Laura Balser and her husband, Matt Smith, bought a penthouse condo for $2.4 million at the W Residences in downtown Atlanta in 2009. For the next three years, they remained the lone occupants of the 74-unit tower.
Because the concierge desk was fully staffed, “we got treated like rock stars,” says Lt. Col. Smith, a member of the Georgia Army National Guard. Occasionally the couple would use the hallway outside their home as overflow space. They let their cats roam, and once Ms. Balser, a principal at human-resources firm Mercer, lined the hall with 200 gift bags that she filled with pens, notepads and other items in a factory-line procession.
The W, which sits near the soon-to-come College Football Hall of Fame and the Center for Civil and Human Rights, went through foreclosure in 2009 and relaunched at the end of 2011, with prices 40% to 65% below the initial pricing, says Erik Dowdy, associate broker at the W Residences in Atlanta. Today, 33 of the 74 units have been sold and seven more are in contract, most of which were listed under $900,000. “At the current rate, we probably have a year or two of inventory left,” Mr. Dowdy says.
After years of excess inventory and virtually empty floors, luxury condos in Atlanta are selling again.
After years of surplus inventory and virtually empty high-rise residences, the market for luxury condos in Atlanta is heating up, albeit at prices below the market’s peak in 2006. In the past six months, 14 new condos for $1 million or more have sold, compared with nine new condos that sold for $1 million or more during all of 2011, according to Haddow & Company, an Atlanta-based real-estate consulting firm. In the city’s overall condo market, inventory has evaporated by 90%; within the past five years, condo inventory has gone from 5,000 units to 500 units, according to Metrostudy, a housing-data firm.
Even so, it has been a difficult recovery for Atlanta, where luxury condos are relatively new, says Josh Herndon, an associate at Haddow. In the mid-2000s, people who had been living in the suburbs, where land was relatively inexpensive, started moving closer to downtown for the restaurants, sports teams and cultural offerings. That spurred a building boom “inside the perimeter”—the more urban areas within the I-285 beltway. However, many of the luxury towers weren’t completed until 2008, when the U.S. housing market was going bust. By the end of 2008 the city had a nearly nine-year inventory of unsold condos, Mr. Herndon says. The bust forced a number of developments into bankruptcy proceedings, and these companies are just now beginning to regain their footing.
A good example is the St. Regis Residences in Atlanta’s Buckhead neighborhood. In April, Jimmy and Lynn Hayes bought an unfinished 5,000-square-foot, three-bedroom, 3½-bath condo there for $4.1 million. They are in the midst of customizing it and expect their new home to be completed by the end of the year. Mr. Hayes, the CEO of Cox Enterprises, a media company, says he and his wife had been looking to move from a single-family home to a condo for a few years, but wanted to wait until the timing was right in the market.
In February 2012, the developer of his South Carolina home filed for bankruptcy. Although a new owner and reorganization resolved the situation, Mr. Hayes says the experience made him more cautious. “I didn’t want to go through the uncertainty again,” he says.
During the real-estate bust, the St. Regis had contracts for 47 of its 53 units during pre-sales, when the building was under construction, says Douglas McMahon, senior managing director of the Tavistock Group, which acquired the St. Regis in February 2011. But many of those buyers walked away from their nonrefundable deposits during the downturn. That prompted the Tavistock Group to take all available units off the market for six months for upgrades. About $10 million went toward the model residences, redoing the lobbies, private garages and other improvements. In October 2011, the company put the unsold condos back on the market for $3 million to $6 million each; so far 11 have been sold and one is under contract.
The Mandarin Oriental Residences in the Buckhead neighborhood has had a similar story. In 2010, iStar Financial, SFI +2.64% the building’s lender, foreclosed on the hotel and 25-condo residence, then called the Mansion. John Kubicko, iStar’s senior vice president, says the company signed a longterm management agreement with the Mandarin before relaunching it in late 2012.
The building, designed by architect Robert A.M. Stern, allows condo owners to use the hotel spa below the residences, a concierge service that provides wake-up calls every morning regardless of where a homeowner is, direct elevator access to the workout facility and a Del Frisco’s restaurant. Current condo owners include Kenneth Dan-Anyiam, a Nigerian entrepreneur, and S.M. Abu Zaheed Hassan, a prominent plastic surgeon in Augusta, Ga., according to public records. Last month, a two-bedroom, 3,099-square-foot unit went under contract for an undisclosed price to a businessman from Hong Kong. Currently, pricing at the Mandarin, which ranges from $1.46 million to $4.9 million, is 28% below the prices when it was known as the Mansion. Still, 17 of the 25 units remain available.
The lower prices don’t bother Holly and Rick Wolfert, who bought a two-bedroom unit in 2008 for $2.6 million, before market prices tanked. “We never viewed this as an investment property,” says Mr. Wolfert, a retired business executive.
The Mandarin is finishing its latest model apartment, a $2.45 million, three-bedroom condo designed by Harrison Design Associates with Miele appliances, a marble-slab fireplace and a terrace with an outdoor fireplace.
Prices have held up at one Buckhead development, Sovereign, because its owner, Regent Partners, paid off its debt by selling the office portion of the building, says Kristi Torgler, Regent’s director of sales and marketing. Twenty-five of the 82 condos are left, ranging from $920,000 to $2.7 million. Units include Wolf appliances, marble and hardwood flooring, and outdoor terraces. Building amenities include a 5,000-square-foot fitness center, a business club and a wine cellar.
The Ritz-Carlton Residences, which launched in 2010, didn’t go through foreclosure, but did cut prices as inventory lingered. Two years ago, Carole Kirk, a fashion stylist, bought a two-bedroom, 2½-bath condo for $600,000—about 40% less than the Ritz’s original price. Ms. Kirk says she wanted a home after her husband died that was safe and that had staff to help her carry groceries. She says she received several upgrades, such as built-in storage and mirrored walls, free “because it was such a bad time” in the market. She also says she didn’t have to pay homeowner-association fees for two years.
Now things are looking up. In the past six months, Ritz units have been selling for an average of $378 a square foot—much lower than the original price of $650 a square foot, but up from the last six months of 2012, when $371 a square foot was the average sales price. Ms. Kirk does have one gripe about the increasingly full building: “Before I didn’t have to wait for the elevator,” she says.