Continued growth in the retail market, Thomas said, hinges on residential growth.
“I think that the future for downtown San Antonio, as far as retail is concerned, is tied to residential,” he said. “For downtown retail truly to thrive, we need more people living in the downtown area.”