Domain in the Skyline
Condo developers aim for new heights
The recent announcement of a new construction project by one of the area’s most prolific apartment developers would not have seemed unusual but for one thing: The project isn’t an apartment complex, but rather a 15-story condominium building.
In recent years, new condo construction projects in New Orleans have been relatively rare. While developers floated proposals and attempted to drum up interest, few projects that included more than a handful of condo units actually came to pass.
Condominium projects, depending on market conditions, can carry significant financial risk for both a developer and a unit owner. If, for instance, an owner-occupied condo is located in a building where many of the units are vacation homes owned by people who live elsewhere, it could suffer a substantial loss in value during an economic downturn that prompts the sale of many second homes.
Even in better times, condominium units can be harder to sell than the average single-family home, particularly if they aren’t located in an extremely high-demand neighborhood. And sometimes, the condo association terms and covenants that go along with ownership can complicate both the purchase and sale of a unit.
The special risks that accompany condo ownership tend to make lenders wary, which makes it more difficult for a buyer to obtain financing for a purchase. Similarly, lenders are reluctant to extend millions of dollars in financing for development of a brand new condominium building.
All of which makes the recent announcement by the Domain Companies stand out. The developers broke ground on their $80 million, 89-unit luxury condo building in August, shortly after they secured financing in the form of bank loans and equity capital.
“We are creating the finest residential building in New Orleans by any measure.” Domain principal Matt Schwartz said in a press release announcing the project, which the company dubbed the Standard.
One likely reason that Domain was able to snag financing for the Standard is that, through its development of many apartment units around the city, the company had come to understand the local market and could make informed guesses at future demand.
Founded by two Tulane University business graduates with a family history in New York real estate, Domain made its mark on New Orleans by creating apartments in old buildings along or near the Tulane Avenue corridor, in hopes of tapping demand fueled by the new University Medical Center and Veterans Administration hospital in Mid-City. Domain built the Crescent Club, Preserve, Meridian and Gold Seal Loft apartments in that area.
The company later announced the remaking of an entire city block into South Market District, a $450 million downtown project that, in its first stages, would contain several hundred apartments in two buildings, along with a parking garage and retail space that now houses Arhaus Furniture, a CVS drugstore and popular restaurants.
During the past decade, Domain has put some 700 rental units into service in New Orleans. In time, the developers may convert some of the apartments into ownership units – a common practice with older buildings that were renovated into apartments using tax credits that support the upgrading of historic structures.
Eligibility for the credits requires that units be maintained as rentals for at least five years, after which property owners often convert them into condos and offer them for sale. Most of the condominium units located in and around the city’s Warehouse District are former rental apartments that became condos after the five-year interval expired.
Much rarer than these conversions have been brand new structures that were built as for-sale condos. With construction of the Standard, the Domain Companies may be taking a risk. Or, it could be getting a leg up on potential future competition.
Other developers have their own condo projects on the drawing boards, or in some stage of approval, or construction. Generally, these projects contain 20 or fewer units. The Baker’s Row condominiums under development in the Marigny, for instance, consists of two four-unit buildings.
But larger developments are also on tap. The planned makeover of the 33-story former World Trade Center into a Four Seasons hotel will include about 75 luxury condos on the building’s upper floors. But after many delays, completion of that project is at least a few years away.
Meanwhile, work on the Standard has begun. Domain promises a building “with an elegant, reflective metal facade and deeply set windows to enhance the play of light,” according to the company’s press release.
The ground floor of the building will double as an art gallery, and nearly 30,000 square feet of outdoor space will contain a pool and deck with private cabanas, gardens and fountains, along with a pool house and outdoor kitchens with barbecue areas.
Features of the one- to three-bedroom condos will include floor-to-ceiling windows, solid white oak flooring, marble countertops and high-end kitchen appliances. Two penthouses will occupy the 15th floor, each with 2,000 square feet of outdoor living space.
Pricing information for the new units is not yet available, but by most indications, Domain intends to put its condos in the upper tier of luxury residences in New Orleans.
High-End High Rises
Prices on luxury condominiums in New Orleans can range as high as $800 or more a square foot. The city has relatively few high-rise condo buildings. They include:
One River Place
600 Port of New Orleans Place
625 St. Charles Ave.
Lake Marina Tower