Standard Pacific Abandons Downtown L.A. Condo Deal
Suburban home builder Standard Pacific Corp. has opted out of an agreement to buy a major Los Angeles condominium project, another sign that downtown's once-sizzling condo market might be losing steam.
The condo development, adjacent to Union Station, was behind schedule and was having trouble attracting buyers for the units priced in the $600,000 range. Instead of being sold as condos, the 272 units will be leased as apartments beginning today by the project's owner, Lincoln Property Co. of Dallas.
"The delays of getting buyers into the building, combined with the market softening, all conspired to cause us to reach the conclusion we did," Steven Ross, director of planning for Standard Pacific's Los Angeles division, said Tuesday.
Although prices in the downtown market -- one of the last in the Southland to heat up and stay hot -- continue to rise year over year, sales have slowed considerably while the supply of units continues to grow, creating what some analysts say is a condo glut.
From January to June, sales of existing downtown condo and loft units plunged 25% compared with the year before. But developers have added 6,900 condo units and lofts in the last five years, with an additional 5,600 slated to be built in the next two years.
Condo developers downtown and elsewhere are starting to reevaluate their projects, particularly those who entered into deals at the height of the housing boom, as prices were driven higher with the help of short-term investors.
Some projects slated to begin sales this year have been pushed back to 2007 or 2008, analysts say.
"Maybe downtown has gotten a little ahead of itself," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. "Downtown is a young market, and we don't have that much history as to how it will perform in a true cycle."
Developers "have to take a hard look at the crucial combination of what they paid, what it will cost to build and deliver their units and what they will actually get," said Peter Dennehy, senior vice president of the Sullivan Group of Real Estate Advisors.
Some developers with projects well underway are devising strategies to adjust to the slowing downtown housing market.
For instance, Kor Group, which is close to finishing its Eastern Columbia condos at 8th Street and South Broadway, presold nearly all of its 96 units. But the company purposely held off the market 10 of its highest-priced units: penthouses starting at more than $1 million each.
