Condo Projects Hit Sweet Spot

Condo Projects Coming
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Within the next two years, downtown Fayetteville will have at least 236 new condo units. And they’re preselling like hotcakes.

Brandon Rains, project manager for The Barber Group, said more than 60 percent of the company’s seven-story Legacy building condominiums have either been presold or reserved for potential buyers. Only 11 of the 37 units are still available. The proposed building will be on Watson Street, one block north of Dickson Street.

Rains said the reservation period, which lasted from August through October, is officially over. During that time, people could have reserved a unit by plopping down a refundable $10,000 or 3 percent of the purchase price, “whichever was greater,” Rains said. Now that the reservation period is over, new contracts for the remaining condos will be binding.

The Legacy building, which includes a first floor restaurant and retail space, is scheduled to be completed and ready for occupancy in the fall of 2006.

Rains said the contract-holders range from young professionals to established business people. They’ve had out-of-state interest, too, from as far away as California and New York.

Veteran developer Richard Alexander of Alexander Merry-Ship & Alt Real Estate Group Inc., or AMA Real Estate, said he’s glad there’s some new condo competition in town.

“The reason I am happy to see 236 units is because if [developers] build 236 units, then 436 units are going to want to come down[town] because you have life down here,” Alexander said when asked about the potential projects in the pipeline.

At one of Alexander’s condo projects, the former St. Joseph’s Church off Lafayette Street, 30 of the 33 units sold before construction was complete.

He said his company’s theory behind downtown development in the last 10 years has always been that residential activity breeds more commercial activity.

Among several other projects, Alexander developed the UARK Bowl on Dickson Street. The 14-unit project opened in 2002. Ted Belden, Rob Merry-Ship and the late Lamar Anderson were also owners.

Alexander is also developing several condo projects scheduled to open in 2007 off the downtown Fayetteville square including units in the Bank of America building, the old McRoy & McNair building and Renaissance Towers, a hotel and condo project which will be on the site of the old Mountain Inn.

“The renaissance of the downtown is happening precisely because we are introducing downtown residential,” Alexander said.

He said it means a return of the commercial businesses that fled the area as it deteriorated in the 1970s.

The Deal

If current market conditions prevail, buyers could stand to win big appreciation in the coming years.

It’s all about the cash buyer, said Jason Daugherty. Daugherty has bought three condo units at the UARK Bowl in the last year and has sold one of them.

He started buying real estate when he graduated from high school in 1997 and is a co-owner of a human resource staffing and consulting company in Fayetteville.

Daugherty said when a buyer doesn’t need a bank loan, the appraisal is left out and the “comp” or value of comparable property in the area increases.

For Daugherty that means by $40 to $50 per SF in appreciation since his January purchase of two condo units at the UARK Bowl on Dickson Street.

Sheree Alt, principal broker with AMA Real Estate, said two of the group’s 22 condo units on Campbell Avenue sold for $80 per SF more within one year.

“That’s interesting for an 8-to-9-year-old property,” Alt said.

The last unit at the UARK Bowl sold for $385,000, or $210 per SF, she said.

Daugherty said he rents his UARK condo units for $1,200 per month, or about $1 per SF.

He said he originally bought at the UARK Bowl for personal use and as an investment tool. He occupied one unit for about six months, which gave him the benefit of owner-occupied interest rates.

He said at the price point he can rent those units, he can make a cash flow, meaning the rental income covers the bank note. So the bill is paid and Daugherty benefits from the market appreciation.

Daugherty said renting a condo requires much less maintenance than a rental house. There’s no garage or lawn to fiddle with.

“You can only build so many condo units off Dickson,” Daugherty said. “The value is only going to continue to skyrocket with what Fayetteville has done to the downtown area.”

Daugherty has reserved a unit in the Legacy building, where he plans to live and finance it with beneficial owner-occupied rates. He said he went for a condo in the middle of their range of offerings for a better chance at resale.

“When you get to the $500,000 and up, there aren’t as many people that want [the condos] as second homes,” Daugherty said.

Rob Merry-Ship, a partner in AMA Real Estate, said building the right volume at the right price points is key.

“You can price yourself out of the market,” he said.

That’s why Merry-Ship and Alexander, along with various other investors at various times, such as Belden and John Nock, build to rent if they have to.

That’s what happened at the UARK Bowl when the project opened.

“The beauty of that project was that we rented them for a year [remaining condo units] and as the leases came up, we bought or sold them,” Merry-Ship said.

He said too much of a higher-end inventory will sit on the market.

“I look at it as either rental or sales,” Merry-Ship said. “[Renting] pays the note, and you keep the value.”

Merry-Ship said about 50 percent of the units at The Lofts at Underwood Plaza are reserved. Developers Bill and Craig Underwood, Belden, John Chambers, Merry-Ship and Alexander are asking buyers to put down 10 percent of the purchase price for a reserved condo spot.

Perhaps the Lone Ranger in the condo drive is Kevin Curry.

Curry, who lives in New York, has owned his own 5-acre morsel of land off Razorback Road since 1985.

But he didn’t just “fall into” his 42-unit Barnhill Condo project. He conceived it about three years ago.

He said national buying trends created by the baby boomer generation, coupled with the “impressive growth” of college sports and the growth of Northwest Arkansas, make it the right time to develop.

Curry has listed condo units, which start from $225,000 for an 875-SF unit, with Brett Hash of Re/Max Associates in Fayetteville.

Crossland Construction Co. of Rogers will build the five-story steel structured building that offers spaces up to 3,500 SF that can be divided.

Curry said he has invested in real estate projects for more than 20 years.

He should know about calculating risk because the MIT graduate is an over-the-counter derivatives expert. When asked to explain, Curry said he deals in custom Wall Street transactions valued at $100 million and above in a $36 trillion-per-year global market, although he said he is “essentially retired.”

“I do feel Fayetteville is the cultural hub of Northwest Arkansas and Arkansas,” Curry said.

Curry said he hasn’t started his reservation program yet, but plans to in the next few months. All of the Barnhill residents will have community access to a 4,500-SF entertainment terrace and an “iconic view” of the University of Arkansas athletic fields.

Curry said he thinks there is a segment of the market that would like to be directly across from the Razorback football stadium.

Will Fayetteville reach a saturation point?

Merry-Ship said he thinks there will be a pricing saturation point.

“I think the trend there will be a lot of these built and they will go higher and higher in price,” Merry-Ship said.

What will become tough will be the ability to build smaller units at an affordable price.

“When you build small you still have to put the utilities in,” Merry-Ship said. “When you get them too large you run the risk they could sit there awhile.”

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