Correction to This Article
A Jan. 14 Real Estate article on condominium sales gave an incorrect year for the founding of the biggest condo seller in the Washington area, Crescent Heights of Miami. The company was founded in 1986, not 1997.

Boom Owes Much To Miami Firm

Saturday, January 14, 2006

One of the biggest Washington real estate stories in the past three years has been the condo boom and the conversion of thousands of apartments to for-sale units.

But the biggest player has always kept a low profile here -- Crescent Heights of Miami hasn't sought the limelight, according to Efy Bashary, regional manager for its East Coast and Mid-Atlantic operations.

The company is better known in its South Florida base, home to miles of condo canyons. The company was founded in 1997; its principals are President Sonny Kahn and Vice Presidents Bruce Menin and Russell Galbut, all from the Miami area. Galbut's roots, according to an article last year in the Miami New Times, go back to a drugstore-diner that his grandfather opened in 1935. The paper said his "extended family of brothers and cousins grew into one of the largest landowners on the [Miami] Beach, selling hundreds of millions of dollars' worth of condos here over the past few decades -- not to mention similar projects across the country."

Little attention was paid in the Washington area in 2002 after Crescent Heights bought its first apartment complex in Northern Virginia, 500 units known as the Fountains of McLean in Tysons Corner, Bashary said.

"Nobody back then was doing conversions" of any scale in the Washington region, Bashary said. "People were doing tiny little ones in D.C., some historic buildings, and little conversions of 10 units here and there. But nothing of this magnitude."

When the renovated garden-style units sold out immediately, and a nearby project, the Gates of McLean, did the same, "the market started noticing," Bashary said. "The competition started popping up very slowly. But we had had no other competition until then. I wish there had been any -- it would have made it much easier for me. My lender was asking me why nothing was happening there. It was very hard to convince them that this was a great market."

Crescent Heights took the lead quickly, say industry trackers, because its rental-conversion products were so much cheaper than newly built units. That made them much more attractive to first-time home buyers who were being priced out as prices here exploded.

Crescent Heights' success led others, both big national builders and small investors, to enter the condo conversion and construction market here. Real Capital Analytics analyst Robert M. White Jr. said Monument Realty, a Washington-based office developer, went into condo conversions because "they saw they could make money." The Carlyle Group, a global investment firm based in the District, national powerhouse Trammell Crow Co. and Reston-based Comstock Homebuilding Cos. have also been active, White said.

But Crescent Heights has been the busiest, according to research firm Delta Associates. Of 13,698 area condo sales in the region in 2005, Crescent Heights had about 1,100, or about 8 percent, of the total, according to Delta's count. Its closest competitor was KSI Services Inc., with 821 sales.

In 2004, Crescent Heights had an even bigger share of the market, about 11 percent of the year's 9,108 sales.

Real Capital Analytics lists Crescent Heights as the buyer of about 1,100 apartment units in Northern Virginia in 2004 at a cost of about $265 million. During that year, the company paid at least $1.4 billion to buy 6,538 units nationwide, according to Real Capital. The company tracks deals of $5 million or more.

Through September 2005, Crescent Heights had spent another $219.4 million to buy 730 more Northern Virginia apartments for conversion, according to Real Capital.

The conversion explosion here has drawn criticism from affordable housing advocates, who have sounded alarms about the impact on renters who have seen their homes turned into condos.

Bashary said Crescent Heights "does not evict people, we don't push them out," but instead follows the legal requirements to give tenants notice when a property is sold. "We do what the law requires."

He added that those who want to buy a unit "get an inside price" and "the ones that don't, stay as long as they want."

Virginia does not require that tenants get the first opportunity to buy an entire building or to match an offer, unlike the District. Tenants in all of the local jurisdictions do have the right to buy their own apartment in a conversion, according to development lawyer Robert M. Diamond of Falls Church.

Diamond, who has represented many condo converters in transactions, said most of the properties are not housing long-time renters. "Very few people in those projects have been there five or 10 years. They tend to be young, single professionals who are highly transient."

How much longer will the condo craze last? White, of Real Capital, said that in September, Crescent sold three big properties in California, New York and Florida. That signaled to him that the conversion party may be winding down. "When something like that happens . . . when one converter is flipping to another, and it's more profitable to flip to someone else than go ahead, it seems like we're at the end of a cycle," he said.

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