Blunt talk at www.okccentral.com

[Steve]

My latest guest blogger is being brutally open about how he sees things being done downtown.

[EBAH]

Man, brutal but as far as I am concerned, spot on. I've long found the lack of emphesis on rentals Downtown distressing. Everyone likes to talk about these retail districts and dream stores to come in but without people actually living down there it will never be realized. In our market, rentals just make a lot more sense. Me and my wife are perfect examples. We would live downtown in a heartbeat. Being in our late 20's both with good professional employment and no kids, we are almost the perfect downtown tenants. However, in this market for that kind of money we could have a nice "historic" home with twice the square footage, close proximaty to groceries, services, etc. And with only older wealthier people moving in downtown, you'd have a lot hipper neighbors in the inner city. The other thing I'm glad to see addessed is the infill issue. I agree that core to shore is getting ahead of ourselves. Why don't we try and build 1 walkable district that someone would actually want to walk through before we start taking on yet another vast empty plot of land downtown. The closest we have right now is Bricktown and to a lesser extent midtown. Both of these places offer little to anyone other than dining and drinking. I think if we started filling in some of these empty spaces with rentals and get some beating hearts down there, the rest would kind of take care of itself. Maybe we'd get retail offering or even begging to come in rather than us having to "pitch" it to them.

[Pete]

Lots of common sense from Belanger:

We conducted a market study of 14 peer cities that had neither sexy mountains nor shorelines and found that each had between 2 percent and 8 percent of their MSAs’ population within the urban core. At the low end for OKC, that math translates to 24,000 people. Even counting the Jail, we are under 2,000 today

Just shows how far we have yet to go. People clamoring for a grocery store downtown need to read this a few times.

Also, he's echoing the growing sentiment of many on the board, which is that the Core 2 Shore stuff is too soon and bound to fail if we clear out big areas with MAPS 3 and then expect development to follow -- at least any time in the near future.


His take on the need for more rental units is interesting, but also makes a lot of sense. It's the one type of housing that has done well thus far.

[soonerguru]

He has his own agenda. Not exactly a neutral party.

[Steve]

Of course he has his own agenda. Sooner, there is no such thing as a neutral party on all this.

[betts]

It's a Catch-22 in that I've heard from a lot of people that they don't want to move downtown until there is a grocery store, pharmacy, Target-like store and yet these stores don't see the demographics there allowing them to locate near the CBD. I think if you live downtown you have to be creative in your shopping. Most of us go north a few times a week for other things, and so it's easy to pick up what you need at that time. It would be nice to have a market that would allow one to buy fresh food for dinner, but still, with good planning, it's not that big of an issue. And 23rd St., as well as Classen provide a lot of the other requirements.

[Pete]

Neutral parties don't have that sort of insight. And to be fair, he's worked his tail off to try and get a variety of projects done downtown.

I respect the fact he was frank and named names.

His comments about The Hill and OCURA were particularly interesting. I don't mean to wish misfortune upon anyone but that one big failure may finally force some needed change in both personnel and attitudes.

[wsucougz]

I didn't think it was brutal at all. Why not make The Leslie for rent? Does that violate an OCURA requirement?

[soonerguru]

Of course he has his own agenda. Sooner, there is no such thing as a neutral party on all this.

I didn't mean for it to come across so harshly. His opinion is valid and warranted, and, in rereading his blog, he does make many excellent points.

Unfortunately, I get the idea he's really pushing rental housing only due to the failures of many of these overpriced projects (and I've never liked the look of The Hill aesthetically).

Is there no middle ground in this discussion? Does it have to be overpriced condos or rentals only? Can't there be some entry and midlevel to-own properties?

[Pete]

Yeah, I think the combination of more rental units and entry-level condos makes the most sense. You'll get a lot of renters eventually wanting to own in the same area.

But part of what he's saying is that apartments are much easier to get financed these days. Condos won't get built without lots of pre-sales and that's hard to do when you don't have anything people can physically see.

[bluedogok]

I agree with him, like I stated in the "buying downtown" thread that new apartments in Downtown Austin was really the catalyst to get the residential towers (one rental, the rest condo) that are built or being finished. There are many who would like to live downtown and for various reasons may not be able to finance a condo but can afford rent while they are building towards a time at which they can buy, especially in the current financial environment.

I also agree with his assessment that OKC has never been much of a condo market whereas many of the Texas cities have been for good and bad. In this part of the country lenders are more apprehensive to loan on condos than they are on detached single family homes in large part because they are traditionally a harder sell should they have to foreclose on them. My wife works for a non-profit doing affordable housing assistance and accessibility modifications, in the past they have had some lenders who were more critical of financing a condo than they were a single family home because of past experiences with them.

It is a chicken/egg thing, if people want the support stores to locate downtown they are going to have to move in first and just put up with having to drive somewhere to get groceries and such to get the demographics to a point where they will move in. Austin has a bit more of that support downtown but most of the downtown dwellers that I know still have to venture out of the core to buy some of the basics. People are just going to have to commit to the lifestyle to see results, stores don't move in based off the hope that something will grow, if they do they typically don't last long enough to reap the rewards.

[Pete]

Saying condos have not done well in OKC is an understatement.

The only ones I can think of that sold quickly (apart from The Centennial) are really more patio homes than condos; developments like The Waterford and Saint Martins that drew mainly retirees that want to park in an attached, private garage and live behind closed gates.

On the other hand I can list dozens of projects all over town that have completely floundered -- many have gone rental.


Here's an honest question: Has Oklahoma City EVER had a successful condominium project? (As opposed to townhomes and garden homes.)

[Steve]

Yep. There are plenty in the suburbs that have done well - far more than I can name.

[Pete]

Please name a couple.

[Steve]

Jamestown (I think that's the name) along NW 63 east of Penn, there's a condo development at Memorial Road east of Broadway that got expanded twice this past decade - a friend lived there and made a nice profit selling her unit, condos in Quail Creek (west side), and in the heart of downtown, the Sycamore Square condos have done quite well this past decade or so. Now if these don't fit your definition of condos, then I'm a bit perplexed as to what does.

[Steve]

Pete, I just know you're delaying responding here because you're furiously googling each project to prove I don't know a damn thing. Which of course is always a possibility.

[Pete]

Actually, I know all about all the projects because I looked at condos extensively all through the 80's and was in the real estate business. I promise not to use Google once on this topic (unless we just can't figure something other and need to look it up).

Not familiar with the ones on Memorial east of Broadway so they must be newer.

Another possible example is Nantucket on Britton east of May -- this was the first of a series of projects by Charles Givens but really the only one that could be considered condos. But I could just as easily point out the Hemingway, which was largely empty for several years after completion. I think they may have rented some of the units for a while.

But I would say, with the possible exception of Jamestown (west of May) which I believe are townhouses anyway, all those other developments were pretty disastrous for years on end.

The ones in Quail Creek may have even gone back to the lender at one point and Sycamore Square was a disaster anyway you slice it. I remember going to look at them when they were only a couple of years old and they still hadn't sold but a few of them... And of course, had to convert the southern complex to rental and it remains that way today.


My point is that there is almost no track record for profitable condo development in Oklahoma City. It seems we try a flurry of development every ten years or so only to experience wide-spread failures.

Off the top my head, I could name a dozen projects that were catastrophic failures and I'm really struggling to come up with any exceptions.

[Steve]

Well hell, wasn't everything here a disaster in the 1980s?

[Pete]

But I'm not just talking about the 80's... The 90's the 00's, even the 70's... Don't think there was anything before then.

And remember, there were long periods of the 70's and early 80's that were just as up as things were later down.

You can't blame the economy for never being able to develop profitable condos over a 40 year span.


For example, I mentioned the Hemingway... That was complete around 1981 which was definitely a go-go time in OKC.

[Steve]

It's an interesting question you're brining up.
Here's my take on the downtown housing market to date:
- The Centennial. Yes, it was a complete sell-out. But it's also lacking life and vitality. Why? Many, but not all of the units ended up being corporate pads bought by the usual suspects for entertaining clients, hosting employee recruits, etc.
- Block 42 is the second most successful, and does have a real community living there. But sales have pretty much stuck at having several units still on the market following the crash. I suspect Block 42 would be closer to full by now had the crash not happened.
- The Central Avenue Villas are doing ok considering the units became available after the crash. Again, however, the villas have several units just not selling.
- The Maywood Lofts, without a doubt, would be opening this fall completely sold-out had the crash not happened. Ron Bradshaw, however, lost a lot of investor sales with the crash and now just has the owner-occupant buyers. I'm not sure this is a bad thing. But the ground floor retail space may be a challenge due to configuration with the street. TIme will tell.
- The Brownstones at Maywood Park. Everyone raves about the quality of design. But the multi-levels turn off a lot of buyers.
- Sycamore Square: initially an 80s bust, now doing quite well.

Pete, there are a lot of people wanting to buy downtown. But there is a massive disconnect between what they want and what's been built. I'll be delving into this very, very soon.

[Pete]

To be fair, Block 42 has to be considered a success because it's sold all but 11 of it's 42 units (at least according to it's website).

And although it is only 17 units, the Harvey Lofts completely sold out.


Disconnect with buyers or no, the terrible track record of condo projects in OKC means that it will very difficult for any new projects to be financed. And pre-selling anything this is completely unbuilt is near impossible.

I'm just worried that the damage done by these failed projects will extend far beyond the investment made by the developers. It may cripple condo development downtown for quite some time.

[Steve]

Yes, and Block 42 has made its money back. Forgot about Harvey Lofts. Yep - that's a definite success as well.
As for financing... we might be entering an ice age on financing for quite some time to come. And people I talk to expect The Hill to be capped off with buildings already started, with no more to follow.
I'm not really arguing so much w/ you on this point - just questioning some of the reasoning.

[soonerguru]

I'm just worried that the damage done by these failed projects will extend far beyond the investment made by the developers. It may cripple condo development downtown for quite some time.

Bingo. That's why there was a wave of apoplexia when The Hill was awarded the Deep Deuce bid by the savants at Urban Renewal. What a DISASTER.

And, with such a large footprint, the Hill's failure is spreading the misery.

I've spoken to numerous city leaders about this stuff over the years, dating back to the beginning of the decade. Frankly, they just don't get it. Most of our "movers and shakers" live in Nichols Hills and Edmond. They don't really understand the downtown vibe, and have made poor decisions for the city because of it.

[Pete]

Allow me to summarize my two main points:

1. OKC has a terrible track record with condos; not just recently but going back to the very first projects. There are underlying reasons for this (such as inexpensive home prices in general, the huge amount of land available for development, and the almost total lack of traffic) that haven't changed much over the last 40 years.

2. Even with all the excitement of downtown, there have been more failures than successes in the downtown condo market -- and condos in general.


Both of these things conspire against future developers even in a healthy financial climate and we are very far removed from that.


I will say the nature of real estate development is that the money has to go somewhere -- too many people make their livings by lending money and building things. At various points it's been speculative office space, then retail properties, apartments, hotels, and light industrial... It seems to me that the money will now go back into rental units as that's the one area that seems quite strong.

I also doubt we'll see new condo development for quite some time.

[Patrick]

Hefner Village has been a pretty successful condominium complex. 6000 Penn is partly leased, but overall, has over 50% ownership. Same with The Barington near Northpark Mall. There's Quail Springs Condos just east of Quail Springs Mall.