As Baltimore experiences a record boom in luxury apartment development with close to 14,000 new units over a decade, a market expert said some could convert to condominiums in the coming years.
"A lot of them are being built that way, as condos," said Ryan Grimes, senior vice president at All Risks Ltd., a Hunt Valley insurance firm that has a partial focus on real estate risk assessment. He spoke Thursday at a forum at Hayfields Country Club sponsored by KatzAbosch.
Grimes said the "luxury apartment game" seen locally is part of an ongoing development trend across the U.S. that has created a glut of units. In turn, some developments are being sold to new investors who then retool the projects into for-sale, market-rate dwellings.
"It is being duplicated all across the country," he said. "That’s going to happen. We’re doing that type of a deal now."
Grimes said several multi-family development projects in certain U.S. regions including Maryland are "being built and spec’d out as condos." He cited amenities added to the developments like rooftop infinity pools, dog parks, gyms and large social areas that include kitchens and grilling stations as a stage-setter for future condo conversion.
"The [for-sale] market is not there now because the buying cycle is off," Grimes said, adding that millennials who are renters today are saddled with college debt and not yet prepared to commit to a mortgage.
The large supply of luxury apartments in Baltimore has created a bubble, some developers have said over the past five months. In response, several developments are offering rental discounts that include up to three months of free rent. One was even offering the perk of a cruise.
Still, two prominent developers said Thursday they had no plans to convert their projects to condos.
Stephen Gorn, CEO of Questar Properties and owner of 414 Light where 394 ultra-luxury apartment units are set to open in the coming six months, said the $170 million 44-story glass tower now being completed would not convert to condos.
"We do not have any intention nor do we expect to convert our building to condominiums,” Gorn said, of the project where rents will range from around $1,800 to $8,000 a month for a penthouse.
Toby Bozzuto, president of The Bozzuto Group, said Thursday that the 282-unit Liberty Harbor East on the waterfront would also not convert to condos. The development has 35 condos included, he said.
"It’s not a conversation we’re having," Bozzuto said. "Our projects are so big with 300 and 325 units that they are designed better than condos. Their intention is to be rental."
Bozzuto said investors in large multi-family projects have institutional equity that is "not set up to support condos." Bozzuto, he said, had rental and for-sale products including Alta 47 in Locust Point, a 47-unit townhome project that has sold 43 dwellings to date.
Nearby, the new Anthem House development is 85 percent leased and a companion project, Anthem House II, is preparing to open this summer across the street with 54 additional apartments.
Both projects are part of Baltimore’s apartment development that has been red hot for five years.
In the coming year, Baltimore is expected to add at least another 1,400 luxury rental units to the landscape. They include the 394 units at 414 Light St. and 346 new units at 225 N. Calvert St, a former office building that was gutted and rebuilt into a multi-family project by Monument Realty.
On the horizon is the Liberty Harbor East development and the first units in a massive redevelopment of West Baltimore near the University of Maryland BioPark. A $50 million redevelopment of the ultra-modern former PNC Bank office building at 2 Hopkins Plaza is now leasing 183 apartments.
At Harbor Point, the 17-story 1405 Point just opened with 289 apartment units. Under construction in Little Italy is a 380-unit tower by AvalonBay Communities at the former Della Notte site.