Silo's developer biding his time

The Baltimore Sun

For a man with about $175 million riding on an unconventional condominium project set to open in the spring, Patrick Turner seems remarkably unworried.

Never mind that the real estate market is in the dumps. Never mind that no one has ever put condos in a converted grain elevator or really knows how many people want to live in one.

And never mind that not one unit at Silo Point has sold.

Turner, a developer known for tackling tough, unusual projects, is turning the abandoned plant at the edge of a peninsula in Locust Point into 228 upscale condos. Concrete bins once used to store and weigh grain are becoming modern lofts in the sky.

But unlike most developers of new homes, Turner is forgoing pre-construction sales, which developers typically count on to build momentum and help cover costs. Turner says he will not announce prices or take deposits until the end of January, about two months before the bulk of the project opens in April.

"Most developers won't take the risk," Turner said.

But he says he's financially able to wait and believes it's better to set prices according to the current market. That helps minimize the risk of either low-balling them and forgoing profit, or setting them too high and then being forced to cut prices, losing contracts from early buyers .

At this stage of a project - especially in a slow market - most developers would be advertising low, "pre-construction" prices, opening sales offices and putting the finishing touches on a model designed to sell.

Turner is doing none of that.

Such a strategy could be risky, especially in a slumping housing market in which sales of condos have been slower than other housing types and inventory is climbing. Some developers have slowed timelines for projects while others have shifted planned condos to rentals.

"You have a large project," said William Rich, a Delta Associates vice president who tracks condominium sales in the region. "If the sales pace isn't going as quickly as hoped, you would be sitting on lots of units, and paying utility bills and other costs on an empty building. When you start sales right at the end, options are more limited, in case something goes wrong and in case sales aren't up to expectations. You have a building already, you can't knock it down or change it easily to a hotel or office building."

John E. Kortecamp, executive director of the Home Builders Association of Maryland, said Silo Point was the first project he knew of in the Baltimore area that wasn't attempting to sell well before completion.

Pre-sales "build momentum for overall sales," he said.

But buyers in Baltimore often respond better to a finished product than to plans on paper, said Michael Yerman, a partner in Yerman, Witman, Gaines and Garceau Realty, who has worked as a sales agent for the Ritz Carlton Residences under construction in the Inner Harbor and has overseen development of other city condo projects. Most new buildings have offered pre-construction sales at sales trailers or offices. But waiting to sell could help pique buyers' interest, especially for such an atypical conversion, he said.

"It's unusual, it's bold and a little daring, but it just may work," Yerman said.

"It's a very, very unique and avant-garde project," he said. "The whole idea is something that Baltimore has never seen, with lofty, glassy units and very upscale. I think they want Baltimore to see it when it's finished, not looking at plans. It's an interesting concept not to pre-sell; we'll see if it's going to work or not."

Downtown Baltimore, unlike some other markets, has not reached a point of saturation with new condos, said Daraius Irani, director of the applied economics group at RESI, Towson University's research and consulting arm.

Still, eliminating pre-sales, "does seem somewhat risky, given the current real estate market," Irani said. "However, they're not making any more water views."

Ever since Turner purchased the old grain elevator from Archer Daniels Midland Co. in 2003, he has believed the towering concrete plant backing up to Locust Point rowhouses could become one of the most unique addresses in the city.

Despite a slowdown in the market, Turner says 75 people have lined up to put down deposits, which he won't take - yet.

Turner's lender gave him the option of holding off on sales, he said, because his company has a 15 percent to 20 percent equity stake in the project and owns the land.

"The reason we did it, we just thought the real estate was so spectacular," said Jodi Gallivan, a vice president with iStar Financial Inc., Silo Point's lender. "We had confidence in Pat in executing the deal."

On a recent morning, Turner bounded across the dusty construction site, stepping over boards and wires and crisscrossing to avoid the puddles. He ducked into one of the old silos that once stored grain and peered skyward.

He rode a construction elevator up to the project's newly built glass and steel wraparound building and strode into a concrete shell of what by spring could be someone's living room. A test kitchen had been installed, with gleaming stainless appliances and fixtures and black granite countertops.

The building will have ground-floor restaurants - the developer says he's in talks with several interested in moving in - a residents-only sky lounge and possibly a spa.

Turner says he sees how his selling strategy - one he has used on other redevelopment projects - might seem risky.

But then again, he says, most people have considered Silo Point risky from the start.

"Everyone said when I bought [the old grain elevator], we were crazy," Turner said. "They said we'll never get it done, we'll never get it zoned. It's impossible to do."

With construction moving ahead, he said he believes the market will improve.

"I think in April of next year, the market will be in a better position," Turner said. "It will start to level off."

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