Southwest developers and real estate agents switch up their sales strategies to beat the slow housing market
Its been several years since Minneapolis-based development company the Lander Group hired outside real estate agents to list a project.
But the company diverged from that course this year when it hired two from competing agencies to sell one
Barry Berg from Coldwell Banker Burnet and Steve Havig from Lakes Area Realty are working alongside Lander Groups Tony Kriha to sell 2626 West Lake, a planned 46-unit development fronting Lake Calhoun.
2626 is a unique project, so weve handled sales uniquely, Kriha said. Though a little unorthodox.
Berg and Havig were brought on in April, after months of slow sales. So far, 11 purchase agreements have been signed, a dozen shy of whats needed to begin construction. Kriha is hoping to get the needed sales by this fall, and he thinks the new real estate team has a shot at making that happen.
The trio is determined to keep 2626 from going the way of some other Minneapolis developments that couldnt cope with the sluggish market.
The way I see it, this is a project that ought to get built, Berg said. Its worth everybody rolling up their sleeves and rowing in the same boat.
Though the Lander Groups strategy is uncommon, a continued lull in condo sales is causing developers and real estate agents throughout Southwest to think differently about marketing. Big-buck campaigns and large newspaper ads are disappearing from some sellers strategies, replaced with word-of-mouth advertising and increasing Internet saturation.
Some projects are complete and have sat with a few unsold units for the better part of a year. Others are struggling to sell enough units to get started. But none of Southwests major new developments has been able to sell out, and buyers have a bounty of options to choose from, making the job of selling condos a challenging one.
In the buyers shoes
Real estate agents selling condos in Southwest said sales centers are busier now that its warm outside and there are plenty of buyers out exploring options.
Buyers such as Ron Conley, 43, and his wife Marcia, 40, who started looking for a new condo a couple months ago.
The recently married couple lives in a small condo in the Uptown area and is looking for something larger. They stopped into the sales center at Track 29 a partially completed development near 28th Street and Aldrich Avenue that is planned to have 125 units when finished earlier this month to take a look around.
We like the area and would like to stay if possible, Ron Conley said.
The Conleys dont need to buy right away, though. First they have to sell the condo they currently live in.
Though the Conleys arent worried about being able to sell their home, others thinking about moving into a condo are, particularly owners of single-family homes.
Where weve really seen the market drop off is among older buyers who have a home to sell, said Mary
Bujold, president of Minneapolis-based real estate research and consulting company Maxfield Research.
She said the city hasnt seen a big dip in home values, but buyers are being cautious.
Deb Greene, president of the Minneapolis Area Association of Realtors, said the empty nesters shouldnt be bothered if their home doesnt fetch as much cash as it would have a few years ago when the market was hot.
One part empty nesters are missing is that the selling price (of a condo) when they go to buy will be lower as well, she said. Everything is in proportion. The true market value is what a buyer is ready and willing to pay in todays marketplace.
But not all empty nesters are shying away from the market.
Chuck and Carol Pexa, of Lowry Hill, made the decision to sell their home at 301 Kenwood Parkway and buy a condo at 2626. They signed a purchase agreement a year ago and have had their home on the market for 10 months.
Our children are grown and moved away so we really dont need three bedrooms, Chuck Pexa said.
The Pexas $3.2 million home, which is designed by the Lander Group and being used as a demo for 2626, hasnt been quick to attract buyers. But Chuck Pexa said with no condo to move into yet, theres no urgency to sell.
Still, he wishes the market would pick up so he and his wife could move forward with their plans.
Once you make a decision, you want things to move forward, he said. Its a little frustrating in the sense that you want things to happen.
Though the Pexas fellow homeowners might be slow to show at sales centers, more young people are starting to take an interest in new development.
Ryan Theuninck, 26, is a renter who started looking at condos converted from apartments about a year ago. But after earning a bonus at work and watching Eat Street Flats, a 62-unit condo development near completion at Nicollet and Franklin Avenues, rise out of the ground a few blocks away from his apartment, he decided to check it out.
He signed a purchase agreement for a roughly $210,000 one-bedroom condo last month.
I thought I might as well do it now, he said. I feel like I got it toward the bottom of the (market) slump.
Construction of Eat Street Flats started before the development was half sold, which is unusual in the condo business for funding reasons.
The days of 60 percent presales are over, said Lucy Brown Minn, a principal with Lupe Development Partners, which developed Eat Street Flats.
The development is still eight units shy of being half sold, but construction continues. In an attempt to boost sales, Lupe went as far as converting nine two-bedroom units into 18 single-bedroom units, which are selling faster, Minn said.
Even though the project has a ways to go in sales, Lupe and buyers including Theuninck are confident it will be completed. Being able to see the building itself was a big draw for Theuninck, he said.
Sellers of several other area developments, such as a 72-unit mixed-use project called Mozaic at Lagoon and Fremont Avenues, dont have the luxury of showing off even a partially constructed development.
Clark Gassen, president of Uptown-based CAG Development, which is working with Southwest development company The Ackerberg Group on Mozaic, said he is relying heavily on sales center traffic. Gassen hopes to get the project underway this summer.
Gassen said he has cut back on marketing expenses for Mozaic, especially in spending on print ads, and is depending more on word-of-mouth and Internet advertising. He said prices for the contemporary development, which range from around $240,000 to $2 million, arent going to budge.
At the end of the day, if youve got to discount some units, the money isnt there for a successful project, Gassen said.
Taryn Kelzer, a Coldwell Banker Burnet real estate agent selling Track 29, said selling a currently nonexistent 71-unit portion of that project has been difficult. The 25-percent-sold project segment needs to be 50 percent sold before construction begins, she said.
She said many buyers lose interest when they find out how far off completion could be. She estimates the development could be finished in about a year and a half. As incentives, Track 29 offers free upgrades such as wood flooring and granite countertops.
Julie Regan, a sales associate with SKY Sothebys who represents the Portico, a 30-unit development planned for 1601 Lagoon Ave., said she is also offering free upgrades such as Wolf ranges and Sub-Zero refrigerators. That project has 11 reservations and needs four more for construction to start.
Less than a mile west of the project is a fenced-in pile of rubble that will eventually be used as fill for the foundation of 2626. Berg, Havig and Kriha use it as a vantage point to show prospective buyers what the views from the development will look like.
Were sitting on the premier site in town, Kriha said. Were hugely