The developer of Bellevue's luxury Bravern complex is converting one of its two nearly finished condo towers to apartments, acknowledging that buyers are in short supply.
The developer of the luxury Bravern complex in downtown Bellevue, bowing to new market realities, is converting one of the project’s two nearly finished condo towers to apartments.
Bellevue’s supply of high-end high-rise condos still exceeds demand, said Dan Ivanoff, managing investment partner at Bravern’s developer, Schnitzer West. “So we’re shorting the supply,” he said.
The switch isn’t permanent, Ivanoff added: The 236 units now for lease in the southern tower will be put up for sale as condos again if the housing market recovers.
Schnitzer West also said prices will be reduced for the 215 remaining condo units in the northern tower but didn’t give details.
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The Bravern’s condos have been the weak link in the mixed-use project, one of downtown Bellevue’s most ambitious ever, which broke ground in December 2006.
The development covers most of the block just west of Interstate 405 between Northeast Sixth and Northeast Eighth streets and 110th and 112th avenues Northeast. In addition to the two 33-story residential towers, the complex includes two office towers and a 305,000-square-foot retail center.
The office buildings, both fully leased to Microsoft, were finished in spring of 2009. The shopping complex, anchored by the Northwest’s first Neiman Marcus store, opened last fall to considerable fanfare.
But Schnitzer had presold only about one-quarter of the 451 luxury condos before the market tanked. And, with the two residential towers scheduled for completion next month, Ivanoff acknowledged at least some of those presales were unlikely to close because buyers no longer can qualify for financing or can’t sell their present homes.
On top of that, hundreds of condos remain for sale in two competing downtown Bellevue high-rise projects.
County records indicate about 150 of the 377 units at Washington Square, completed in early 2008, remain unsold. And buyers have closed on fewer than 100 of 539 condos at Bellevue Towers, completed early last year, despite price cuts last summer.
Considering all those factors, converting one of the Bravern’s two condo towers to apartments for now “was a prudent investment move for us,” Ivanoff said.
The units that now are rentals could be put up for sale as condos again in 18 to 24 months, he said: “I’m definitely seeing the residential market cutting loose.”
But for now, he added, “I think demand is scared. Demand is concerned about financing. And demand doesn’t want to be first.”
The Bravern isn’t the first new condo project to convert to apartments in the face of declining demand. Schnitzer made the same move last year at Equinox, a 204-unit building in Seattle’s Eastlake neighborhood.
If Equinox hadn’t been converted, Ivanoff said, it would have competed with two other new Schnitzer condo projects in Belltown and on Capitol Hill: “You’re going to cannibalize your own properties.”
The developers of at least three other Seattle projects designed as condos — Rollin Street, Expo 62 and Moda — also switched their buildings to apartments before they opened.
Almost no new condo projects are under construction or in the pipeline in downtown Seattle or downtown Bellevue. When the market for condos does recover, developers who have converted their buildings to apartments will be poised to switch them back and capture that demand, said James Stroupe, a condo specialist with Realogics Sotheby’s International Realty.
“Let’s face it — these guys don’t want to hold product,” Stroupe said. “They’re just biding their time.”
Schnitzer West mailed letters Monday to all presale buyers in the southern tower informing them of the decision to convert the building to apartments, Ivanoff said. They will be offered units in the northern tower, he added, or some may choose to rent the units they once intended to buy.
Apartments at the Bravern will rent for $1,100 to $5,000 monthly, Schnitzer said. Condos range in price from $320,000 to $6 million.
Eric Pryne: 206-464-2231 or firstname.lastname@example.org