Condo Developer becomes Apartment Developer on Stella Street project in Wenatchee!
The Stella Street Condominium project, just off McKittrick in Wenatchee completed its phase 1 of 24 units just this September. Of course, this is not the ideal time to have inventory coming on the market so the developer, Gary Noyes, is getting adjusting his game plan to rent the units as apartments.
According to an article in the Wenatchee Business Journal by Ryan Bently, normally Mr. Noyes would expect to sell the units as condominiums in about 6 months. In the current market, it would take much longer. So, to adjust to the market, he will now rent the condos as apartments. He intends to market the project as apartments as well.
While not an ideal outcome, it may well be a good strategy in the current market where rentals are tight. Noyes mentions that condos typically cost up to 15% more than apartments to build and these include amenities like fireplaces and decks. With the tight apartment market in Wentachee and what is probably the nicest product of its type in the market, the homes should rent quickly.
While he plans to market the complex as an apartment to commercial investors, if nobody comes along as an investor that wants to buy the project as apartments at least he has the landlord’s cashflow until the market improves and he can sell them as condos at a later date.
That seems to be the likely outcome based on what I’m seeing in the commercial property market. The return rate that investors are able to get in this market would likely make the market price as an apartment well below Mr. Noyes’ break even as well, unless he finds an investor who will value the potential later condo-conversion high enough in today’s market.
But, Mr. Noyes is smart. He could waste months of time trying to market the project as condos without the cashflow of renting them now. And, if he sold a few, he would likely have irritated owners who find themselves living in an apartment building when they bought into a condo development. With that prospect, he is probably wise to go ahead and rent them and bide his time until the market improves.
This is something for everybody with property they are considering selling in this market: Should they consider renting or leasing the property and getting some cashflow going right now?
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