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Condo-conversion craze sweeps through Lowcountry
By Dennis Quick
Senior Staff Writer
Last June, River Point Row, a former apartment community on James Island, converted to condominiums. Of the 132 units, only two remain unsold.
In December, Melrose Park Town Homes, a 156-unit apartment community in West Ashley, changed ownership and announced the apartments were converting to condominiums.
It’s all part of a trend that for the past two years has spread throughout the Lowcountry.
Between 500 and 600 apartment units in the Charleston area were converted to condominiums last year, estimates Raymond Case, president and broker-in-charge of North Charleston-based commercial real estate firm Coldwell Banker Commercial Atlantic International Inc. Case expects another 500 to 600 units to be converted this year. About 300 units were converted in 2003.
Trademark Properties on James Island has converted about 1,400 Lowcountry apartments during the past three years, according to Richard Davis, Trademark’s president and CEO. Trademark recently converted the 300-unit Enclave apartment complex on James Island and will begin selling the units on Feb. 12.
“It’s not just a Charleston trend, it’s a national trend,” says Case. “It’s happening in Las Vegas, New York, Miami, L.A., everywhere.”
Last year in Fairfax County, Va., 3,400 apartment units were converted to condominiums. In Las Vegas, more than 12,000 units were converted in 2004.
The driver behind the condo-conversion trend is the demand for affordable home ownership. In the Lowcountry, the average cost of a single-family home is about $259,390, according to the Charleston Trident Association of Realtors. The area’s average salary is roughly $31,430.
“For affordable housing, condo conversions are about the only thing you’ve got left,” says John Vance, a real estate agent with Premier Properties of Charleston LLC. “New construction is far out of reach” for many aspiring homebuyers.
One-bedroom condominiums at River Point Row, marketed by Premier Properties, began selling for $79,900, says Vance. Those units now sell for $86,900. Two-bedroom units, all of which have sold out, would sell for about $96,900. Regime fees to cover lawn care, repairs, water and sewer fees, and other costs range from $136 to $154 a month, depending on the size of the units. The dwellings are from 750 to 1,050 square feet.
Buyers are snatching up condo conversions almost as soon as the dwellings hit the market. River Point Row sold 32 units in one week, Vance points out. He says many parents bought them for their college-age kids because the property appreciation and the tax write-off make it a better deal than renting. Retired seniors also have purchased units.
In November, 140 units of Daniel Island’s 254 Seven Farms Drive condominium community sold in one day. More than 800 potential buyers vied for the dwellings. The one-, two- and three-bedroom condos sold from the low $100,000-range to $205,500. All 40 units of the second phase sold out in December. 254 Seven Farms Drive was intended to be an apartment community but switched to condos before construction began.
“With low interest rates, why rent when you can own? That’s what’s driving this,” explains Matt Sloan, COO of the Daniel Island Co.
Sloan adds that in 2003, the island’s 292-unit Daniel’s Landing apartment community converted to condos, with units selling from more than $100,000 to $300,000. Many renters bought their units. Sloan points out that the condo communities are Daniel Island’s most affordable.
The condo-conversion craze makes sound business sense for the investors who buy apartment complexes and convert them, says Case. For example, an investor who buys a unit for $60,000 usually sells it as a $90,000 condo. Conversion costs, which include replacing appliances and sprucing up the place, can be minimal if the buildings already meet fire protection and other safety codes and are in good condition.
“It’s less expensive to buy apartments and convert them than to build new condos from scratch,” Case notes. “With existing apartments you’ve already got the buildings, the infrastructure, the nearby schools.”
Case also points out that building new structures means developing new land, which means facing zoning ordinances designed to limit population density.
The absorption of apartment units into the Lowcountry condo market has created another housing need: more apartments. Apartment builders are well aware of this. “They’re all over Charleston,” Case says, adding that his real estate firm has apartment-building contracts with builders form Georgia, Florida, Kentucky and Virginia.
Case sees the condo-conversion trend continuing through the first quarter of 2006. He believes two factors will slow the trend: a rise in interest rates and the building of affordable town houses, the Lowcountry’s next hot housing trend.
Dennis Quick is senior staff writer for the Business Journal. E-mail him at dquick@crbj.com.
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