Hanna Heights Shifts To Apartments

Jenyum November 25, 2007

There’s real life at night on that block these days. I was there Friday night around 9 and I thought it was hopping, then came back out after a movie at 11:30 and if anything there were even more people out, at the One Heart. It could be a really appealing place for 20 somethings who can’t afford to buy right now.

KevinFreitas November 25, 2007

Glad to see the market downtown starting to regulate itself a bit. Now maybe this will make entry into urban living more market rate.

Crenshaw Sepulveda November 25, 2007

From the Hanna Heights web site regarding one of the units:

“The Vivaldi I units are the smallest of the one-bedroom units. They are one-floor units and include a master bedroom, living room, deck, optional electric fireplace, kitchen with bar, dining room, pantry, bathroom with washer/dryer, linen closet, and secured parking stall. These units are ideal for a single person or couple.
“

I love this, they refer to the bedroom in a one bedroom cracker box unit as a “master” bed room. Do real estate types have no shame? “Master” bedroom lol.

In all seriousness, this does not bode well for Prium. What kind of rents are they going to have to charge for these units? Rule of thumb is 1% of the selling price per month. People are going to pay $2500 a month for a one bedroom with a “master” bedroom? People that can pay $2500 a month for rent understand what a master bedroom is. I’m beginning to think that these Prium projects are going to be taken over by the Tacoma Housing Authority or MLK housing development association. How does this bode for the Walker right next door? I understand Walker project wants to build an apartment tower right next to the Walker on St. Helens.

This entire Prium business plan is an unmitigated disaster. God help us all.

Brotha E November 25, 2007

Definitely a smart move on their part. To bad they did all of those upgrades before making this decision. On the tour of urban living they had alot of interest and some killer views just not enough to compete with the downturn in the market. If hope this keeps them going though, they really are an asset to T-Town. Those in the market to rent better jump at the chance to live in a 300k+ place while they are available. Now lets see what happens with the Roberson. I also noticed that Metropolitan hasn’t started their project at 25th and Yakima.

Erik Hanberg November 25, 2007

C.S.—1% of the selling price? I haven’t seen that elsewhere in town. Many apartments rent for $800 – $1000 that would be worth more than $80,000 or $100,000 if they were condos. I could actually see the Hanna Heights condos doing pretty well at the $1000 – $2000 range. One St. Helens has some apartments at $2,500 that don’t compare as favorably to some of the better units in Hanna Heights.

Crenshaw Sepulveda November 26, 2007

Erik, I’m going by the common wisdom in the residential rental business. I’m told that you rent your property out for 1 percent of what you owe on it per month. So if you owe 200k on a house and you are renting it out you should be getting 2000 bucks a month for it. That covers your mortgage costs, insurance, upkeep,taxex etc and maybe puts a buck or two in your pocket. There is of course what the market will bear and I’m not seeing too many takers for $2500 a month on a 800 square foot one bedroom, but that is another story. Sure you don’t see rents like this in Tacoma, but you could very well see them in the near future as people stuck with property they can’t refinance and condos going rental start hitting the market. I don’t think they will get the 1 percent but that just means more foreclosures and more bankruptcies. I don’t make up the rules, this is what they teach you in real estate 101. The more I think of it the more I’m convinced that Prium properties will end up as subsidized housing like the Winthrop. Friends, the future is pretty grim. I know we don’t want to face this, I know some with to get out with the laundry on their backs, but this is not a good sign, not for Prium, not for downtown, and not for Tacoma.

What rentals rent for is a factor of what is owed on them, sure when you sell an apartment as a condo the price goes way up, but you are putting the cart before the horse. Once it is sold as a condo you have the basis to calculate the rent. In a perfect world a $1000 a month apartment would sell for 100k or so as a condo but all those stainless steel appliances, granite counter tops, faux hard wood floors double or triple the costs of the conversion. We are going to have a real big disconnect between what people need to get for these rentals and what the market will pay. If the market will only pay half your nut you are heading for foreclosure or bankruptcy. You don’t even need to take real estate 101 to figure that out.

Brotha E November 26, 2007

CS,
I really doubt that they are using RE 101 to decide the going rate on rent. Besides they didn’t have to buy them. I would assume this is just a business decision that had to be made based on the current mortgage/credit crisis. Nobody I know really saw the severity of our current situation comming. If they had to turn this into replacement housing to get the Winthrop off the ground would that really be so bad? Everyone keeps complaining that we need some nice affordable housing anyway. Well here it is. I think it would be kinda funny, while those downtown were complaining about some kids ruining there business and not their own bad business plan they got some highend subsidized housing built right under their noses.

Elliot November 26, 2007

Yeah, I’m voting against the “conventional wisdom” of 1% for rent prices. I can think back to the last 5 houses I’ve rented, and that would have been insane in every single case.

I just hope these places fill up, renters are more likely to be young and out at night, which is what this neighborhood needs, not a bunch of shut-ins with big TVs.

kris November 26, 2007

I think this is a smart move. I would rather see market rate apartment renters then empty condos bought by investors. This means more consumers downtown.

drizell November 26, 2007

I’ve heard many landlords mention that 1 percent thing, and agree that it’s total hogwash. The least appealing thing for me about Hanna Heights is the floorplans do not seem very imaginative; they seems to be designed with rental living in mind.

I took a stroll by Chelsea Heights this afternoon and was encouraged to see that things finally seem to be progressing. Looks like the fourth floor has been drywalled and all the windows are finally in.

I think the St. Helens neighborhood could definitely use some more diversity. The only time I ever see 20-somethings anywhere near the Grand Cinema is when they’re out walking their dogs.

The demographic shift near 6th and Fawcett over the past couple years is amazing.
Just a few weeks ago, I went to the Grand for the first time in about 6 years. In 2001, the the theatre was about half full, with mostly people under the age of 30. A couple weeks ago, my date and I were the only ones under 30. The theatre was packed and the average moviegoer was about 60. It felt like Movie Nite at the Senior Center.

If Hanna Heights turning into an apartment building is what will cause an influx of some Gen-Xers and Gen-Yers, so be it!

Crenshaw Sepulveda November 26, 2007

Normally drizell makes a lot of sense to me but what the heck is “rental living”? Why would someone that rents something want to live differently in an apartment than someone that buys the apartment as a condo? Indeed, how does one live differently in an apartment then in a condo?

People are taking issue of the 1 percent thing. I’m wondering what you think of the 8x the annual gross as the selling price of a rental? Same hogwash? An apartment renting for $1200 a month would sell for $115,200. So what is wrong with the picture in Tacoma, the selling prices are too high or the rental prices are too low. Are people being gouged on the prices of condos? Something just isn’t right. At $115,200 the smallest condos at Hanna Heights would be snapped up by the young. At $250000 Prium isn’t able to sell them and is considering renting them out.

Crenshaw Sepulveda didn’t force the developers to build all these condos that people don’t want to buy. The Sepulveda method is to make smart renovations like the old Mecca and repurpose buildings for mixed use in the downtown core. The Sepulveda method is to build projects that the young workers in downtown can afford. For a while there were those that were touting downtown as a place for the wealthy. People saying if you can’t afford it you should look elsewhere. People saying there is no right of the low income to be in downtown. I guess with my rules of thumb (rules that have been followed for decades, I might add) I’m not one of the smart ones, the people like Prium are the smart ones.

When the Walker was an apartment building it was filled with younger people, they were amongst the ones that bought the tickets at the Grand Cinema when it first opened. Sure the demographics have changed, the young are not part of the plan for downtown.

Marty November 26, 2007

Drizell,
Maybe it was the movie you were seeing. I just returned from “No Counrty For Old Men”. The theater was half full everyone looked under 40 and most looked under 30.

Pick better movies.

By the way, it is Cohen Brothers at their best. Don’t miss this movie.

Mofo from the Hood November 26, 2007

I’m conducting an informal survey.

What kind of money is better.

A) Money from people over 50.

B) Money from people under 50.

Crenshaw Sepulveda November 26, 2007

Old money, young money, the thing is that is about the money and not about creating a community that will work. It is about building and selling the next trendy thing and not worrying about how it all works so long as the next project can be built and people can be sold some sort of dream of a future that works. We do well with the building and the selling and not so well with the future that works.

Rebecca November 26, 2007

I think this is great. What livens up a neighborhood more – empty condos, or full apartments? I never thought I would say it, but finally Prium is showing some common sense instead of plain greed. Renting these will get more people on the streets, which I’ve heard on exit133 touted as the best way to prevent crime.

drizell November 26, 2007

Crenshaw,

To answer your question about renting vs. owning, I just thought the layout and use of materials in Hanna Heights was more aligned with a lot of the new apartment buildings built downtown. Of course, there should really be no difference. I think it’s a bit too pessimistic to think that the Prium projects will one day become public housing. I’m not familiar with Washington real estate laws, but I think Tacoma could really benefit if it had coop apartments.

Marty, I think you’re right on about the choice of movies. We saw “Into the Wild,” so I assume all those seniors wanted to relive the idealism of youth that was so prevalent in that film.

morgan November 26, 2007

Deja-vu in the marketplace? Wasn’t Thea’s Landing originally going to be all condos but part way through they realized the market wasn’t quite “there” yet. Can anyone confirm?

I’m not familiar with this 1% thing. The thinking usually goes, “charge what the market will pay.”

Sometimes it makes sense to turn a condo building into an apartment building until the next housing boom.

intacoma November 26, 2007

I laughed when I saw what one-st helens was charging. If Hanna Heights wasn’t so ugly I might consider it. The worst part to me are the decks, I never want a grate deck. I’m glad to hear they are turning to apts. Great news!

RR Anderson November 26, 2007

Oi, lets not get started on the design of these things.

Why do all new buildings need to look like the EMP? Please somebody take the 3D programs away from these in-human monsters (architects).

Erik B. November 26, 2007

I’m not familiar with this 1% thing. The thinking usually goes, “charge what the market will pay.”

True, they would charge 5 percent if they could or 1/2 of one percent if that is all they can get. We will see. However, apartments seem to have some demand downtown and Court 17 seems to be full.

The units have to be worth something considerable being 1) right next to the grand, 2) killer views, 3) gated parking, 4) new and upgraded units.

The cool thing about the choice to run it as apartments is that we are going to see the units filled much sooner rather than later.

Plus, it will clear up all of the “backlog” statistics for condos which have caused some hand wringing.

With these two condos going to apartments and Old City Hall turning into office space, we are going to have another condo shortage before we know it.

Les November 26, 2007

‘Prium is showing some common sense instead of plain greed’ HA! Make no mistake – the greed is in place..Think they’re not forced to build some cash flow here? Also – They’ll be looking to sell units again as soon as the market rebounds.

Jake November 26, 2007

I think I have seen Marcato renting out some of the developer owned units. Grandview Condos on 21st and I Street has been advertising units for rent. Vista Del Rey in the Stadium District is a condo building that is all rentals.

The only reason this building will go to full on apartments is because they sold zero units. The reason they sold zero units might be because it is pretty boring (other than the view). I know the market is slow but atleast a few units should have moved. It is like Theas Landing. They are having a harder time re-selling those units because they are boring (IMO). They just don’t compare once you see a building like the Roberson. There are more interesting properties for your money out there. If Hana Heights was built in 2002 when condos were a newer thing in Downtown they would have probably sold fast but I think the market has changed a bit and you have to offer something more interesting.

I would tell developers 4 things:
1. Make it interesting. Cookie cutter granite doesn’t fly anymore.
2. Retail is must.
3. Height Height Height. People are tired of the 5-9 story boxes.
4. Views are overrated. Almost every house, condo, and commercial building in downtown has a view.

Of course a stronger real estate market would help as well.

Erik Hanberg November 26, 2007

Jake,

I might be wrong on this, but I think Hanna Heights, being on the north side of 6th is constrained by code to 9 stories. It’s the south side of 6th where the height limits are much higher (in theory Triangle Townhomes just across the street could have been 400 feet per code … I think).

Mofo from the Hood November 26, 2007

Let me know when downtown is filled with apartment dwellers in brand new buildings who pay over $1000.00 a month and are under 30 years old. I want to see that. I want to witness first hand the consumer frenzy spilling out onto the streets.

Jake November 26, 2007

Erik I think you are right, though you count the 90ft from the highest frontage so it looks like they could have added another story. I was speaking in general for Downtown Tacoma. If you build 5-9 stories in a DCC zone or the DR zone they are still all 5-9 story buildings. I think the city really need to look at the height limits. 90-100’ is a high as we can go in most of Downtown. 90’ zoning next to a 400’ zoning doesn’t seem right. I think 250’ should be the height limit in the St. Helens Neighborhood.

Mofo from the Hood November 26, 2007

Hey! After I just reread #27 I think I’ll use that idea for my next novel: “Idealism in Tacoma.”

Steven November 26, 2007

Sorry, I have to comment on rental pricing. Basic econ 101: what you paid is a sunk cost. Whether you uncle gave you the building or if you paid 500m for it, no one cares. What you can get for rent will be the same: What the market will bear. Supply and demand sets the price.

Now, the decision to build or buy an appartment might be decided on if you think you can get your 1%, but once you have spent your money, it no longer matters.

Steven “the frustrated economist” W.

Rebecca November 26, 2007

Oh, I don’t think they’ll get too much over a thousand a month as apts. I think they’ll TRY, liked they TRIED to sell these, and they will end up renting them cheaper just to get some income after awhile.

Jake November 27, 2007

I am sure they will get over $1000 a month. Have you seen rental rates in DT Tacoma?

Here are the rental rates for some of the new apartment communities in DT Tacoma:

Villagio Apts:
Studio-422sqft $825-$850
Classic Studio-512sqft $850-$995
One Bedroom- 663sqft $990-$1140
Large One Bedroom- 710 sqft $1050-$1250
2bd/2bth- 934 sqft $1350-$1550

Court17:
Studio 517-570sqft $835 – $950
1 bedroom 586-676sqft $970-$1235
2 bed 923-1016sqft $1375-$1560

Bella:
Studio- 500sqft $720-$860
1 Bedroom- 667-740sqft $780-$980
1 Bedroom- 715-716 sqft $890-$1330
2 Bed- 897-938sqft $1050-$1525
2 Bed- 926-950sqft $1190-$2005

Metropolitan Phase I:
1 Bedroom- 615-816sqft $849-$3099
1 Bedroom- 935-994sqft $1409-$1529
2 Bedrooms- 880-1285sqft $1179-$2129

Thea’s Landing:
Studio- 500-602sqft $800-$900
1 Bedroom- 613-1,234sqft $800-$2,000
2 Bedrooms- 870-1,364sqft $1,100-$2,200

So add to the fact that Hanna Heights is upgraded and the apartments complexes are all standard finishes and they are larger floorplans (starting at 854sqft), I don’t think they will have a problem renting them for a good price per sqft.

Erik B. November 27, 2007

Here are the rental rates for some of the new apartment communities in DT Tacoma:

Thanks Jake. It always helps to have “content” interjected in the blogosphere now and again.

Crenshaw Sepulveda November 27, 2007

If you can’t rent your condo to apartment units for what you need to cover your costs you could very well be looking at bankruptcy. If you are able to cover your costs with modest rents then why are the units selling for so much as condos. I’m assuming Prium took out a construction LOAN to build the property or has investors that will want a return on their money pretty quickly. My point is if they can cover their cost at $1000 a month then how can they be selling the same unit for 250k?

Rebecca November 27, 2007

I thought Prium was filing bankruptcy? I thought I was saw that flung out there somewhere on exit133 – or am I remembering wrong?

Crenshaw Sepulveda November 27, 2007

Rebecca, you may have seen that somewhere in Chapter 11 of this saga. Stay tuned.

Jake November 27, 2007

You need to remember that $250k unit has a lot of profit in it for Prium, which will turn to equity now that they are apartments. The construction loan cost comes to $188k per unit. All of the units were over $250k, most well over $300k.

EXAMPLE:
A builder builds a house. Market value is $250k. The builders land and construction cost was $190k. The market is slow and he decides to rent the units instead of selling. He gets to rent out a $250k house for market rent but only holds a mortgage of $190k. 1.5 years later when the market picks up the builder sells the house for $285k.

Prium is probably going to or already has refinanced. The thing is the profits are more long term with apartments unless they sale the complex when it is full of renters. You now have to wonder if they are changing their strategy from short term profits to long term profits where is the money going to come from for the Winthrop?

Christy November 27, 2007

Aren’t they paying for new apartments for all of the people who have to move out of the Winthrop as well?

Erik Hanberg November 27, 2007

Jake, you bring good math skills to this here thread. Thanks.

Pat McGregor November 27, 2007

We are dealing with a possible Prium project over here in the South end. Prium is working to bring a development to the 35th and Pacific area – the area could house up to 110 units and most of the rental units would be 80% of the median income of the area (rents would probably be 800-1000 dollars from what I hear). Some of the winthrop residents would also be eligble for units at this site. I have some concerns about this project, especially with the design and size. The area is surrounded by a methadone clinic, an electrical substation, a de-tox facility, the county coroners office and the Pierce County Health Department. They are proposing to build here because the city made an agreement with Prium to rebuild the lost units of affordable housing, UNIT FOR UNIT. This is about 170 units. While this does not mean that all the Winthrop residents will go there, we are still concerned about it becoming a low income housing project eventually when the newness wears off..Prium is looking at other sites to spread out these 170 units..I hope they are considering these two sites for some of the replacement housing, as 110 units seems too large at this location. A smaller, well designed site would better suit this area and spread out the lost units throughout the city, rather than have 65% of them at one location. Again, I understand that most of the Winthrop residents would not live here (that is what we were told), however, the design that we saw would not attract young professionals, when they could rent downtown and get something nicer. Prium has committed to a design charrette, which we hope will result in a more upscale look for the building..the mixed use will be difficult, as the site does not even front on Pacific, making it difficult for retail to survive. I have proposed a “storefront” police station that could house bicycle cops to patrol both the Lincoln and McKinley business districts..That seems like a better use of the retail space than actual retail…

I am all for affordable housing. I am a school teacher and see our new, young teachers (I am 36, is that old??) strugging to find somewhere to live in Tacoma. If I didn’t buy my house when i did, I couldn’t afford to live here..

This has ro be done smartly however, I am from New York and have lived in “affordable” housing, except we call them the projects..they are not fun to live in at all…The neighborhoods deserve to be safe, as do the people who need the affordable housing…

Erik B. November 27, 2007

the area could house up to 110 units and most of the rental units would be 80% of the median income of the area (rents would probably be 800-1000 dollars from what I hear).

I believe the 80 AMI refers to 80 percent of Pierce County AMI income which is will be actually quite high although sometimes the state standard is used.

That means the new building possibly could be of higher income than the surrounding community at 35th and Pacific and bring some more life to the area.

Also, if Prium is willing to put in retail, I would consider allowing them to do it. Why not a space where a restaurant could go?

If they make it a government space as you request, you might be forcing them to produce a worse result.

In the end, troubled neighborhoods are going to improve by the re-introduction of people working for a living.

drizell November 27, 2007

I would argue that a building on that site with or without retail is a better use than a vacant lot. Being from New York, you would probably realize that the safest neighborhoods there are often also the most densely settled in a tradition pattern of urban development. The rent-stabilized places built “project-style” like Stuy Town are less safe. The LES still has far less crime than areas like East New York that have vacant lots everywhere.

So the priorities should first be getting a building onto the site, then ensuring that it’s designed for a traditional urban neighborhood.

Jake November 27, 2007

This is what I think will happen with that land.

-Prium gets steal of a deal from city on the land.

-City rezones land to high-density mixed-use.

- Prium builds 110 units on small portion of land.

- Prium fulfils obligations to city written out in the sales agreement.

- Prium sells off the rest of the land for high profit.

- Then who knows?

Crenshaw Sepulveda November 27, 2007

drizell, you speak like a true New Yorker and a possible follower of Jane Jacobs. Jake is starting to sound as cynical as I am.

Mofo from the Hood November 27, 2007

RE: The Proper Tenant
@40 (I am 36, is that old??)

Anyone unsure of qualifications to move into a new condo should first study the billboard advertising and construction site signage with artist drawings.

Say for example that you like the condo’s near the entrance to Point Defiance Park. I think they’re named The Point. The advertising that I’ve seen shows a line-up of 18 year-olds posing like a JC Penney ad. Now how about Hanna Heights? Their advertising shows young adults that are possibly 30+ years-old. Oh, and also when studying either of these ads, you might want to pay attention to the dress code. That would include body posture too.

So Pat McGregor for you if you’re 36, then I might direct your cohorts down to the Foss. But, they might try Hanna Heights—-Just don’t go into the rental office wearing an ascot and wing tip shoes and smoking a Sherlock Holmes pipe. Oh, and don’t even think about dreadlocks and tats.

Pat November 27, 2007

Great comments – I am not against developing the property – I do like Drizell’s comment about ensuring it is designed for a traditional urban neighborhood..I agree that the vacant lot is not good – it has attracted all kinds of illegal activity to the area. However, i still wonder if this is the highest and best use of the property, given what does surround it…I’d love to see a resaurant there, but can it survive, given it will be set back off of Pacific? And, will people come to this building, when they can rent downtown and be surrounded by good retail, water, views etc…At the Pacific site, you will have a great view of the substation, Health Department and Human Services…

I am happy about the 80% AMI – I just hope that that if they cannot rent these things, we don’t drop the standard and create a project type housing. That is why design is of the utmost importnace in my mind, as it will have to compete with many other buildings in a more attractive setting..

By the way, we are starving for some sort of mixed use project in the Lincoln District – anyone hear anything???

Erik S November 27, 2007

Jake, what are the vacancy rates like in the apartment buildings that you listed? I do recall (from this thread) that Court 17 (any relation to Site 17 in Seattle?) is rented out. That’s good. We need folks downtown.

I think that some of the developers are being a bit optimistic with their prices as they try to find what they can actually get, but I’d also expect that some folks will be more willing to “splurge” a bit over what they’d normally consider a fair price when renting. After all, if the building stays vacant or they don’t like downtown, they can move. No mortgage to pay off there.

As for how this is working out for developers, I’m inclined to suspect that Crenshaw is right whether or not 1% is the ideal target. I’m pretty sure that they won’t cover their development costs on rents, but it will help stop the bleeding of cash. I don’t think they’ll be selling the units listed at $250K for $285K in 1.5 years, either, but I’m hopeful that they’ll to be able to cover their development costs and move on.

CJ November 28, 2007

Thank you Jake for the reality check. My rental rents for just under $100 sq ft with a view and my renter complains about the rent. I am seeing a huge generation gap between old school and what the market needs to be to keep us progressing, yes progressing. You should break it down for those that think rents should be based on the goodness of your being and show them how a rental value is determined on a resale. To much work for my brain right now. I do appreciate your input.

Mofo from the Hood November 28, 2007

From the renter’s perspective I would suggest not paying rent above 40% of take-home pay. Take-home $2000.00=Rent @ $800.00.

Crenshaw Sepulveda November 28, 2007

If I might throw in another rule of thumb, housing costs should equal 30 percent of your income. A monthly income of 2000 would indicate you can afford an apartment renting for $600. There are a fair number of $600 apartments in Tacoma so that would seem about right. Doesn’t look like any of them are on Jake’s list, however. A single person with the $2000 a month income would have a tough time renting in downtown, on the other hand a couple with $2000 month each would probably do alright. Not sure their combined incomes would qualify them to buy much of anything in Tacoma, but they could rent comfortably.

Mofo from the Hood November 28, 2007

C.S. @50

That ratio is better yet. If you gotta sign a bondage contract, then at least try to maintain a little control and keep your misery level low.

Crenshaw Sepulveda November 29, 2007

One of the things that lead to the current housing crisis is the fact that many lenders let people devote a larger percentage of their income to housing then is wise. 30 percent gives you some flexibility while 40 percent or higher is a prescription for disaster. One lender who will go nameless, I’ll just use their initials (WM), tried to get me financing that would have been 50 percent of my income, flattering but fool hardy.

Erik S November 29, 2007

Excellent point, CS. And, shockingly, I heard of still worse financing.

wes November 29, 2007

i’m putting some new teepees on the market: low cost, energy efficient, can be setup with any view you’d like or close to your favorite business. perfect for downtown living.

any takers?

51 comments