The downtown Seattle condominium development Escala has sold just six units out of 269 available — a fraction of what developers of the luxury tower initially projected they would sell by this time.
As a result, the developer of the 30-floor tower, Seattle-based Lexas Cos., is cutting prices, overhauling its sales strategy and chopping monthly fees to buyers. The building, located at Fourth Avenue and Virginia Street, has 67 units pending and is in conversations with those potential owners about their purchases, according to the building’s marketing firm. Partners in Lexas Cos. did not return calls for comment.
Escala cost $370 million to build. The Lexas Cos.’ lender, Fremont General Corp., filed for bankruptcy in 2008 and sold its commercial loan portfolio to New York-based IStar Financial. That company is now handling the financing on the project, which is not in jeopardy, according to the marketing company.
Lexas also has temporarily closed its Seattle sales office, which was run by an in-house team, as it revamps its strategy. It has hired Rennie Marketing Systems of Vancouver, British Columbia, to lead its outreach and brought in Bellevue-based John L. Scott Real Estate to head up condo sales.
It’s now also unlikely that Lexas will break ground on a new condo and hotel tower to be built at Stewart Street and Denny Way in downtown Seattle, according to Bob Rennie, principal of Rennie Marketing Systems.
“Everybody’s been hanging around waiting for the old economy to come back and it’s not,” said Rennie.
Escala’s troubles underscore the continued pain in the downtown Seattle condo market and are a harbinger of stalled sales at other newly built towers across the Puget Sound region. A slew of new condos is coming to market, increasing competition for sales, and buyers are having trouble finding financing, according to local real estate experts.
“I’m not going to say (developers) overdid these buildings, it’s just horrible, horrible timing,” said James Stroupe, a condo expert and broker with Windermere.
At Escala, Lexas will cut prices by a “substantial” amount, but the discount is not yet established, said Rennie. The units were originally aimed largely at high-end buyers and ranged in price from $600,000 to $12 million.
In an effort to shave hundreds of dollars off homeowners’ fees, developers have scaled back services at the 25,000-square-foot Club Cielo, an upscale “social club” that provided a dining area, massage services and other amenities and is operated by Seattle-based Columbia Hospitality.
Lexas spent $25 million to $30 million building the club, once touted as a hip addition to the downtown social scene that nonresidents could also enjoy. Now, however, only residents can use it and they will pay separately for most services. The owner of a 1,000-square-foot-unit in Escala, for example, was paying 79 cents a square foot per month for homeowners’ fees, or $790. Developers are hoping to reduce that cost to about 55 cents per square foot, or $550 each month.
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