Bethesda condo developers still optimistic despite market downturn

Wednesday, Oct. 11, 2006

Searchlights lit up the sky over 8400 Wisconsin Ave. last week announcing not the opening of a nightclub, but the start of sales for condos.

A lavish party on Thursday launched the sales for condos in the Trillium, the set of three luxury condominium buildings planned for the site of the current Clarion Hotel.

Despite a general slowdown in the Washington, D.C., metro area condo market, developers of the Trillium say they still have reason to celebrate. Sales began on Saturday and in the first three days, they did between $10 million and $12 million in sales, said Len O’Donnell, principal of Patrinely Group, which is developing the project. Patrinely Group has offices in Bethesda, New York and Houston.

‘‘I’m really pleased by the turnout [for the launch party],” he said, ‘‘but more importantly by the amount of interest. The project was resonating with people.”

Condo prices have remained flat this year compared to 2005, said Walter Molony a spokesman with the National Association of Realtors.

‘‘We’ve had a big build up of inventory and that has shifted the market toward buyers,” he said.

According to a report recently released by Delta Associates, an Alexandria commercial real estate research company, buyers are less motivated to buy condos now. Some factors that contributed to the slow down include:

* Summer is typically a slow period in the housing market.

* Prices are no longer moving up with last year’s drama.

* Mortgage interest rates were steady this quarter.

* Incentives are low relative to the cost of condos.

* Buyers fear prices may drop and they do not want to buy at the peak.

As an incentive to get people to buy, The Chase, a condo conversion located at 7500 Woodmont Ave., with units starting in the high $200,000s, this month began offering $5,000 toward closing costs on studios.

But at the highest end of the market, where buyers are willing to spend up to several million dollars on a condo, those factors contributing to the slow down may be less important.

Developers and others say that serving a certain niche of buyers with a good product will keep the Bethesda market afloat.

Jane Fairweather, a Bethesda real estate agent, said aging, wealthy baby boomers who are ready to give up large houses in exchange for luxury condos with plenty of amenities will continue to fuel the market for condos in Bethesda.

Although the market may have slowed, ‘‘the desire is there and there are natural forces in the universe — getting older,” she said.

That is exactly the type of buyer who is interested in the Trillium, O’Donnell said.

‘‘We’re getting people who are saying, ‘We’re ready to move out of our big house in Potomac or Bethesda’ and they know what they want and they’re looking two or three years down the line,” he said. ‘‘They are a very discerning group of buyers and they’re not concerned about whether they can get more if they sell their house next month rather than this month.”

Units in the Trillium are priced starting around $500,000 for a one-bedroom to $3 million for a three-bedroom at close to 3,000 square feet, he said.

For those prices, residents get details such as Italian cabinetry, top-of-the-line appliances and marble bathrooms. Amenities will include a 24-hour concierge service, fitness center, pool and spa and valet parking. Groundbreaking for the nine-story, 173-unit building is scheduled to take place next year.

Lionsgate, a condominium project currently under construction in downtown Bethesda, offers similar amenities with units ranging in price from the high $600,000s to more than $2 million.

Mark Dubick, president of Duball LLC, the Reston developer of Lionsgate, said units in that project continue to sell well.

‘‘We think we timed it perfectly,” he said. ‘‘We are very, very confident that by the time we’re ready to deliver in late ’07, that we will be sold out.”

Lionsgate will be 12 stories and include 158 units.

Still, appealing to the wealthiest buyers didn’t save Canyon Ranch, the mixed-use project that was planned for Rock Spring Centre, outside the downtown. Developers recently scrapped plans for the $1 billion project, which would have included 453 luxury condos, a hotel, apartments, wellness center and restaurant. The developers cited the downturn in the market as a reason for the decision.

O’Donnell and Dubick said the downtown location of their projects and the fewer number of condo units to sell made their developments more viable than Canyon Ranch.

‘‘I’m selling an urban lifestyle in downtown Bethesda,” said O’Donnell. ‘‘They’re looking at a resort lifestyle by Montgomery mall.”

Fairweather said each of downtown Bethesda’s condo projects will appeal to different buyers.

‘‘I don’t believe that they’re competing with each other,” she said.

Different details in their design and their locations — Trillium is at the edge of downtown Bethesda, while Lionsgate is in the middle of it — distinguish the two projects, O’Donnell said.

‘‘Each location is something different,” he said. ‘‘We have a lot of green space and we’re near a park. ... Lionsgate is a little more urban. It might appeal to someone who wants to be right in the middle of all the hustle and bustle.”

Both Lionsgate and Trillium are located in Woodmont Triangle, an area of Bethesda where revitalization has been slower than elsewhere downtown.

In January, the County Council passed the Woodmont Triangle Amendment, to stimulate housing and retail. The amendment allows developers to build taller buildings in return for providing public amenities.

Planners estimate that in the next several years, 3,500 new residential properties — condos and rental units — will be built in downtown Bethesda.

The Lionsgate and another condominium development, the Adagio located on Wisconsin Avenue and Bradley Boulevard, are currently under construction. As many as five more are in various stages of the planning process.

Fairweather believes that the demand for condos in downtown Bethesda is high enough to keep the market healthy.

‘‘The most important thing in real estate is location, location, location,” she said. ‘‘Bethesda is that. These are class A, triple A properties.”

And while O’Donnell said he can’t ignore changes in the market, he is confident that his project will still attract buyers.

‘‘We believe that well-planned, well conceived projects in great locations will continue to sell,” O’Donnell said.

‘‘Will we sell this project a little more slowly than two years ago? Sure. But we sell all our projects. If I sell 15 a month, instead of 25 a month, that’s fine. I have time.”