When Gerald Hartshorn learned last November -- the day before he was moving in -- that his Silver Spring apartment building was converting to condominium ownership, hewas surprised, but unfazed. The 27-year-old broadcasting executive had anticipated the possibility of condominium conversion and its potential rewards when choosing an apartment.
"I saw it as a natural course of events," Hartshorn recalled. "It doesn't take long looking for an apartment before you realize that anything that's in reasonable shape in a decent neighborhood is a candidate for converting to condominiums."
Condominium conversion -- which often offers substantial price discounts for tenants -- "is the most readily available avenue for young professionals to build equity," Hartshorn contends.
The discounts offered tenants are particularly hefty when units are bought "as is." In the District, for example, tenant discounts can range from 20 to 40 percent of the price offered outside buyers, as tenants utilize the city's strong tenant protection laws as a bargaining tool with a developer.
"Depending on how industrious you are," Hartshorn observes, "you have the opportunity for purchasing a home whose value is far in excess of your purchase price.
"If someone is interested in establishing equity quickly, and they happen to be a tenant in a building that's converting to condominiums, the potential is there for a windfall," he says.
In fact, one of Hartshorn's neighbors in Silver Spring's Georgian Towers complex acknowledges that he moved into the building two years ago with an eye toward an eventual price discount. "That's the reason why I rented an apartment here," said the man, a government accountant in his early 30s who asked not to be identified. "I figured it would convert to condominiums at some point."
Washington condo specialist G.V. "Mike" Brenneman calls such individuals "migrant purchasers."
"Typically, they tend to be fairly young, professional or quasi-professional." Brenneman said. "They seem to know what's going on as well as the developer.
"If a guy who lives in a building starts to see strange faces looking at the paint and the plaster, the rumors start flying," Brenneman said.
He added, "I am constantly amazed by the sophistication" of the migrant purchasers. "I ought to hire some of them to work for me."
At one downtown building, Brenneman said, a member of the area's Advisory Neighborhood Commission, a watchdog group on zoning requests, spotted the healthy discount from a potential conversion and moved in, "for that reason.
"We recognize that phenomenon" as area real estate professionals seek to capitalize on willing buyers during a period of slow condominium sales, Brenneman said.
"If somebody wants to buy that bad that they're crazy enough to disrupt their whole life to move into a building ahead of time," he said, "you're not going to turn them away."
Brenneman said that at Chestnut Grove, a Reston condominium development, "we actually permitted people to move into a later section and get a small discount" after the conversion was announced. Persons who moved in after the conversion was announced received a 5 percent tenant discount, plus the opportunity to purchase their unrenovated units at the "as is" price -- 18 percent off the fully rehabilitated price of the high $40,000s to mid $60,000s.
One Arlington County housing specialist says it is not unusual for her to receive calls from individuals trying to figure out what apartment buildings are likely condominium conversion candidates.
Based on the sale of apartment buildings, a likely indicator of conversions, housing specialist Frances Lunney says she is often able to identify rental buildings slated for a conversion announcement.
But high interest rates can sidetrack the best-laid plans of migrant purchasers, Lunney warns. For instance, tenants in several Rosslyn apartment buildings received advance offers of "very substantive discounts" in return for their support of a condominium conversion, she said; but, faced with today's interest rates, some of the young professionals now find they can't afford to buy.