Officials see bad omens for projects

Seth Rosen / Charlottesville Daily Progress
Published: January 21, 2008

With more than 600 residential units slated to be built over the next two years in downtown Charlottesville, some developers and city planners are predicting that the combination of the flagging economy and the amount of competition will precipitate the downfall of a few of these high-rise projects.

Last week local architectural firm Daggett & Grigg presented a proposal to the Board of Architectural Review for a nine-story building on Water Street, with up to 17 high-end condos. The tower, to be located on the parking lot across from the C&O Restaurant, is the sixth high-rise project within blocks of the Downtown Mall that either has been approved or is under consideration.

If built, the developments would transform the Charlottesville skyline, bring hundreds of new residents to downtown, invigorate the shopping and retail corridor, and fill the city's coffers with additional real-estate revenue.

But all of the projects are set to be finished within an 18-month span, leading some to question whether the downtown market can absorb more than 600 condos at once. With so many developers racing to finish their projects at the same time, there's a good chance that a few will not come to fruition, many in the Charlottesville development community believe.

"I think that a number of those projects that have been approved probably will never get built," said John Matthews, a local architect. "And the ones that do get built, the trigger will be pulled when developers feel the risk is moderating."

To date, none of the developers has hit the brakes on a project, let alone scuttled plans. But with the economy dipping into a possible recession, banks will be more cautious about supporting condo buildings, developers acknowledge. And the difficulty securing financial backing could push some developers to table or abandon projects already in the pipeline.

"We've always said around the office that of all the nine-story buildings coming online at once, at least one would go by the wayside," said Brian Haluska, a city planner.

Plenty of work to be done

Only one of the towers - the 57-unit Waterhouse on Water Street - has broken ground. And that was no easy task, said Bill Atwood, Waterhouse's architect and developer. It took time to pre-sell nearly 50 percent of Waterhouse's units - the magic number bankers and developers look to lock up before they move forward.

But with the subprime mortgage crisis devastating the economy, banks are likely to be more frugal this year and less willing to take a risk on a condo project. While a college town such as Charlottesville is more immune to the vicissitudes of the housing market than the Washington, D.C.-area, financial backing is still drying up and the local housing market already has cooled.

"The credit market is so bad and the banking business has gotten so tight that it is extremely difficult to get a project started," Atwood said.

The key then is to be one of the first projects out of the gate. Following closely on the Waterhouse's heels is The Gleason, a 44-unit, six-story tower on Garrett Street. Construction is set to begin in March, with the first residents moving in a year later.

Other projects are not as far along. According to Haluska, the developer of the 201 Avon project - a 100-unit, nine-story building next to the Belmont Bridge - has asked for a six-month delay until June to complete a final site plan. The architect of 201 Avon did not return phone calls.

Both a proposed 79-unit development on the corner of West Main Street and McIntire Road and the new Water Street project still need to win the approval of the Board of Architectural Review before work can start. Construction is scheduled to begin later this year on the 315-unit Coal Tower development - spread out over 62 townhouses and four buildings - that will run from about 10th Street Northeast to Meade Avenue, just north of the CSX railroad tracks.

When all those projects will actually break ground remains to be seen. "In times like these, it's not prudent to make predictions," said Jim Grigg, the lead architect for the 600 E. Water St. project.

Realistic projects-

The Gleason and Waterhouse's head starts call into the question the viability of some of the other towers, said Oliver Kuttner, who sold the Coal Tower property in 2003 to Coran Capshaw. While the demand for downtown condos is high, there's a limit to how many can open at the same time.

"I think they are coming late to the table," Kuttner said, referring to 201 Avon and the W. Main/McIntire project. "By the time you get through that many units, you are getting to saturation."

Others are more sanguine about those projects' prospects. While developers may ultimately have to delay them for a few years because of the competition, there is certainly room downtown for an additional 600 units, said Bill Lucy, chairman of the Planning Commission.

Many baby boomers in Charlottesville, Albemarle County and beyond are looking to sell their houses and downsize to smaller condos adjacent to the region's shopping, dining and entertainment hub, he said. And in the coming years, that trend will only increase.

An option for the developers is to turn some of the proposed residential units into commercial space, for which there is a stronger market now. The number of residential units in The Gleason dropped from 65 to 44 and additional commercial space was added, though developer J.P. Williamson insists that move had nothing to do with demand in the residential market.

"It's very easy to take a residential floor to commercial, but very difficult to go the other way," Haluska, the city planner, said. Developers in Charlottesville tend to be cautious, many here say, and are unlikely to push forward a residential building without the proper financing and commitments from tenants.

"Are we going to go full-bore ahead without any pre-sales or testing the water- No," said Bob Englander, the developer of the site on the corner of West Main and McIntire.

Englander's plans are still being molded. This summer when he received a zoning change by the city, he announced that he was going to put 79 units in the nine-story tower. Now, though, he says the building could have as few as 50.

The building's location and design will be a strong selling point, Englander said, and help the product break through the crowded market. He's confident that construction can begin by the end of this year but acknowledges there are no guarantees.

"We have one foot on the accelerator, one hand on the gear shift and the other foot on the brake as well," Englander said.