Incentives offered to heat up condo sales
By Alan J. Heavens<br />INQUIRER REAL ESTATE WRITER<br /><br />The summer doldrums, a down real estate market. Even with 85 percent of his 167 units sold, Symphony House developer Carl Dranoff said he was looking for a surefire way to get million-dollar-condo buyers to look his way.<br /><br />How about a free Smart Car (retail value: $16,590) and a $75,000 parking space in the high-rise’s garage to go with the next three units sold?<br /><br />”It was a great marketing move,” said Dranoff, considering that gas prices are still high, there’s a yearlong waiting list for Smart Cars, and he’s also promoting his “green” development farther down the street, at 777 S. Broad St.<br /><br />”Our phone traffic has quadrupled over July, and we expect agreements of sale for all three in a couple of weeks,” he said today.<br /><br />Even though year-over-year real estate sales in the city are off about 28 percent for the first six months of 2008, incentives being offered by other condo developers seem a bit more restrained than Dranoff’s Smart Car deal.<br /><br />Parking, in one way or another, is involved in many of those incentives, since spaces at high-rise residences are running $40,000 to $125,000 (the higher amounts being in and around Rittenhouse and Washington Squares).<br /><br />At the Residences at Two Liberty, “buyers get three free years of valet parking,” said Ruth Hirsh Lincoln, whose firm represents the developer. “There are also a car and driver on call ‘as available’ for owners, in the same manner as those offered to guests of a luxury hotel.”<br /><br />Bruce E. Lang, an agent with Coldwell Banker Real Estate on Columbus Boulevard, puts free parking at the top of the list of incentives he’s hearing about, followed by developers’ buying down interest rates (from 6.5 percent to 4.5 percent, for example, to reduce buyer payments), or, in the case of previously owned condominiums, sellers’ paying closing costs or condo fees.<br /><br /><span style=”font-weight:bold;”>Center City Realtor/mortgage broker Fred Glick</span> said some developers “are throwing in upgrades on certain units” and offering what he called “advantage pricing” for condos that are delivered quickly. “But it is less the norm,” he added.<br /><br />Richard Voith, who follows housing trends as senior vice president of Econsult, a Philadelphia economic-consulting firm, said he had heard of no incentives similar to Dranoff’s offering at Symphony House, “but that doesn’t mean it’s not happening.”<br /><br />On the other hand, Allan Domb, developer of Parc Rittenhouse and the Barclay, among other high-rise condo buildings, said he had not “even offered a bicycle.”<br /><br />Domb, who has been in the high-rise market for almost 30 years, said there were three condo markets in Center City, and the most problematic was new construction.<br /><br />”The older buildings have a 1 [percent] to 1.5 percent vacancy rate – Wanamaker House has two units of 333 available,” he said. “Adaptive reuse, including Parc Rittenhouse, the Ayer and the Warwick [also one of his buildings], are 70 percent to 90 percent sold.”<br /><br />Some newer buildings are just 50 percent sold. Domb and others wondered where the break-even point might be for some of them, especially with lenders’ applying greater pressure.<br /><br />”Banks must now know they are going to get repaid in order for the draws [to pay for continued construction] to be given,” Glick said. “They need proof of sales.”<br /><br />Domb argued that it would be better if developers “took incentives to the source of the problem – the suburban empty nesters who want to buy in town, but can’t sell their houses. Offer to buy down the mortgage, for example.”<br /><br />At the low-rise end of the condo market, said Realtor Mark Wade of Prudential Fox & Roach, there isn’t much evidence of sales incentives right now. “[But] give it another few months, at the sign of the first frost, and I think we will be seeing a lot more incentives from developers.<br /><br />”It is their way of dropping their prices without really dropping their prices,” Wade said. Throwing in a parking space “is one way to keep the sale prices at a certain level in the Multiple Listing Service and in the public records, because those two sources of comparables don’t reflect whether the unit had parking” or not.<br /><br />Though his fellow developers don’t seem to be following Dranoff’s lead, one Symphony House condo owner is. Prudential Fox & Roach agent Jeff Block is overseeing an open house Sunday for a one-bedroom unit with an asking price of $459,000.<br /><br />The out-of-town sellers, whom Block declined to identify, are offering a week’s stay each in their two-bedroom, oceanfront time share in Mexico to the buyer and the buyer’s agent.<br /><br />”When they asked me if it would help, I basically told them, ‘No one is going to buy a condo at that price just to get a free week in Mexico.’ “<br /><br />Same for a Smart Car, he said.<br /><br />”It is a nice bonus, but would it cause someone to buy a place they weren’t going to buy?” Block asked. “Unlikely, I presume.”<br /><br />Contact real estate writer Alan J. Heavens at 215-854-2472 or firstname.lastname@example.org.