55 West shifts gears to survive
What began as a project that aspired to create an upscale urban neighborhood, including lavish $4 million penthouses, in the core of downtown is ending with the humble hopes of leasing enough units to keep the lights on through a painful recession.
The first renters will move into the tower that took the place of the old Church Street Market in August. It’s a strategy by the project’s lender, which initiated a foreclosure on the building last year, to wait out the housing bust.
“I don’t think in this market that we would be successful in trying to sell them no matter what price we put them at,” said Bob Hensley of Grosse Pointe Development, who was brought in by Dutch lender SNS Property Finance to finish the project. “The bank is taking a hit on the project, they’ve acknowledged that.”
It’s a big hit to the tune of about $180 million, according to court documents filed in the foreclosure proceeding.
Loans to the original developer Euro American Advisors totaled $132.8 million in 2004 and later loans and fees totaled more than $45 million, records show.
The bank’s decision to lease the more than 300 units brings about the best chance for Church Street, which has been plagued by development disasters in recent years, and the project’s survival.
“We believe in downtown, we believe in the market,” Hensley said. “If you shut it down, you still have to pay taxes, utilities, security. [Leasing] helps defer some of those day-to-day expenses.”
That model is becoming more and more common. The Paramount on Lake Eola has turned to leasing at least some of its units to keep cash flow coming in.
Today brings the yin to 2003’s yang when downtown apartment developers were clamoring to prove condominiums weren’t just for the beach by putting their units up for sale. Fast forward to 2009 and the reverse trend is playing out as condominium developers rush to fill a demand for apartments now that financingfor condo buyers is so scarce.
Thomas Allen of Urbanista, which focuses on resales and rental of downtown condos, said the building will help fill a void of work-force housing at affordable rates
“You really have a nice level of apartments we’ve never had in the city’s history,” he said.
He estimated the demand was strong enough to see 55 West at an 80 percent occupancy rate within about 18 months. The smallest apartments, which were once on the market as condos for $219,000, will likely rent for just under $1,000 a month.
Eventually the lender would like to put all of the units back up for sale.
Hensley said it could be as many as five years before that happens.
Interior construction on the tower’s upper floors, which was temporarily stopped while the lender attempted a deal with a hotel to fill some of the space, will likely be complete in October.
Still uncertain is what will become of the shells for the penthouses at the top of the tower. Even if the condo market is revived, it is doubtful it would support the $4 million units intended for the space. Options now include office space or other commercial uses.
“That’s not our highest priority right now.”
[zilla_alert style=”white”] Originally posted on the Orlando Sentinel website by Beth Kassab. [/zilla_alert]