Downtown condo sales weaken

Two pools, one on them on a rooftop. Two fitness centers. A concierge and a view of Nashville's skyline.

Living in the Icon condo tower in the Gulch is like living in a resort, says Allison Flores after becoming one of the high-rise's first residents more than two months ago.

There's just one thing missing. People.

"We have no neighbors," Flores said. "No one above or below."

Living alone on a small wing of the Icon's fourth floor, Flores and her husband, Leo, are surrounded by condos whose expected owners have not shown up, at least not yet.

Three months after the Icon's developers, Franklin-based Bristol Development Group, began taking final payments, a total of 48 units, or roughly 12 percent of the building's 418 units, have closed on sales, according to deeds filed in Davidson County.

That slow pace reflects some unusual circumstances — construction is being wrapped up on the Icon's top floors even as residents move into the lower part of the building — but it also shows that the economic forces dragging down condo sales nationally are casting a pall over Nashville's condo market, too.

"We're in an environment where people are concerned," said Dan Daniel, a Bristol principal. "Am I going to pay too much? Is it a good time to buy?"

Sales are slow enough that Bristol is considering litigation to keep recalcitrant buyers from reneging on contracts. Elsewhere, in downtown's Encore and Midtown's Adelicia, both of which have sold many more of their units, more time may be needed to sell out the rest of their units.

It's a sharp contrast to two years ago, when the downtown's first condo tower, the 307-unit Viridian on Church Street, closed more than 80 percent of its units within the first three months. The building was entirely sold out after a little more than a year.

Each successive building to open since then has seen closings grow harder to come by. After three months, the Adelicia, a tower near Vanderbilt that opened last December, closed not quite 70 percent of its units in three months. It is now 88 percent sold, with just over 20 units remaining.

Next was the Encore, a tower next to the Schermerhorn Symphony Center that started closings in late February. After three months, it had closed just over 40 percent of its units. It has since pushed closings up past 50 percent.

Icon, meanwhile, closed just over 10 percent of its units within three months, a pace that Daniel said pleased his firm, given the economic climate and the fact that only 17 of the tower's 22 floors have units ready for occupancy.

"It's a tough market right now," Daniel said.

The developers of all three high-rises with units on the market — the Adelicia, the Encore and the Icon — say sales have been slow this summer. The Encore, for instance, was selling 45 units to 60 units a month in the spring. Now, it's selling about 15.

Time is expensive

"Obviously, we're not pleased with it," said Tony Giar ratana, the building's lead developer.

The slowdown comes even though developers remain eager to close out their buildings quickly.

It typically takes developers two years or more to build a condominium, from the time they sign contracts to the time they start cashing out and turning units over to buyers. And until the last unit is sold, they remain on the hook for the interest on construction loans, staff salaries and other expenses associated with a building, with each day that units remain on the market reducing profit margins all the more.

Bristol, for instance, started the Icon's pre-sales period in April 2006, 28 months ago. The firm does not expect to finish the building entirely until the early fall.

The slower economy, tight lending standards and bad publicity for the real estate market — the same factors cited by countless real estate agents, homebuilders and homeowners for depressing sales — are blamed for the slowdown in Nashville's condo market.

Shoppers are wary

But in a large condominium, psychology can also be an important factor. If buyers sense that sales are slow, they could worry that developers will cut sales prices so they can unload units at a discount to trim their expenses.

"Even if you want to live in it, you don't want to pay $12 for something that's worth $9," said Ray Hensler, president of Corner Realty Partners, the Adelicia's developer. "A lot of people are just trying to figure out what they got."

That has made it harder for developers to hold onto all the buyers who were committed to a project at the outset.

When construction started on the Icon, all of its units were committed to buyers. Several of those anticipated buyers — Bristol Development will not disclose how many — have asked to pull out of the project.

That has prompted the firm to send out warning letters threatening legal action against people reluctant to close on sales, even if buyers forfeit their deposits.

"We don't have the option," Daniel said. "The bank has to approve any contract that is reworked, and they're not in the mood to let anybody out of their contracts."

Giarratana, meanwhile, says the Encore has suffered a net loss of 13 buyers. It began construction with 80 percent of the building committed, and with sales to new buyers it now has 76 percent of the building under contract or closed.

"We're optimistic that we'll be able to accelerate the pace of closings through the balance of the year," Giarratana said.

On Flores' floor at the Icon, four other buyers have closed on the purchase of their condos in the last three months. Two have put their units up for rent. That leaves just two more potential residents on a floor with 38 units.

That falls short of the vibrant community Flores had hoped for when she moved from Franklin to the emerging Gulch neighborhood.

"They (residents) will bring energy, which I like, when it's full," Flores said, "but it's not full."

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