Chris Brassard and Omar Diaz had apartments in mind when they built a 12-unit complex on May Street just south of West Magnolia Avenue on Fort Worth’s Near Southside. Then their leasing agent, Will Northern of Northern Realty Group, suggested they consider selling the units as condominiums.
The supply side of the equation was simple enough: apartment development is much easier to finance than condos, and a search for condo listings on the Near Southside found virtually none. Demand was as interesting, yielding few comparisons except for the quick, successful apartment-to-condo conversion a few years ago of the 36-unit Forest Park Tower off Forest Park Boulevard.
With the rapidly increasing appeal of the Near Southside, “people want in this area, and there’s nothing” in the condo market to buy, said Brassard, whose Square One Development went into partnership on the project with Diaz’s Forma G&D.
So Brassard and Diaz decided to convert their development at 1320 and 1324 May St. into the Magnolia-May Street Condominiums, with the units becoming available a few weeks ago.
The finishes already included granite countertops, stained concrete and hardwood floors on the first and second floors, tankless water heaters and gas fireplaces, stainless sinks and wooden casings on the windows. Brassard and Diaz went with hardwoods instead of carpet on the third floor and upgraded fixtures in all of the units.
At asking prices of $265,000-$275,000 and about $213 per square foot, the units come in under what Brassard says is to many buyers an important $300,000 barrier.
“That’s just not where the market is,” he said. “Especially for younger buyers. Their psychology is that’s their lid.”
Interest is strong, with one potential buyer interested in purchasing three units, living in one, and leasing the other two, said Brassard and Diaz, who declined to say what they have invested in the property.
Obtaining a mortgage for condos has become more difficult, with Fannie Mae and Freddie Mac recently increasing the required number of owner-occupied condos in a development from 50 to 70 percent as a condition for loans. In a new development such as Magnolia-May, that would have required pre-sales of eight units, Brassard said.
Brassard and Diaz established a relationship with Southwest Bank as “preferred lender.” The bank, for one, agreed to carry qualifying mortgages as portfolio loans, adjustable rate and financeable in five years, Brassard and Diaz said. And other programs are available through the bank that help deal with the new Fannie Mae and Freddie Mac requirements.
Brassard and Diaz set their homeowner association fee at $250 per month, which includes gas, water and trash, common area maintenance, and building insurance. The metal roof pared the insurance costs. “There are no big-ticket add-ons that drive up your HOA” fees, Diaz said.
Brassard and Diaz believe more condos are coming to the Southside, even with the challenges developers and buyers face in financing them.
They recently purchased three 50-foot-wide lots in the 300 block of College Avenue, with plans to re-plat them into four 37.5-foot-wide lots, each with a duplex and townhome. Brassard and Diaz said they’re planning the development as apartments – “that’s a more conservative pro forma,” Brassard said – but could convert them to condos.
Tom Loughborough, a Plano investor who bought the Forest Park Tower in 2009, improved the interiors, replaced the windows, and converted all of the apartments to condominiums in more than three years.
Average sale price was $180 per square foot, said Loughborough, declining to say what he paid for the property. According to Tarrant Appraisal District values, the Forest Park condos are worth $176-$215 per square foot today at market.
The tower is about 90 percent owner-occupied today, with all of the buyers local, and a number coming from the surrounding neighborhoods, Loughborough said.
“It was crazy; I probably could have sold 100-plus units easily,” Loughborough recalled. “There’s just not enough units over there. There’s an unbelievable underground demand for this.”
Developers have built condos downtown, but the Southside property carried a different appeal, Loughborough said.
“A lot of those people (say) we don’t want to be in the middle of downtown proper,” Loughborough said. “We want to be in the middle of a neighborhood.”
The Fort Worth architect Ken Schaumburg built the eight-unit Schaumburg Lofts condo development on Daggett Avenue in 2004. Schaumburg pre-sold five of the condos; he and family members own the other three, including one Schaumburg uses for his home and office.
“I didn’t make any money on any of those five guys,” Schaumburg said of the pre-sold units. “But that’s kind of the nature of condos.”
Schaumburg built the 14-unit Le Bijou condo development downtown at the top of the market in 2007, pre-selling five of the high-end units and ending up in “friendly” foreclosure on the others. The lender ended up making money, Schaumburg said.
Today, he’s investing in apartment developments.
“Multifamily financing is a lot easier,” he said. Lending is based on market studies and equity requirements, and “if they believe there’s a market, it’s pretty easy money to borrow.”