When Phil Crout decided to move out of his Capitol Hill condominium, he had his eyes set on Washington Park.
“I wanted to be near Wash Park, and I wanted a condo because of the convenience,” Crout said. “And I wanted a price point that was under $200,000.”
For the pricy Washington Park neighborhood, that could have been a tall order. But he found a condominium complex that had recently undergone a renovation. The complex had been a dilapidated apartment building called Penn Square.
Urban Redevelopment, a local developer that buys old apartment buildings and turns them into chic condos for the 20-something set, redeveloped the property and changed its name to Icon 195.
Called a “condo conversion,” renovated condominiums such as Crout’s are becoming a mainstay in Denver real estate and are lauded as good ways for young buyers to get into the market.
But as always with real estate, buyers should beware, experts say.
“Denver has been off and on with the condo-conversion market for a long time,” said Jeff Engelstad, a professor at the University of Denver’s Daniels College of Business. “And Denver has certainly had its ups and downs.”
The current crop of condo-redevelopment firms market reconverted apartment complexes built in the 1950s and 1960s with words like “modern” and “urban” to “young professionals” who have been priced out of homes in swankier neighborhoods.
The buildings getting redone typically are valued from $900,000 to $2 million, according to Denver property records. Once completed, developers can resell the apartments — now classified as condominiums averaging 500 to 1,000 square feet — for as much as one-and-a-half times the original value.
Some projects are selling well. In Crout’s redeveloped condo complex, only nine of 21 units are still available. Another redeveloper, Modo Developers, has sold out its first three redeveloped properties since it started in 2003 and has only a few left in the others it recently completed.
Both companies have other projects underway.
But are former rundown apartment buildings turned into condos really worth the prices ranging from $140,000 to $260,000 per unit?
“It depends on what your definition of ‘worth it’ is,” said Byron Koste, a professor at the Leeds School of Business at the University of Colorado at Boulder.
“As an apartment it offered certain things that had relative value,” he said. “As a condo it has certain things that offer relative value.”
Put simply, “can you take an apartment and turn it into a nice condo?” Koste said. “Yes.”
Take Modo Developers, whose name is a play on the word LoDo, but means “modern downtown” instead of “lower downtown.”
According to the company, it revamps some interior items such as electrical wiring and plumbing in the units. Modo also spends a great deal of time with cosmetic items such as exterior treatments, new hardwood floors, balconies and rooftop decks.
“On the inside, they go down to the bare bones,” said Dave Ness, a broker with Urban Thrive, the marketer of Modo properties.
Utilities in Modo buildings are usually included in homeowners association fees, which can run about $200 a month. Prices for Modo condos can start in the mid-$140,000s.
But even with a cosmetic and infrastructure work, buyers need to keep asking questions about the property.
“You’ve got to ask yourself how much different does it look now that it’s a condo and not an apartment,” Engelstad said.
Consumers should consider whether utilities are shared or individual to the unit. Older apartments often have a central boiler system that feeds all of the units in a building.
“When you rent a unit and the boiler goes out, you would just call the super,” Engelstad said. “I would think that would be a big deal if you were buying. I would want to have separate utilities.”
Crout’s condo at 195 South Pennsylvania St. has utilities individual to the unit, including water. Urban Development took out the common boiler system.
“People are willing to pay a little more per square foot if you give them something that they want,” said Todd Narlinger, who runs Urban Redevelopment Colorado.
Another element consumers should determine is if other conversions are going on in the neighborhood.
“If I’m owning, I don’t want to be next to a regular apartment,” Engelstad said.
Prospective buyers of these properties also should have a sufficiently long time horizon.
“Condos have always gotten a bad rap,” said Engelstad, noting that they usually are the first to lose value in a declining market.
Given the pyrotechnics in the real estate market, it’s unclear whether the sector has bottomed out. But real estate experts seem to agree that buyers should have a time horizon of five to seven years.
Also, as always in real estate, location matters. For buyers with limited means, condo conversions can present a good way to get into markets such as Capitol Hill or Washington Park without much money.
