When a developer tells you he bought an 87-unit apartment building in November, started converting 17 units to condominiums in December and plans to start selling them at an open house Saturday, one thought comes to mind: “In this market? The guy must be crazy.”
But you don’t say that to his face. You politely ask to see the units.
Then he tells you his condos are in Tacoma’s Hilltop neighborhood, and suddenly you have no trouble asking him, “Are you nuts?”
No, Ron Gintz isn’t nuts. Just the chief operating officer of his family-owned development company who doesn’t mind lower-than-expected profit margins and risky niche projects.
The Gintz Group restored a warehouse building into office space on Broadway, moved its headquarters there and sold the rest of the building as office condos. It has nearly finished turning the old Mecca Theater, a Broadway porn film house and former hotel, into a residential and commercial condominium. Last month, it bought the historic, vacant and dilapidated Luzon Building at South 13th Street and Pacific Avenue with plans to restore it for office condominiums.
Now, the 1967-vintage Vista Rainier Apartments have become the Gintz Group’s 27th Street Station: 10 buildings spread across the narrow edge of 4.5-acre bluff above Nalley Valley. Most have views of Mount Rainer.
“This is a little scarier than some of the other things we’ve done, but not a lot,” Gintz said. “The Mecca was sleazy. The Luzon is a wreck. … But here the Hilltop is redeveloping so beautifully. Every other house has new paint and the lawn mowed. The more we looked at this, the more we thought it was a no-brainer.”
Gintz handed me a copy of his pro forma, which describes how his company bought the apartments for $4.1 million – or about $47,000 per unit. The reconstruction crew stripped the units to the studs and built them back up at about $33,000 per unit. Gintz also replaced the exterior railings, lighting, walks and stairways. Some buildings needed roof work. And they turned it into a gated community – the Hilltop’s first.
The one-bedroom units will sell for $119,990 to $136,990 – depending on the view. Want two bedrooms? Those run $148,990 to $167,990.
“We won’t make a killing,” Gintz said. “But we like taking ugly properties and making them nice.”
To lessen the risk, the Gintz Group’s lender won’t allow the company to convert all of the apartments at once. The conversions, Gintz said, will occur in four phases. Once the company reaches a sales milestone on a phase, it can start the reconstruction of the next.
Gintz expects to “ratchet up” the prices in succeeding phases.
That strategy keeps the cash flow from the still-occupied apartments and hedges against a stagnant market. For example, a New Home Trends report on 2007 condominium sales in Tacoma showed that of 25 new and converted condo projects, just one unit per month at each project sold at an overall average price of $383,580.
In the greater downtown area of Tacoma, Raelene Rogers of McCament & Rogers, a real estate consultant and brokerage, tracked condominium closings during the first quarter of the last three years: 29 in 2006, 54 last year, 22 this year.
Miller Condominium Marketing, working Gintz Group’s sales strategy (lower price ranges and teaming with the City of Tacoma’s Down Payment Assistance Program), expects 27th Street station to sell five or six units a month.
Rogers doesn’t think so.
“This project is particularly interesting because it’s affordable,” she said. “What we’re seeing now is, if the price is affordable, they’re selling. At the higher end, things aren’t selling.”
Gintz said he believes “this time next summer the doldrums we’re seeing now (in the housing market) will be a distant memory.”
We’ll see. Whether 27th Street Station has a downside depends on how you react to this sentence taken straight from the project’s marketing plan: “27th Street Station will set the tone for gentrification of this neighborhood.”
Gentrification describes the phenomenon that occurs when moneyed people move into a low-income neighborhood and fix it up enough over time so the traditionally poorer residents have to move out because they can’t afford to live there.
Tension arises from trying to improve a historically notorious neighborhood while still trying to keep it affordable for its longstanding residents.
Gintz acknowledges he had to evict tenants to remake the first condos and will have do to so with the rest of the tenants eventually.
“We got panned on one of the local blog sites because of the gentrification and forcing people out of the neighborhood,” Gintz said. “But those people were going to get forced out anyway as rents go up.”
True. Decades of work to drive crime from the Hilltop and increase homeownership – and the neighborhood pride that comes with it – will inspire more projects like 27th Street Station.
For example, I talked this week with another developer who recently purchased a swatch of older adjacent view homes near Gintz’s investment. What’s the plan? Tear down the old homes and build four new homes that will sell for more than $450,000.
Welcome to the new Hilltop.
Dan Voelpel: 253-597-8785
27th Street Station
Location: South 27th Street and Martin Luther King Jr. Way, Tacoma
Units: 17 condominium conversions for sale; 87 units overall
Prices: One-bedroom, $119,990 to $136,990; two-bedroom, $148,990 to $167,990
Developer: Gintz Group, Tacoma
Grand opening/ open house: Saturday and Sunday, noon to 6 p.m.