Condo conversions take a slower pace today, but the trend still exhibits reasonable revenue potential.
Condo conversions make economic sense in expensive housing markets like Washington, D.C., Philadelphia and Miami, among others where converted rentals remain the best option for entry-level buyers. Companies like Apartment Investment and Management Co. (AIMCO), CityView and J.A. Reinhold Residential look to capitalize on the for-sale trend.
Jeffrey Reinhold expects the conversion trend to stay hot for a long time to come. The CEO of Philadelphia-based Historic Landmarks for Living even formed a separate company to focus just on this niche. J.A. Reinhold Residential aims to solely turn multi-family rentals into condos for sale. The new firm’s initial purchase included five apartments in the area for about $88 million, two of which are being converted into a $55 million to $60 million process. Reinhold’s 110 unit Locust Point will see $9 million in upgrades or approximately $100,000/unit, which would sell from the mid-$200,000’s to mid $400,000’s. The 108 unit Lofts at Logan View will get $7 million in renovations. A one-bedroom could sell for more than $270,000, while the two bedroom could fetch $450,000 or more. Reinhold believes his affordable luxury product will appeal to first-time homebuyers who wish to live in the city but cannot afford the high home prices. The strategy works well for the company since it bypasses land and construction costs to build in such a central location. Another bonus; no oversupply worries because the area isn’t overbuilt and enjoys a robust economy.
Historic Landmarks for Living owns and operates nearly 2,000 apartments in urban areas and is able to provide Baltimore Apartments, St. Paul Apartments, Minneapolis Apartments, Chicago Apartments and Philadelphia Apartments. As a private company it doesn’t look for a fixed IRR. Reinhold remains on the search for suitable investment opportunities to purchase an asset. He keeps his options open to convert the company’s existing portfolio as favorable market conditions dictate.
As the CEO of Historic Landmarks for Living, the company responsible for rehabbing and managing some of Philadelphia’s most interesting rental properties, Jeff Reinhold knew there was an abundance of historic buildings in Philadelphia that could be converted into sophisticated luxury homes.
Yet in the current housing market in Philadelphia, many condominiums are geared toward a wealthier demographic, leaving little choice for young professional homebuyers who want to stay in Center City. For Reinhold, the lack of affordable condominiums presented a new opportunity.
“As the market was starting to appreciate in price, we were starting to see homes and condos inching up towards the $700,000 to $1 million range — prices the -first-time homebuyer really couldn’t afford,” says Reinhold. “In front of me was this great niche waiting to be created.”
Last year, Reinhold launched a new residential real estate company called J.A. Reinhold Residential. The concept was simple: Take well located multi-family properties and turn them into for-sale condominiums. Because the units would be conversions and not new construction, Reinhold could offer the properties at a lower price point, making them accessible to the first-time homebuyer. The first two properties J.A. Reinhold Residential has converted are the Lofts at Logan View at 17th and Callowhill streets and Locust Point at 25th and Locust streets on the Schuylkill River in desirable Fitler Square and adjacent to Schuylkill River Park. Both buildings are conveniently located, with the Lofts at Logan View situated by the Parkway’s museums and minutes away from the Center City business district, and Locust Point set equidistant to both Center City and University City. The sales of offices at both properties are now open with fully furnished models. The properties are being renovated inside and out. Locust Point and Lofts at Logan View are beautiful examples post-industrial architecture, with features like 13- to 17-foot timbered ceilings, exposed brick walls and dramatically tall windows showcasing striking views of the city. The units themselves have been renovated with the high-end details common to luxury condominiums, such as granite countertops, Decora cabinets and hardwood flooring. Pricing at Locust Point, which also boasts 70 parking spots, begins in the high $200,000s for a one-bedroom condo.
“At that price points you would generally have to look for something south of South Street or in Northern Liberties— it would be difficult to find a condominium within walking distance of Center City,” says Reinhold.
A longtime Center City resident himself, Reinhold found his work extremely satisfying, and particularly enjoys the creativity that goes into re-imagining existing architecture. Reinhold eventually hopes to expand the company to other cities, and believes that his conversion model is fulfilling an unmet need in the real estate market. “I know that people really appreciate living in historically significant properties,” Reinhold says. “With our company we’re taking what are already tremendous buildings and doing something truly different — restoring them at a luxury level that is still affordable.”
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Welcome to the Philadelphia Pennsylvania blog. This blog contains a wealth of information about Philadelphia, Pennsylvania, Apartment living, and housing opportunities in our great city and other metro areas of the U.S.. Learn about efforts at restoring architectural relics of the past - former factories, warehouses, schools, hotels, hospitals, train stations - into first-class houses and apartments, and in preserving these distinguished residential communities for future generations. Please enjoy your stay on our Philadelphia apartments blog and feel free to share your stories on life in Philly and the city of brotherly love. In addition, we welcome all commentaries regarding building remodeling, home remodeling, kitchen remodeling, bathroom remodeling, and house hunting. Thank You!