It had been anticipated given the low pre-sales rate that Rollin Street Flats would convert to apartments, especially in light of the new Fannie Mae condo guidelines. Here’s an excerpt of the letter that was sent to pre-sale buyers:
Unfortunately, pre-sales at Rollin Street are at approximately 25%, which is below the 50 – 70% threshold Fannie Mae and most mortgage lenders require for buyers to obtain financing.
Market conditions tell us we will not achieve the required minimum 50% pre?sales in a short timeframe.
As a result, we have decided to convert Rollin Street into a rental apartment building. We will refund your earnest money deposit (currently safely held in an escrowaccount) and any deposits you made for upgrade finish options.
We had expected to be able to communicate this decision earlier, but the process of getting permission from our construction lender took much longer than we had hoped.
Additionally, they are offering a credit to Rollin Street pre-sale buyers at Vulcan’s two other SLU properties – Veer Lofts and Enso.
We appreciate the commitment that you have made to the South Lake Union neighborhood.
Recognizing this, we will offer you a credit to apply toward a purchase at either Enso or Veer Lofts–our other two condominium projects in South Lake Union. You are also eligible for a lease credit to apply toward renting a home at Rollin Street.
I actually see this as good news for the condo market. The immediate effect is the reduction of 200+ condo units from the downtown market, which is significant, and should benefit existing properties (e.g. 2200, Cosmopolitan) as well as soon to be delivered properties (e.g. Enso, Escala, Alex, Olive 8). After 2009, there will be no new condo units delivered in the downtown area until 2012 at the earliest, providing much needed time to for the market to absorb the inventory and stabilize.
So what about the prospects of the other developments that’ll be delivered this year. I believe two are on thin ice – Marselle and Danielle -and both could do well as apartments. Currently, Schnizter is adamant that Equinox will remain condos, but given the poor sales activity at all three of their Seattle projects (Brix and Gallery being the other two), it’s hard to fathom they can keep all three as near empty condo buildings. On the other hand, we’re seeing a glut of new apartments complexes in the downtown area (Olivian, Aspira, Rollin Street, Taylor 28, Axis, Hyatt Place, Moda) so there will be stiff competition for any new entrants into the rental market.