Canyon Ranch Abandons Plan For Md. Condos
Wednesday, September 27, 2006
The on-again, off-again effort to bring a luxury Canyon Ranch condominium community to North Bethesda is now officially off, making the high-profile development the region's latest victim of a slumbering condo market that has claimed dozens of projects.
The announcement yesterday from a financial partner of Canyon Ranch, an Arizona-based high-end spa operator moving into condo development, came a little more than a month after the project's developer, the Penrose Group, informed potential buyers that the project would be reevaluated for 30 days because of a slowdown in the real estate market and rapidly increasing construction costs.
In the past six months, developers of 31 condo projects with a combined 5,700 units have abandoned their plans, according to Delta Associates, an Alexandria real estate consulting firm whose clients include Penrose. Condos are taking much longer to sell, as speculators have all but abandoned the market and buyers have become cautious.
Mark W. Gregg, president of Tysons Corner-based Penrose, did not return several phone messages yesterday. However, Kevin Kelly, president of Canyon Ranch, said the deal fell apart because "the market had changed on us."
Kelly said that had the deal hit the market a year ago -- or even a year from now, when he predicts a rebound -- there wouldn't have been a problem. But the development had sold just 30 of 434 units, for $59 million. The project, which also included hotel rooms, retail space and a 90,000-square-foot wellness center, was valued at $1 billion.
"I'm disappointed the market turned prior to us getting it out fully into the marketplace," Kelly said.
So were buyers who had made deposits. "I'm terribly disappointed," said Stuart Bindeman, a Bethesda resident who had put down money for a condo unit. "My wife and I were looking forward to living there. Fortunately I have a beautiful home, and we will stay in that for the time being."
The developer is making arrangements to refund the deposits. Canyon Ranch is still interested in pursuing another project in the Washington area, executives said.
The question now is over what will happen to the 53 acres near Old Georgetown Road and I-270 -- a spot many developers say is one of the best undeveloped properties in the region, with quick access to downtown Bethesda, local shopping and a major traffic corridor.
That responsibility apparently rests with Penrose. People familiar with the deal said that Penrose leased a major portion of the land -- for the hotel, wellness center and retail -- from the Davis and Camalier families. For the land under the condos, Penrose had a sales-and-acquisition contract with the families.
"The responsibility for finding new tenants and new land uses is that of the Penrose Group," said Larry Thau, managing director of CB Richard Ellis Group Inc.'s Bethesda office and a business associate of the Camalier family.
Most of the other canceled condo projects are being converted to rental buildings or reverting to apartments after unrealized condo conversions. About a third of the planned units were scrapped altogether. In Montgomery County, eight projects, not including Canyon Ranch, have been discarded or will become rentals.