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Northwest Current -- April 27, 2004

Market strength yields conversions
By Dwight King-Leatham

The strength of condo sales in the District is fueling a burst of conversions - from apartment buildings, hotels and even office buildings.

Sales in the District remain strong, driven by the low interest rates on home mortgages and an abiding interest in shopping and working close to home, according to District real estate professionals interviewed last week.

Andrew McAllister, a member of the financial team with the national brokerage firm Cushman & Wakefield said he has witnessed a "big shift" toward urban condo dwelling over the past 18 months.

"As land prices have shot through the roof, people are moving into the city, especially since the city is turning the corner as a place people want to move in to," he said.

The 14th Street corridor and Capitol Hill are just two of the spots in the city where "a lot of gentrification is occurring," McAllister said.

More and more people are opting for in-town condo living to be "close to the action downtown," McAllister said. "They're sick of sitting in traffic on [Interstate] 66 and instead are willing to move to smaller residences so they can live closer to work".

Around Dupont Circle, demand for condominium living has led Monument Realty to plan to turn the six-story, former Congressional Quarterly building near 22nd and O streets NW into some 35 large units - if the demand for the large units exists, group representatives say.

Sparked by buyer demand, both small and large professional real estate groups have been adapting to the new condo-buying enthusiasm. During the past 18 months or so, McAllister and the rest of his eight-member team at Cushman & Wakefield have racked up more than $1.4 billion in condo-building closings, he said.

A big part of the new surge in condo development has been the frenzied conversion of apartment buildings or hotels in condominium complexes.

Monument Realty is seeking Zoning Commission approval to convert the Watergate Hotel in a 155-unit luxury cooperative, and Castle Development Corp. recently bought the Braxton Hotel at 1440 Rhode Island Ave. NW is slated to become either residential condos or rental apartments.

But part of the condo explosion has pitted condos against rental units, with monthly payments having dipped to about the level of apartment rents or, in some cases, even lower, according to lawyer and Dupont Title & Settlements LLC owner Babak Movahedi. Movahedi spends much of his time helping those involved in condo transactions work through the negotiations of tenant-sponsored conversions.

"Because mortgage interest is so low, the demand for rental hosing has gone down," he said.

Rental payments have become comparable to the cost of purchasing a home, with the monthly payments pretty much the same as rent, he said. "So it does not make any sense to rent when you can buy as easily and, meanwhile, build up equity," Movahedi said.

Mike Postal is co-founder of the Tenacity Group, which specializes in tenant-sponsored condo conversions. Comprised of the former Capital City Builders and several other general real estate-related companies, Tenacity is a "vertically integrated" group of companies geared to one-stop shopping for condo conversions, he said.

Postal said the tenant-sponsored conversions "work favorably" for buyers all over the city.

He said the market has been "very good" for the past five years but downright "feverish" in the last two years.

Tenacity Group's "banner project" is the $16.25 million Cathedral Court Condominiums at 3010-3100 Wisconsin Ave. NW, "the largest conversion we know about in the area to date," said Postal. Tenants organized the purchase after the Washington National Cathedral sought to buy the apartment buildings.