Reduction in Luxury Condo Prices Kick-Starts Sales

Last spring, developers of two new luxury condominium projects in the greater San Fernando area significantly reduced prices to boost sales. Six months later, it appears their marketing efforts are paying off. The 100 unit Excelsior, located at the mixed-use Americana at Brand in Glendale, debuted in July/August of 2008. But only nine of the units had sold by April. So Caruso Affiliated, developer of Americana at Brand, dropped prices. “You have to meet the market, and we had the ability to do that,” said Rick Caruso, CEO of Caruso Affiliated, at the time. The condos were originally priced from the low $700,000s to $2.4 million, depending on size and floor plan. After the price cut entry-level units were selling in the mid $400,000 range, and all floor plans were marked down by 30 to 40 percent. Caruso has sold an average of six units per month since the price cut. There’s only one remaining two-level townhome, and many of the floor plans have sold out. The developer has 55 units under contract and closed on two escrows. The first residents moved in during December. “It has kind of been a snowball effect,” said Paul Kurzawa, executive vice president of operations for Caruso Affiliated. “And we’re getting even more interest from buyers who know that when they purchase they can now move in right away.” The condos range in size from 1,320 square feet to 2,632 square feet and include hardwood and travertine flooring, designer bathrooms, gourmet kitchens and luxury amenities like five-star concierge services All have two bedrooms and at least two bathrooms. Another positive for Caruso is that Americana at Brand recently won the Gold Award in the International Council of Shopping Centers (ICSC) 2009 United States Design and Development Award Competition. Three of Caruso’s other developments have also won ICSC awards, including The Grove, The Promenade at Westlake Village and The Commons at Calabasas. Champion Real Estate Group, developer of The Burbank Collection mixed use facility located in downtown Burbank, is the other company that significantly reduced prices back in April. Developers dropped condo prices by an average of 40 percent in order to sell the smallest units in the low $300,000s and larger ones for $500,000 and more. The Burbank Collection includes lofts, one, two and three bedroom units, and penthouses. “The decision has played out well,” said Robert Champion, president of Champion Real Estate Company, adding the company has sold 65 of the 100+ units at an average rate of five per month. Champion said, prior to the economic meltdown, about 50 percent of the units had been pre-sold. But by the end of 2008, appraisals were coming in lower than the agreed upon sales price and mortgages were falling through. The company approached its lender, which had originally approved the sales prices, and requested to adjust prices to meet the market. The lender agreed, and Champion has marketed the properties primarily through direct mail, e-blasts and print advertising. “We haven’t done any events to market the property, because in this market events don’t do anything…prices do,” said Champion.