Squeezed by the sharp downturn in the housing market, one of the nation's largest homebuilders has sold the bulk of a luxury townhouse development in Baltimore's Federal Hill to a local developer who immediately cut prices about 20 percent.
Lennar Corp. sold 22 homes in the 26-unit Federal Place development off Key Highway to Terra Nova Ventures. Lennar, largely a suburban builder, has no other projects in the city. The sale closed Nov. 29.
Although terms of the sale were not disclosed, Terra Nova principal David F. Tufaro said the deal allowed the new owner to set prices it felt were more in tune with the current market.
"It turns out that Lennar was making a corporate decision, not limited to Baltimore, to reduce their inventory and improve their balance sheet," said Tufaro. "We felt it was a great project and great location and the right price. At the right price, houses will sell. The market has not fully reflected that because sellers have not reduced their prices."
Lennar, one of the nation's largest builders, had completed the first of the four-story, two-car garage homes in the spring, with some units priced at more than $1 million, said Cynthia B. Conklin, a partner at Yerman, Witman, Gaines & Garceau Realty, which brokered the sale and is handling marketing.
None of the homes sold until November, when four that had been priced at $795,000 sold for $695,000 or just above, with closing cost help, she said.
Under its new ownership, Federal Place homes start at $695,000, with the average price in the low $700,000 range. The priciest home, used as the model, had been on the market for $1.25 million and is now priced at $995,000. The three-bedroom homes have elevators, rooftop terraces and gourmet kitchens with granite countertops and cherry cabinets.
A Lennar vice president declined to further comment yesterday.
"We have many hundreds of transactions each year, we report on the ones that are significant and we do not provide additional information," said Vice President Marshall H. Ames.
Lennar said Friday that it has formed a land investment venture with Morgan Stanley Real Estate to acquire, develop and sell real estate, and said the new venture had acquired about 11,000 Lennar home sites valued at $1.3 billion in Maryland and seven other states. The sites, valued at $1.3 billion, include raw land and partially and fully developed projects.
In its most recent quarterly report, for the period that ended Aug. 31, the Miami homebuilder reported decreasing revenues and per share and operating losses as new-home prices have fallen and cancellation rates have soared.
Conklin said she did not believe the Federal Place project was part of the portfolio sold to the Morgan Stanley venture.
She said Lennar hired her and Robert L. Merbler Jr., another partner at Yerman, Witman, Gaines, to sell the project.
"They were thinking they were going to get over $1 million for all these houses that came equipped with an elevator, granite, the finest appliances and grills on the deck," Conklin said. "They were not having great success."
Builders caught in the housing slowdown have had to halt construction or reduce prices.
"In many cases, it makes sense to sell everything at one time and move on," said Merbler. "I think it's something you're going to see more of."