published Thursday, June 16th, 2011

High-end condos sell poorly, but North Shore starts recovery

Jay Hicks stands amid the construction of a project on the second floor of The Terrace at Frazier in North Shore of Chattanooga. The first floor of the condominium project has been sold out.
Jay Hicks stands amid the construction of a project on the second floor of The Terrace at Frazier in North Shore of Chattanooga. The first floor of the condominium project has been sold out.
Photo by Jenna Walker.

The housing crisis struck just as developer Jimmy Hudson put the finishing touches on his sparkling mixed-use development on Chattanooga’s North Shore, The Terrace at Frazier.

But after a slow start in an anemic real estate market, Hudson has nearly sold out the first two floors of his four-story building.

“They kind of came in one after the other,” he said of his tenants.

More than 22,000 of the building’s 29,000 commercial square feet are now spoken for, as electricians, plumbers and framers hurry to prepare the once vacant space for occupants.

Tenants themselves say they were drawn to The Terrace’s location, as well as the plentiful parking at the attached CARTA lot, which is almost always empty.

“I worked at River City Co. for a year doing retail recruitment, and the No. 1 thing you hear about is parking,” said leasing agent Cullon Hooks.

A year ago, Regions Bank was the only tenant in Hudson’s ambitious development. Today, new tenants like Cory Allison of WiggleWorm have built bright, airy stores with frontage on Frazier.

Allison said she opened her baby products store in the building because Frazier Avenue “is the place people go to get local flavor.”

She also considered Warehouse Row, a struggling development on the Southside, but stuck with the North Shore.

“I know all the owners here, we really believe we’re a cohesive group,” she said.

Even though the avalanche of new commercial deals has filled much of the building, the residential space has been a harder sell, said Rebecca Potts, sales manager.

Only four of the structure’s 16 residential spaces are filled in spite of features such as high ceilings, expansive views and large living areas. That’s double the number of condos that were occupied in summer 2010, and all sales are good news in a tough market, Hudson said.

The problem then as now was that many of the more expensive condos were attracting interest, but potential buyers couldn’t sell their existing houses to make the move downtown, Hudson said. Since then, he has quietly lowered prices on some of the more expensive units, bringing them below the $600,000 mark.

“All things considered, we feel very blessed,” Potts said. “We’ve worked hard and it’s been difficult, but in comparison to how it could be, we feel very blessed.”

A mixed bag

By comparison, the 417 Building, which Cornerstone Community Bank took over when developer Whitehall Properties went bankrupt, is mostly occupied on the residential side, though property manager Braden Selby has yet to fill half of its commercial units.

The building has done well because of its postmodern interior design as opposed to the more traditional condos available in other buildings, Selby said. The 417 also has fewer units to fill — only 12, 11 of which are occupied.

“To be totally honest, they are killer interiors,” Selby said.

As with other sellers, the bank dropped prices about 10 percent, which helped put the units within reach of buyers.

One North Shore has filled 92 of its less-expensive condos, with about 20 under rent. That leaves about 90, or just under 50 percent still unsold and vacant, according to agent Margaret Thompson.

Leasing the apartments helps to fill the rooms, but developers take longer to earn back their costs by not selling the units outright, Thompson said.

Butch Lunsford, a partner in the development group that built The Bridgeview on Northshore, has sold about a third of the units in his complex and leased the remaining two-thirds.

“The market’s awfully soft,” Lunsford said. “We didn’t want to chase the market and start discounting prices, so we’re basically doing more leases.”

The 12 dwellings he’s sold for about $7.4 million don’t make up the $20 million investors spent on the project, but some money coming in is better than no money, he said.

“We’re pleased, because we’re in an awfully tough market on the high end,” Lunsford said. “The stuff under $300,000 seems to be selling, but when you get over $300,000 to 400,000, the market stalls pretty fast.”

And the less expensive the condos get, the faster they sell, if the Pinnacle Condominiums are any indication.

With expansive views of the city and mountains, one- and two-bedroom units sell for from $110,000 to $180,000, said sales manager Stephen Kipa.

“Most of the other condos at the edge of the river are super expensive,” Kipa said.

He’s sold 86 condos of the building’s 137 total since Pinnacle opened in 2008.

“It’s all about the price point,” he said Tuesday. “We’ve already sold 15 this year.”

about Ellis Smith...

Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...

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NoMyth said...

Only a fool would purchase a downtown condo at current asking prices. Downtown condos are a horrible investment right now. Developers, banks and real estate agents are driven by greed, not the buyers best interests and they are trying to ignore the housing crisis, holding back a big slug of imminent foreclosures, and are avoiding reducing prices to reflect true market values, which are roughly 2003 prices. It doesn't help that Chattanooga has granted tax exemptions for many of the new developments. As a result, the developer is not losing much on cash flow and does not need to lower prices to sell. 345 Frazier has unfinished condos for 600k, with a view of a gas station. What a joke. Pinnacle is a dump. Bridgeview is nice but prices are out of bounds. It's a shame that the TimesFreePress routinely shills for local developers and isn't writing any articles that are looking out for the buyer.

June 16, 2011 at 7:45 p.m.
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