Beacon Riverside suspends sales efforts, seeks financing

Posted on December 1, 2015 By Editor Articles, Neighborhood News, Top Stories

Despite the rosy projections noted in The Resident’s November issue in a story titled “Low inventory in Historic District means seller’s market,” there is one sector in the housing market that is still struggling. New condominium developments, including Beacon Riverside, by HP 500 LLC, are finding it difficult to sell the concept.

Construction plans for the luxury condominium Beacon Riverside are at a temporary standstill as NAI Hallmark Partners seeks gap financing to start building, and sales have been suspended as well.

In the meantime, the company has returned deposits to early buyers, according to Bryan Weber, Principal, Multifamily, NAI Hallmark Partners. “It was in escrow, so there was no sense in holding on to it,” he said about the deposits refunded.

“We had a good round of early, preconstruction sales, but have realized that the next round will come with building,” Weber said. “Right now our objective is focused on finding funding, probably through equity financing.”

Weber said other interested buyers had indicated they would sign when construction of the 16-story tower was underway. “They are anxious for us to get it going,” he said, noting the most common concern for the pre-construction buyers was whether they would get the same unit once construction begins.

“We own the land and are still excited about the project,” said Weber. “I’m committed, having spent a lot of time on the design and getting permits. We just have to focus now on financing.”

The typical capital structure for financing a new condominium development is made up of a developer’s equity, the purchaser deposits (typically up to 50 percent of the purchase price), and the construction loan, according to a July 6, 2015 online story on Multi-Housing News.

“It can be a challenge for developers to obtain financing because, unless they are a Rockefeller, there is normally a “presale” requirement in the 50 percent (of the total units) range. This is generally not required for [construction of] apartments,” said Gil Pomar, executive vice president, CenterState Bank. “The presales are important to confirm sales price projections and protect everyone from a failed or poorly performing project.”

When the recent recession ended lenders may not have been entirely comfortable with the new purchaser deposit structure. As developments began and purchasers posted their deposits at the agreed upon benchmarks, such as signing, groundbreaking and building top-off or floor completion, then lenders’ confidence may grow, stated the article.

However, Pomar said that was not always the case.

“If you build it…they don’t always come. These presales require the buyer to put up cash deposits,” Pomar said. “The deposits have conditions, but the more and the larger the buyer’s deposit, and more non-refundable it is, the easier to obtain financing. In certain cases the deposits can be used in conjunction with the developer’s equity and the bank’s construction loan.”

Area realtors are still encouraged by the reception Beacon Riverside has had from prospective buyers.

“Beacon Riverside experienced initial success and we feel certain that after the developer begins construction, today’s buyers will be prepared to buy,” said Linda Sherrer, president and CEO, Berkshire Hathaway HomeServices Florida Network Realty.

“We know that qualified buyers are choosing to buy older condominiums and renovate them with the same total real estate investment, but move in less than a year,” she said.

Sherrer noted that the Riverside neighborhood is attractive for condominium buyers for three reasons. She said the location is spectacular near the St. Johns River; shopping, restaurants, retail and arts are all within walking distance, and there is continuing strength in the luxury market in Northeast Florida.