Condo plans for 44 Monroe in downtown Phoenix fall apart

Citing weak demand for upscale condominiums, the owner of high-rise condo property 44 Monroe in downtown Phoenix has decided to convert the project to apartments.

Chicago-based ST Residential bought 44 Monroe out of foreclosure in June and opened a sales office inside the building in November, hoping to sell its remaining 196 units at prices starting just under $200,000.

The company has been unable to sell any of the units as condos, according to a spokesman for ST Residential.

Only 14 units sold originally when the project was built in 2006. Company spokesman Greg Sexton said those buyers will retain ownership of their condo units and could offer them for sale to ST Residential or retain ownership until the building's owners decide to convert 44 Monroe back to a condo project.

"This is a big win for the current residents," Sexton said, adding that the change from an almost-empty condo tower to a busy apartment property would be good for existing residents and the downtown area.

Commercial real-estate analyst Bob Kammrath of Kammrath & Associates in Mesa said ST Residential is following a recent trend in which multifamily properties originally marketed as luxury-condo communities have gone rental.

Condo-to-apartment conversions hinder the ability of existing unit owners to sell their properties, Kammrath said, but could keep the project viable until the downtown housing market recovers.

"I'm sure that's the hope," he said. "The problem is, the rental market stinks, too."

Tighter lending standards and the sudden affordability of single-family homes in the Valley have hit condo investors hard, Kammrath said.

Converting to apartments offers some advantages to property owners, such as recurring revenue and the ability to adjust prices as demand waxes and wanes.

And ST Residential would have the choice to resume condo sales if and when it decides the market can accommodate them.

The median resale price for a condo in Phoenix dropped to under $60,000 in November, according to Jay Butler, an Arizona State University housing expert.

A year earlier, the median condo price had been about $88,000, according to Butler, of ASU's W.P. Carey School of Business.

ST Residential CEO Wade Hundley said his company will continue to monitor the local housing market and could potentially resume condo sales.

"We remain believers in the potential of the downtown Phoenix market, and we know that 44 Monroe will be a part of the recovery when it occurs," Hundley said.

ST Residential purchased two other local condo projects in June that were in foreclosure: Safari Drive in Scottsdale and 3rd Avenue Palms in downtown Phoenix.

Those properties continue to attract prospective condo buyers and will not be available for lease, Hundley said.

A revamped leasing center is expected to open at 44 Monroe in January.

The company did not provide any details about lease rates or how the change would affect existing property owners.

ST Residential is an investment and debt-resolution firm that is 60 percent owned by the Federal Deposit Insurance Corp.

Unlike the Resolution Trust Corp., which the federal government formed to dispose of failed lender-owned assets two decades ago following the savings-and-loan crisis, ST Residential involves the FDIC and a group of private-equity firms led by Starwood Capital Group.

All three metro Phoenix properties purchased by ST Residential in June had been owned by Corus Bankshares Inc., a holding company whose bank was taken over by regulators in September 2009.

Corus, based in Chicago, sought protection from creditors in June, filing for Chapter 11 reorganization in U.S. Bankruptcy Court.

At the same time, ST Residential was formed for the sole purpose of buying $4.5 billion in residential real-estate assets that Corus had repossessed, Hundley said in an interview in July.

by J. Craig Anderson The Arizona Republic Jan. 5, 2011 12:00 AM





Condo plans for 44 Monroe in downtown Phoenix fall apart