Renters are propping up downtown condominium market

COURTESY NAT REA PHOTOGRAPHY
VIEW FROM ABOVE: A dining room with floor-to-ceiling glass leads out to a balcony that’s part of a 29th-floor penthouse at The Residences Providence.
COURTESY NAT REA PHOTOGRAPHY VIEW FROM ABOVE: A dining room with floor-to-ceiling glass leads out to a balcony that’s part of a 29th-floor penthouse at The Residences Providence.

It may be a good time to buy, but in Providence renting has never seemed more popular.
What started as an emergency reaction to the downturn in the housing market – leasing high-end spaces built to be sold as condominiums – has taken on permanence at many exclusive addresses.
With purchase prices in all corners of the market still dropping, rents remain strong as the supply of people willing or able to commit to a new condominium remains limited.
“The rental market is strong in Providence right now and the purchasing market is not,” said Joseph Paolino Jr., managing partner of Paolino Properties, which owns two rental buildings in Providence and a condominium complex in Newport. “When you have an unsure economy plus high unemployment and foreclosures, people are not looking to commit long-term. Renting gives them what they want for a reasonable [cost].”
Last year, Paolino Properties sold its stake in the 903 Residences, a 330-unit development on the Woonasquatucket River in the city built for condominiums and later converted to 231 rentals and 99 condominiums.
Paolino said he expects it to take a “few years” before the condominium market regains its health.
One of the largest residential developments in the city, the 903 Residences now has 231 units set aside for rentals and all of them have leases, with only one apartment unoccupied as a new tenant prepares to move in, said 903 Leasing Manager Christina Thomas.
At The Residences Providence, the 31-story tower attached to The Westin Providence built initially for condominiums, rentals have consistently grown amid sluggish sales and now what was a cap on rentals has been replaced by a cap on sales.
The Residences is 89 percent occupied, with 54 units sold and 35 rented, said Ralph V. Izzi Jr., marketing director for the Cranston-based The Procaccianti Group. Izzi could not provide sales or occupancy figures for previous years.
“Leasing programs at The Residences Providence have been so extraordinarily successful that the inventory of ‘for sale’ residences is being limited to an exclusive selection of distinctive homes,” Izzi said. “The reality is that there are a finite number of available residences within the tower and the logistics of leasing versus selling are slightly different.”
While the trend in Providence is toward rentals, Robert Martin, an agent with Century 21 Crossroads in Wooonsocket, thinks the pattern of turning condos to rentals has peaked elsewhere and will head in the opposite direction soon. “We have lived through that,” Martin said.
He sees the demand necessary for a rebound in the condominium market once people are able to sell their existing homes and downsize.
“What continues to hold the market back is [when] someone trying to buy down is unable to sell their current home,” Martin said. “They just can’t take enough money out of their home to move, so they just stay there.”
Martin is part of the development team of the Rockcliff Farm condominium project in North Smithfield and there he sees a positive sign in interest from first-time homebuyers who aren’t relying on being able to sell an older property to buy.
“Now we are getting more first-time buyers and younger couples who before were looking more for a house,” Martin said. “In the end, these kinds of units have a deck and a yard like a house, but you don’t have to get out the lawnmower or snowplow.”
In downtown Providence, the 193-unit Waterplace towers is already trying to buck the rental trend.
Opened in 2008 just as the housing market collapsed, Waterplace owner Intercontinental Real Estate had turned to renting much of the 17- and 19-story towers until last summer, when they stopped renewing leases and announced that they were going back to an all-ownership model.
Initially it was slow going with only 15 units in the entire complex sold last fall.
Last October, Waterplace held an auction for 29 units, but cut it off after only 12 sales when they began selling for the minimum.
Since then, things have picked up, according to Janice Dumont, partner at PrimeTime Communities, the Massachusetts firm marketing Waterplace, who said in addition to sparking interest, the auction has established prices for the property and provided transparency for potential buyers.
“The auction let the market set the values and gave people a sense of transparency so potential buyers had comparables,” Dumont said. “After the auction people were cautious and worried we might go back to leasing, but now that they have seen those units close, there is more consistency.”
In December, Waterplace started selling units in its second tower and has reached agreements on another 13 units, bringing the total sold to 46. None of the units sold has been a three-bedroom or a penthouse. Dumont said the goal was to sell out Waterplace in two years, a challenging objective in a condominium market that has seen nothing but bad news since the housing bubble burst.
While rents in Rhode Island have steadily climbed for the past 10 years, median condominium sales prices continue to drop and are now approaching 2002 levels.
In January, the median condominium sales price dropped 25 percent compared with the previous year to $155,450, not far above the 2002 year-end median price of $147,000, according to figures from the Rhode Island Association of Realtors.
With better winter weather than a year ago, Realtors report more activity at open houses, but January sales of 60 condominiums statewide was only slightly better than 58 last January (with its snowstorms) and slightly weaker than the 64 sold in January of 2010.
Even the high-end market, which was the last segment to feel the effects of the housing crash, is now struggling. In 2011, there were 70 condominiums sold in Rhode Island for $500,000 or more, compared with 75 in 2010.
As affordable-housing advocates note, rents remain high, with Rhode Island having the 17th-highest average two-bedroom, monthly rent in the country at $924, according to a report released by the National Low Income Housing Coalition this month.
The best news in January is that the average number of days on the market for condominiums, 104, was below the 129 days last January and the 2011 year-end average of 121.
“I think the condominium market is picking up a little bit – it generally follows the single-family market but is also somewhat independent,” said Victoria Doran, who is active in the condominium market as a sales associate with Coldwell Banker Residential Brokerage in Barrington. “We are getting inundated at open houses, which wasn’t happening before. The weather might have something to do with it.”
In Providence, Doran said she sees the large downtown buildings struggling more than some of the smaller properties with more parking.
“We are seeing the big projects downtown start to rent,” Doran said. “I had someone say they could get one parking space downtown, but another one would cost $30,000. That’s tough when two people are living there.” •

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