‘They’ll never sell’ condos have done pretty well

Friday, October 30, 2015, Vol. 39, No. 44

Buying or searching for condos in Nashville can be daunting, especially for those who are fixated on price per square foot. Perhaps a history lesson would be helpful.

In late 2003, when Tony Giarratana announced plans to build the Viridian, it raised the eyebrows, along with the doubts, of the real estate community since there had been no new residential high-rise constructed in downtown Nashville since a moratorium on such development had been issued in the 1960s.

Many said it would not work. Nashville people need yards and square footage, and no one would pay the price per square foot Giarratana was suggesting.

Giarratana began to presale the units at the time of the announcement, requiring a modest $5,000 in earnest money, a sum the naysayers abhorred, saying most of his buyers would walk prior to closing – once they came to their senses.

In this development and many more of late that followed, time was on Giarratana’s side. He completed the project in 2006 and closed his sales prior to the Great Recession, losing but a few sales of his 300 units. Those were quickly re-sold at higher prices.

Unit 1003 in the Viridian sold for $355,200 in 2006, and then was sold earlier this year for $600,000 with its 1,468 square feet, two bedrooms and two full baths. That $408 per square foot.

The original owner would have realized a gross profit of $244,800 on his $355,200, except that the original owners only borrowed 80 percent of the price and invested $71,040. A $244,800 return on $71,040 works well in the minds of most.

Following the success of the Viridian, cranes began to dot the skyline, with the Adelicia and the Icon gaining the most attention at the time.

In 2010, as the recession hovered over the city, a 1,585-square-foot, two bedroom, two and a-half bath unit at the Adelicia sold for $625,000. Last week, that same unit sold for $775,000 after having been listed for $899,900, or $488 per square foot.

Developer Ray Hensler did not blink as the recession settled into the real estate market, requiring large earnest money deposits and closed a remarkable majority of his sales at the Adelicia, even as the city’s market took a savage beating.

The Icon in the Gulch was the most debated project in those times.

Following Giarratana’s lead with the Viridian, Bristol Development teamed with Village Real Estate Services and began presales of 232 units, requiring a $5,000 deposit. At the time, they had intended to have an additional 240 units designated as apartments in the lower floors of the building.

Even the most optimistic never envisioned what would happen. All 232 Icon condos sold in a 32-hour period.

Many real estate experts – the same who doubted the Viridian – scoffed at the results, citing the lack of down payments and unenforceability of the contracts.

Bristol cared not and quickly began plans to convert the proposed apartments to condos. The other 240 were on the market within weeks but did not sell as well as the first batch, requiring almost two weeks to sell out.

Before construction was completed, the Great Recession hit and, as predicted, many of the buyers fell away. However, the attorneys for Bristol held that the contracts were valid and, in a number of cases, Bristol was able to recoup some marketing expense, often as much as $25,000 for those that did not close.

It was a Catch 22: While many people wanted to buy Icons condos, banks were not lending money because too few had been sold. Had the banks loaned the money, more would have been sold.

Soon, lenders opened their wallets, and the Icon units sold.

Last week, Linda Byrd and Alexa Bass, two of the city’s leading Realtors, closed Unit 637 at the Icon for for $600,000.

With 1,323 square feet, two bedrooms and two full baths, this home sold for $453 per square foot. In her remarks, Byrd noted the condo “had dark wenge wood flooring,” a finish much more popular than the light wenge, to be sure.

Two parking spaces were included along with a $5,000 decorating allowance.

To recap, last week’s sales have:

The Adelicia at $488 per square foot, though one sold for more than $1,000 per square foot

The Icon at $453 per square foot, with other sales in the building topping $600 per square foot in 2015.

A Viridian unit selling for $408, while others have topped $485 this year.

Twelve Twelve with prices ranging from $585 per square foot to several of more than $800 per square foot.

Perhaps, finally, Nashville buyers can put this price-per-square foot monster to rest. Maybe it will migrate into the single family neighborhoods.

Richard Courtney is a licensed real estate broker with Christianson, Patterson, Courtney, and Associates and can be reached at Richard@richardcourtney.com.