http://www.eastvalleytribune.com/story/117080
Economy shakes out Tempe development projects
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Garin Groff, Tribune
Two years after one big condo tower got the green light in Tempe, the site remains a fenced-off dirt lot. Just down University Drive from that site, a larger cluster of towers has yet to rise more than a year after the city signed off on that ritzy development.
Yet developers opened the sales office Thursday on a 26-story lakefront condo tower they plan to start building this summer.
Click to see the status on some of the major projects in Tempe
And builders are all but falling over themselves to construct hotels on the lake and downtown.
The mix of stalled projects and bullish approaches to other developments in Tempe has left city officials and builders struggling to grasp just how the volatile economy is affecting the community.
The consensus is some of the planned luxury condo towers won't sell in today's economy and will have to wait years for demand to rebound. But the demand for office space, hotel rooms and certain condos is strong enough to still draw massive investment to the community.
Tempe Mayor Hugh Hallman, who holds an economics degree, expressed exasperation at the idea that some delays could jeopardize the larger vision for a denser, more cosmopolitan community.
"The real story is: My God! - people are still investing hundreds of millions of dollars in Tempe," Hallman said.
Builders would have backed out long ago if they didn't have confidence, he said.
Some city-approved projects won't ever happen, Hallman acknowledged, but only because some "bottom-feeders" structured unrealistic transactions that unfairly tarnish the reputation of other projects.
"The silly deals are going to shake out," Hallman said.
City officials and developers will only privately speculate at what deals they consider silly or realistic. But they say some condo projects will have to wait to break ground.
"You can't sugarcoat it," said Chris Salamone, Tempe's community development manager. "We're in for a rough year, but I think Tempe will rebound sooner than others."
One of the earliest plans to get approval but not rise from the ground is Mosaic, a condo tower with a Whole Foods slated for University Drive and Ash Avenue.
The construction permit was about to expire two years after it won approval, but the city granted a one-year extension recently.
The developer hopes to begin work soon, zoning attorney Charles Huellmantel said, adding the city needs to review more building plans before construction can begin. Various city officials have considered that project solid despite delays.
Work on one of Tempe's grandest projects is far enough away that Tempe will pave the site this summer to provide temporary parking. The University Square project won approval in 2006 for three towers of condos, hotels and offices, but the developer will let the city park cars there until it makes a go of it. A representative for the project did not return a call for comment.
Developers are revamping some major projects. The developer of an Apache Boulevard project called Campus Edge has delayed construction while converting it to apartments for college students. The building will move ahead despite economic woes, said Chris Anaradian, Tempe's development services manager.
"By no means are we having people withdraw their interest from Tempe," he said.
Some developers deny the economy has triggered any significant delays. But some acknowledge financial considerations.
The Lumina Tempe condo and hotel project was supposed to begin early this year but will wait until fall or winter. The later start should mean new condos will go up for sale by the time demand improves, said Brian Sciutto, a sales director.
"It puts us out farther in the correction of the market," he said.
About 25 percent of 245 condos are sold, and owner Constellation Property Group doesn't see the need to lower prices in the two-tower project, Sciutto said.
Two major condo projects are open now or about to open, Bridgeview and Centerpoint Condominiums.
Bridgeview at Hayden Ferry Lakeside opened in February and still needs to sell 56 of 104 condos. That's below expectations, said sales manager Bob Normile, who added that only 10 units would remain now in a normal economy.
Several forces have collided at once and hurt the condo market, said Randy Levin, the project manager for Hayden Ferry Lakeside. The credit crisis has left some buyers unable to get loans. Others can't sell their existing homes. And the supply of condos has surged past demand.
"What's going on now is kind of a cleansing process," Levin said. "You have to ask yourself, were there really too many condos that were put on the board here? Was that too much all at one time?"
Levin doesn't see any fatal flaws in other condo projects and figures buyers will pay to live in Tempe, even if it takes longer than bullish developers had expected.
Woes in the condo market delayed a hotel/condo project at Hayden Ferry Lakeside. A Le Meridien hotel with some condos was supposed to open by year's end but hasn't broken ground.
Lenders demanded a hotel-only project, Levin said, which forced a new design. A new plan and new hotel operator will come forth in a few weeks and construction should start soon, he said.
Meanwhile, Levin said "insatiable" demand helped lease out all but half of one story of a 12-story office tower that opened in February at Hayden Ferry Lakeside. Centerpoint Condominiums is set to open one tower in July and another by year's end. About 25 percent of the first tower is sold, said Ken Losch, a principal in Avenue Communities.
Sales are increasing, he said, and will boom in a few months once visitors can see city lights from the top of the tower and experience upscale restaurants that will open this fall.
Losch figures the economy has bottomed out and said buyers must see a few months of improvement to feel confident.
"People need to see a little bit of that bottom in the rear view mirror," he said.
At least one developer expects to start work in a sluggish economy in the hope of opening when the condo market improves.
Onyx Tempe expects to start building a 26-story tower on Tempe Town Lake in four months. It opened a sales center Thursday and has pre-sales on 25 percent of units, said Patrick Tice, vice president of sales. The developer has been raising prices, he said, because it counts on a strong market when the tower is done in 30 months.
"We're going full speed ahead," Tice said.
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Besides there is demand right now for hotel space and they can fullfill that right now.
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