A condominium building under construction along Santa Fe Drive will now rent its units instead, after buyer interest went down when interest rates went up.
Lenny Taub, CEO of Denver-based First Stone Development, told BusinessDen this week that he kicked off sales for units in his five-story Pop Denver building at 655 Santa Fe Drive in April, and had about 30 of 123 units under contract within a couple months.
But he recently made the call to shift the building to apartments after he said just one additional unit went under contract in the last three months.
Taub cited interest rates, which have climbed from under 5 percent in April to nearly 7 percent this week. But the increase itself wasn’t the core issue. The real problem, he said, was that potential buyers expected the rates to keep going up, so they couldn’t plan for what their interest rate would be when their purchase closed.
“I attribute it to the uncertainty of the rates going forward,” he said.
The Denver Business Journal first reported Taub’s decision.
Condo-to-apartment conversions aren’t unprecedented.
Denver-based Generation Development made the mid-construction shift on its City Park West building The Victor back in 2020, when the pandemic was causing widespread uncertainty.
Golden-based Confluence Development nixed the for-sale component of its Zia Sunnyside project later that year, citing slow sales. And the 12-story Flora project in RiNo shifted from condos to apartments before breaking ground last year.
Taub said those who went under contract for a Pop Denver unit are getting their earnest money returned.
“I felt like I wouldn’t get any resistance, which I really didn’t,” he said.
The building was being marketed by TreeHouse Real Estate. Units started at just under $300,000 for a studio. Taub said one of the two penthouse units had been under contract for about $1.4 million.
“They were all across the board in terms of what we had under contract,” Taub said. “It was pretty even.”
Taub hopes to finish the building next spring, and said he’ll likely start marketing the units for lease around March. Despite the switch, the building itself isn’t changing.
“We haven’t decreased the finishes,” Taub said. “They’re all condo finishes.”
Taub said he’s open to selling the apartment building or holding on to it — whichever makes financial sense.
Taub also has a 140-unit townhome project in the works in Winter Park, with the first 54-unit phase under construction. Seventy-five percent of the units are under contract, and he said “the same thing happened” after the rise in interest rates. Still, he’s less concerned about that project.
“I probably have a year to sell the balance, but I’m not too worried about it,” he said.
Taub is also working to get a construction loan for a 34-unit rental project on Tennyson Street in Berkeley, and is working on plans to redevelop a shuttered church site along Colorado Boulevard at the edge of the Hilltop neighborhood. That’s still likely at least a year from breaking ground, he said.
Taub previously developed in New York, and said he doesn’t quite understand why the condo market in Denver “is such a small piece of the pie.”
But he said he’s not turned off from such projects in the future.
“I would love to get back into it,” he said. “I am a condo developer. It’s just the market. The market’s bigger than all of us.”