A reader asks:
Has anyone else heard the rumor that Mosaic Hermann Park’s South Tower (already under construction) is going all rental once complete?
It would be kinda cute if the second condo tower did end up switching to apartments, since the first tower went in the opposite direction:
[Phillips Development managing director Donald] Phillips says the company financed the first Mosaic tower as a rental property because that was the only way to secure funding.
“We did whatever we had to do to get the thing built,” he says.
- Mosaic orders double-dip as second condo tower moves forward [Houston Business Journal]
- Mosaic: Second Tower Rising [Swamplot]
- Mosaic: More Condos Available! [Swamplot]
Photo: Aerial photo of Mosaic from June: Aero Photo
This wasn’t much a rumor.
Long before the project got off the ground the developers hinted that one of the towers could be rental units. The primary reason is that they would be able to acquire the needed construction financing quicker.
The units in the second tower are identical to the first one, and could be turned into condo units if they see the demand for it.
The location near the medical center and downtown also make the potential for a low vacancy rental project very promising.
The real news is that the FIRST tower is filling with rentals. Call them. You’ll see.
Yes. The first tower IS filling with rentals. I would imagine leasing the new South tower will kill the condo sales in the North tower.
Just because they are filling with rentals doesn’t indicate a problem. It just means that most of the purchasers in the first tower were investors that intended to rent in the first place. Several buildings in Houston operate this way. The building managers will manage the unit rental for the individual owners of the units.
The second tower will remain under ownership of the tower managers. The first tower initially went condo and proved to sell enough to start construction with the intention of the second tower being rental to finance the building.
The building managers could slowly turn the second tower into investment condos.
Regardless, the two towers are a nice addition to the area and is adding the development of the 3rd ward and the Museum District.
Being rental isn’t a bad things as it is catering to a higher end rental crowd just like the One Park Place tower will in downtown or the Museum Tower on Montrose.
Haif documented a lot of this early on when the project was announced and followed until the construction started.
The question I is “What is the status of the ground floor retail/restaurant?” I remember them planning to have this at the bottom. I haven’t heard much….
“Just because they are filling with rentals doesn’t NECESSARILY indicate a problem.”
/FIFY
The question is, are they renting unsold units or renting investor units?
A quick check of a few addresses on HCAD show most of the rental units listed on HAR belong to:
5925 ALMEDA NORTH TOWER LP
142 W PLATT ST
TAMPA FL 33606-2377
The developer.
KJ, usually I’m on the same page with you. However, even though these are high end condom properties, rental property is rental property it rental property. Tenants will almost never provide the same caliber of resident than property owners. Plus, in condo projects, high non-owner occupancy rates make financing just that much more difficult, thereby making an already tough to finance type of property even more of an albatross. Construction financing is one thing, but whoever’s lined up for interim financing has to be wondering if they should be involved at this point.
My angle at this is that the developer from the get go knew at least one tower was going to be rental.
They knew they could not fill this building with condo owners.
They got the contracts they needed to secure financing with full intent on the second tower going rental. While financing when through, most of the contracts were pulled out by mostly investors buying condos because of the shaky market. Now the developer is stuck with pretty much two towers of rental property.
Is this bad? I don’t know yet. In the last three years we had three other rental towers come on the market. One is the Dominion tower (which felt some wrath from Katrina evacuees, but most are out now). The oldest one in the three years is the 1200 Post Oak tower. I think it is still rental, but there were discussions of it going to condos (correct me if I’m wrong). The newest one is the tower located in the Riverway Complex off of Woodway near the Omni Hotel.
All of these projects seem to be holding up well and keeping the units filled (to about 70%).
Currently Mosaic and the One Park Place towers represent three new building. Only one is being occupied with the other two under construction. To me the building to watch it the One Park Place tower since it is in the middle of downtown which is typically a hard market to fill residences. Other rental units in this area are not necessarily doing well, yet jump into midtown and they are doing fine.
The developer thought they would have to initially finance the first tower as apartments, but they held strong and fast that they believed they would sell it out before apartments were ever rented. Now it would seem to have flipped somehow…
From the Chronicle in 2005 when it was announced:
“The company is building a sales center at the site and plans to begin construction on the rental tower in October. It hopes to begin construction six months later on the condominium tower. Both will be 29 stories of residential units on top of five stories of parking.”
Just to get a few rumors cleared up: The rental units in the first tower are being rented from investors. Tower 2 will more then likely be rental before converted to condos. They want to sell tower 1 then move to sell tower 2. Just because tenants will rent doesn’t mean it won’t be the same caliber as buyers. The rental rate is $2.40 + a foot, with the idea that renters will become buyers. Plus when people rent a property they have a credit check & background check. When people go to buy there is no background check. Therefore, the renters might even be of a higher caliber then the people buying, you never know. What is the big deal with renters vs buyers? Every high-rise in Houston has renters. If you know one that doesn’t please tell me the name. With the location of the Mosaic and it’s complimentary shuttle to the Med. Center it just makes sense to have some rentals. People from all over the world travel to the Medical Center for treatments and some just stay a few months.
As for the retail space below. If you were a restaurant owner would you want to occupy the space right now? There is still all that construction of tower 2 and tower 1 should probably be a little bit more occupied. I hear they have a lot of offers and already know who is going to take the space.
Funny, I never considered HCAD information to be a rumor before.
The good news is that their rental rates must have come down! There’s a listing on HAR for a 757 sq ft unit at $1475 per month! That’s $1.95/sf!
Oh, and it’s owned by the same folks too!
5925 ALMEDA NORTH TOWER LP
142 W PLATT ST
TAMPA FL 33606-2377
Of course the developer is definitely an investor, so TECHNICALLY you’re right. Thanks for clearing up the rumors.
The Mosaic is a beautiful building but they can not get it together. I’ve been looking at real estate here in Houston for some time and have visited every building.
What worried me most regarding the mosaic is the size of it. No building has ever sold 800 units. The developers did a nice job, not a spectacular, but nice job on the amenities. The inside of the apartments are fair at best. The cabinets are of the cheapest variety and the construction is apartment grade at best. The developer did a horrible job and at 325-350 a foot I can see why they are stuck with an absorbent amount of inventory.
I spoke with a gentleman names Jack and he explained how the building was originally apartments but they decided to make it condos. He agreed the condos fell short of expectations, but the amenities make up for it and some how justify the price point.
Well this Jack is obviously a politician and knows nothing about real estate. His condescending tone gave me the feeling he was running for office and not trying to help me make a decision on whether I wanted to buy a condo, and the sales team told me more about their prior success then this one. I did find out that tower two is going rental and that the developer has leased units in tower one that were NOT owed by investors.
Unfortunately Mosaic is in a bad location at a ridiculous price. Cavit Emptor.
Florida Capital Real Estate Partners indicates in their literature that Mosaic Tower I & II is part of one of their investment programs along with Hidden Creek Apartments in Allen, TX and Fountains of Conroe and Casa Bella in Tampa. Their strategy is to construct the property, lease it up, and then sell it to a REIT, insurance company, pension fund, or condo company. Knowing the property, what is the likelihood of successfully executing this strategy? They allow a 3 to 5 year timeframe.
The strategy is quite common. REIT investments were popular on the run up to the housing bubble bursting. Some REIT’s are still in good condition.
Large “new” apartment complexes in Houston and in many markets are constructed in this strategy.