A May16 Business article incorrectly said that Washington Communities of Vienna bought the Ridgeleigh at Van Dorn Metro apartments in Fairfax County. Washington Communities is the management company. The apartments were purchased by Washington Communities V LLC, a separate corporation.
The Bad News On Condos
Market Beset by Declining Sales, Foreclosures
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Wednesday, May 16, 2007
Two years ago, during the giddy real estate frenzy, some investors bought 300-plus garden-style apartment units in Fairfax County to convert to condominiums.
Yesterday, a California bank foreclosed on the group's loan and bought the property -- minus about 45 units that had been sold -- for $60 million, outbidding a suitor from suburban Chicago at an auction on the front steps of the Fairfax County Judicial Center. The bank, Fremont Investment and Loan, said it hoped to resell the property.
The foreclosure on Ridgeleigh at Van Dorn Metro was just one of several foreclosures in recent weeks of condo conversion projects in the Washington area and was another sorry sign of the soft real estate market and an oversupply of condos, real estate experts said.
"It's part of the slowing housing market," said Scott MacIntosh, senior economist for the National Association of Realtors. "Fewer first-time buyers are willing to take that risk and go out and buy. I guess they see it's safer to put money in the stock market rather than buy their first home."
In the first quarter of the year, 3,472 condo units that were either in the planning stage or about to come on line in the Washington area were changed to apartments and another 790 were simply canceled, according to a report by Delta Associates, an Alexandria real estate research and consulting firm.
"Rumors of conversion projects going on the market abound . . . so more condo projects will likely end up as apartment buildings," the Delta report concludes.
In 2005, there were about 13,000 condos sold in the Washington area, compared with 6,600 last year, according to Delta. The market has a bloated, 3.4-year supply of condos.
William Rich, a vice president of Delta, said the decline in condo sales has been due in part to problems in the mortgage industry and also to a drop in investors buying condos to resell for profit.
Still, he said, some condo projects are moving forward. "Some developers are just going to plug ahead and wait it out because they think their project is better than what's out there," he said.
Besides the Fairfax County property, banks recently foreclosed on three condominium conversions owned by Triton Real Estate Partners of Annapolis: the 434-unit Monterey Condominium in North Bethesda, the 303-unit Landing at Spa Creek in Annapolis and the 508-unit Rodgers Forge Condominiums in Baltimore County.
Yesterday's auction was on the same day that Korman Communities, a real estate firm in Plymouth Meeting, Pa., announced plans to open a luxury, extended-stay hotel in Fairfax County near Dulles International Airport, a project that had originally been built as a 169-unit condo.
Washington Communities, a Vienna company whose officers include President Richard Deeds and Vice President Lyle Waldron, bought the Ridgeleigh at Van Dorn Metro apartments in late 2005 and secured a loan for up to $84.2 million from the California bank, which has a regional commercial-loan office in Bethesda, according to county records. The bank declined to say how much of the loan was dispensed.
