New Leases on Luxury: Occupants Find Silver Lining in Converted Condos

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TWO YEARS AGO, flipping real estate was considered a viable career path. Snatch up a property, add a couple upgrades (or not), and put it back on the market for a quick buck.

Today, another type of flipping has gained popularity: turning condominium developments into apartment buildings. The D.C. region is littered with would-be condo projects converted into rental units as the housing bubble popped, subprime mortgages rocked the industry and developers failed to secure contracts.

But there's a perk for renters: High-level fixtures and amenities once reserved for home owners now are available in apartments.

At Allegro Apartments, a condo-turned-rental building in Columbia Heights, units have gourmet kitchens with stainless steel sinks and GE appliances, including a top freezer/refrigerator. Nine-foot ceilings and bay windows come standard. The hardwood floors are made of maple, the fixtures include track lighting, and the walls are soundproof.

"[The units are] expensive quality because they were meant to be a condo," said Maj Roembke, the property manager at Allegro with Kettler Management. "You're paying the same amounts you would in another apartment building somewhere else, but you're getting a lot more features."

During preconstruction, units at Allegro were priced at $210,000 for a studio, $300,000 for a one-bedroom unit and $500,000 for a two-bedroom unit. Even though 100 of the building's 297 units were under contract, developer Metro Properties announced in February 2008 it would be switching to rental units when it opened.

"Allegro actually voluntarily shifted early on," Metro Properties President Jeremy Rubenstein said. "We started to have the first real hints of a financial shock and were pretty convinced people were probably going to have difficulty in the end getting financing."

Metro sent signed releases to all of the condo buyers, allowing them the option to stand by their investments or receive their deposit back plus interest, Rubenstein said. Everyone opted to terminate their contracts, he said.

"If we were going to go forward, we were going to have to reduce the prices substantially, and nobody was going to be happy with that situation," Rubenstein said. "The ability to get financing and to get 300 units closed really looked like it was slipping away as the economic environment got worse and worse."

Allegro Apartments celebrated its grand opening April 22, and 90 leases have been signed on the building, where units rent for $1,525 for a studio to $3,750 for two-level penthouses with terraces.

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The numbers show how overdeveloped the condo market had recently become in Washington: Since the fourth quarter of 2007, 6,924 condo units have been canceled and 11,237 units have been moved to the apartment pipeline, said William Rich of Delta Associates, a real estate research firm based in Alexandria.

On the flip side, with dozens of condominium developments becoming rentals, the condo market is less saturated and existing units are in higher demand.

Kristen Albert, sales manager at CityVista (CityVistaDC.com) for the Mayhood Company, said the K Street property has seen a "huge increase" in the number of people signing contracts since the beginning of the year.

"You have these people who were ready to buy; they already have their mortgages and rate locks and need to settle immediately," Albert said. "In some cases, they've already sold their house or ended their lease."

One of those buyers was Peter Bachrach, 30, who originally put down a deposit at the Dumont Condominiums at Fourth Street and Massachusetts Avenue NW. For almost a year, from the time he signed a contract, Bachrach heard constant rumors about foreclosures but could not reach anyone through the sales office.

"You've invested some serious money and some emotional capital into a place you intend to live in, and you end up in a place where you're not sure what's going to happen," Bachrach. "I've committed myself to doing something both financially and emotionally, and now you're going to take me on this roller coaster I can't get off [of]."

Bachrach's apartment lease was expiring, and without any expected move-in date, he was forced to find temporary housing and sign a pricey month-to-month lease.

Then, on Jan. 9, 2009, Bachrach and other contract holders received a letter from the developer, Broadway Mass Associates. Citing "financial difficulties," Broadway asked whether the purchasers "still wish[ed] to close on the property." Bachrach terminated his contract.

Today, the phone number for the sales office at the Dumont has been disconnected; the latest update to the construction gallery online was May 8, 2008; and sales firm McWilliams Ballard, which had been managing sales of the Dumont, sued Broadway Management on Sept. 30, 2008, in the D.C. District Court over the project.

Bachrach found a silver lining in the unfortunate situation: He received his original deposit back in full, plus interest. "In this economic environment, it was probably the best investment I could have made at the time. If it had been in the stock market, I'd have lost half the value."

Despite the unstable market and a terminated contract, Bachrach still hoped to buy. He'd been living in D.C. for seven years, watched his rent go up each year, turned 30 and simply wanted a place to call his own.

"I had already put myself in a financial standpoint where I could buy, moved money around; I was ready to sign on the dotted line and write a large check," Bachrach said. He moved into City Vista on April 1.

"I love having my own place, and I like the increased responsibility," he said. "I love being able to do what I want, when I want and whatever I want to my place as I see fit."

Written for Express by contributor Josie Roberts
Photos by Kevin Dietsch for Express