About Providence

1.14.2001
Market builds for pricey downtown housing units
Five developers have proposed plans for 900 luxury condominiums and apartments in or near downtown Providence.

By D. MORGAN McVICAR
Journal Staff Writer

PROVIDENCE — The bankers chuckled when the triumvirate from the Armory Revival Co. said they wanted to build some high-end condominiums in an old brick building on the edge of downtown.

"There's no such thing as a $600,000 condominium in Providence," said the bankers. "Show us the comparables."

Almost three years later, there is a waiting list for the condos in the old brick building, and the Armory Revival developers recently broke ground for another high-end condo project next door. The $1.25-million penthouse unit has already been reserved.

As remarkable as that might seem to some, it is but the tip of the iceberg. Providence is on the verge of an unprecedented residential building boom, most of it in or near the new downtown, known as Capital Center.

Five developers, four from outside Rhode Island, have proposed projects that, combined, would bring to the city almost 900 luxury condominiums and apartments at a cost of some $365 million. Two of the proposals are for apartments only. The others include a combination of condominiums, office and retail space and hotels.

The new apartments would rent for as much as $3,000 a month, and the condos would fetch as much as $1.4 million, figures that seem stunning in a city where last year one house on the East Side sold for more than $1 million, where, if you can find one, a spacious apartment on College Hill can be had for less than $1,000 a month, and a nifty condo for $200,000.

The would-be developers include JPI, of Irving, Texas, Beacon Companies of Boston, Eastman Pierce of Stamford, Conn., and Newport, Goldfarb Properties of New Rochelle, N.Y., and Paolino Properties of Providence.

As anyone who has followed the rebirth of downtown knows, there can be many pitfalls between the proposal of a hotel, apartment building or movie theater and its realization: inability to secure financing, a souring economy principal among them.

But developers and their market researchers say that, because of assets new and old, Providence has reached a plateau in terms of appeal and viability for expensive, expansive development.

"When downtowns get revitalized, they get to a point where a whole new market element comes in," says Craig Seymour, vice president of RKG Associates Inc., a real-estate economic and planning consulting firm in Durham, N.H.

"You have a new dynamic in Providence now," he says. "Other cities are trying it, but have not hit the point of critical mass. I think Providence has hit it, so it's rolling on its own now.

"A slow economy may slow down the process, but it won't kill it."

TWO-AND-A-HALF years ago, B.J. Dupre, Mark Van Noppen and H. LeBaron Preston, the principals of Armory Revival, had just finished their latest restoration project, a rambling 1785 house on Benefit Street. The five condominiums they created were scooped up immediately, for prices ranging from $250,000 to $319,000.

That success made them think a project they had been pondering on North Main Street might work. The vacant building had once housed Pilgrim Mills, a fabric remnant dealer, and the Blue Point Restaurant. Their idea was to carve seven condominiums out of the historic structure and attract a restaurant into the ground floor.

But you don't launch a $2.5-million project on a hunch. So, before hitting the banks, the developers turned to their friends in the real estate business.

"We talked to brokers at Residential, Coleman, Gower, Sharon Steele," Dupre says. "We don't go out and do these things in a vacuum. Because we really were pioneers in this. It's dangerous. The pioneers take the arrows.

"We talked to them about where the market is. Are we nuts? Is there a demand for this?"

History suggested "no." In the mid-to late-1980s, at the height of an East Side real-estate boom, many older buildings were "condoed," says Libby Isaacson, the manager of Residential Properties Ltd.in Providence. The boom went bust before some were finished, and many condos never sold, but instead were rented for income far short of what investors had anticipated.

The current East Side boom, which began about four years ago, is different, Isaacson says, as are the nature and desires of the market.

"It has not been built on speculation, but on people choosing to live here," Isaacson says. "There's much higher demand for condominiums and rentals the last two or three years."

East Side rental prices have soared by about 50 percent since 1996, and still, demand outstrips supply.

"Ten years ago, we had about 15 apartments to show someone," Isaacson says. "Now, we often have nothing. I frequently will tell people to read the newspaper, check bulletin boards, ride up and down streets looking for signs. I got a little apartment yesterday for $800, had a couple here this morning waiting to get it. And it was already gone.

"People are coming from all over the place," Isaacson says of the swelling residential market. "People who can live in many different places: the self-employed or writers or the younger retired. More of those kinds of people are choosing to live here because of all the nice things about it: the relatively inexpensive housing stock, the proximity to Boston and New York. And it's a charming place to live, with interesting architecture, good food.

"Some are coming from New York, a big chunk from L.A., a lot from Boston," Isaacson says. "They're coming from Newton, Brookline. They're moving from Cambridge, Back Bay, Wellesley. Prices are 30 to 40 percent higher there. A lot of people are commuting to Boston. That was always the fantasy. But now it's really happening."

Often, what they and many who have been here for years seek — luxury rentals or condominiums — real-estate agents cannot provide,"Isaacson says.

"There's nothing nice enough for them," she says.

WITH SOME difficulty, Armory Revival secured the financing it needed for the condo project at 101 North Main St. All seven were sold before the first hammer had been raised, for prices considerably higher than Armory anticipated: from $229,000 to $900,000.

A couple from East Greenwich whose youngest daughter is now in college bought one. A retired doctor and his wife sold their house in Boston and moved south. A transplanted businessman from Charlotte, N.C., took another.

A few months ago, the company began work on a second condo project next door, on Thomas Street, that will result in five condominiums, ranging in price from $340,000 to more than $1 million.

Beacon Companies of Boston has built skyscrapers in Beantown. In October, it announced it wants to build the tallest building in Capital Center, at the intersection of Canal Street and Park Row West, not far from the tallest building now, the three-sided One Citizens Plaza.

The $35-million project would include a health club, communal "living room" with a fireplace and detached parking garage. The 22-story building would contain 180 apartments and some penthouse suites. High-speed Internet access for all units is planned, as are concierge service and a business center.

Rents would range from about $2,000 monthly to as much as $3,500 for a penthouse unit.

Howard Cohen, the president of Beacon Residential Properties, says his firm came down the interstate for several reasons.

"The city's done a very good job providing the infrastructure for downtown revitalization," Cohen says. "There's good transportation, both the train station and airport, which is very important to business executives.

"The mall and other retail plans, the culture in Providence make it a very attractive place. There are a lot of good things happening. What is really required is a strong housing market."

A month after Beacon announced its plans for luxury apartments, another out-of-state developer, JPI of Irving, Texas, the nation's largest builder and manager of luxury apartments, unveiled its own.

Phillip A. Smith, JPI's regional development manager, started "investigating" Providence about a year-and-a-half ago. He met with a local developer, surveyed the territory and concluded, "It's a great opportunity."

In November, JPI announced plans to build a $60-million complex between Harris Avenue and Providence Place mall. There will be 325 apartments, ranging from a 570-square-foot studio renting for $1,140 a month to a 1,300-square-foot, two-bedroom unit for $2,600. The project includes a swimming pool, clubhouse, fitness center, movie screening room and a 450-car garage.

Residents could also avail themselves of drycleaning and dog-walking services and a business center.

"Initially, it was just our understanding of the market and word of mouth," says Smith. "We have a pretty good feel for communities ripe for a JPI project.

"Then we hired a market research firm. They sent out surveys and did a statistical analysis for us that bore out what our expectations were: there is a lot of pent-up demand."

Smith says he expects to draw renters from among affluent students, young professionals and empty-nesters.

"There's been no new supply built in the last 20-30 years," Smith says. "The New England market in general is mostly underserved for luxury apartments. And high-tech jobs and finance jobs are moving into the region, but there's no place for the people to live."

PEOPLE SUCH AS, PEOPLE SUCH AS? say, Christine Bolton.

Bolton decided a few years ago she was ready for a lifestyle change. She, her husband and college-age daughter lived in a house in Raynham, where Bolton had lived all her life.

"We both work, both travel, we're very busy," Bolton says. "We couldn't play anymore. We either worked or worked around the house."

Driving through Providence to work in West Warwick in recent years, seeing the dramatic changes, gave her some ideas about what her lifestyle change could be. One day about two years ago, she saw an ad in The Journal for condos on North Main Street.

"We called the next day and were told they'd all been sold. I liked the idea of the location, the thought of living in the city. I wanted to get back to the idea you could walk everywhere and not live in your car."

Bolton became friendly with Meredith Church, who was listing the North Main condos, and, despite the fact they'd been sold, gave the Boltons a tour of the site and showed her the plans.

A few months later, Church called Bolton, told her one of the buyers had reneged and said, "It's yours."

With construction just under way, the Boltons were able to design their own space. They hired an interior architect, and had everything custom-made — moldings, fireplace, floors. Walls came down to create one wide-open space, in addition to the two bedrooms and two bathrooms.

The condo, not including the work the Boltons wanted, cost $325,000.

"I love it, oh, I love it," Bolton says. "Somebody said it looks like a New York City apartment, but it's warm."

Easily the most grandiose, ambitious and controversial proposal is a $150-million melange of shops, restaurants, offices, luxury condominiums and a hotel along the river beside Waterplace Park.

A 225-room Hilton would be adjacent to Waterplace, with the project spreading east to Exchange Street and Citizens Plaza and north to American Express Way.

A 21-story residential tower along Exchange Street would contain most of the project's 200 condominiums, which the developer estimates would sell for between $400,000 and $1 million.

Robert Mulcahey, a landscape architect and president of Teresphere, of Worcester, Mass., has designed the downtown master plan for Boca Raton, Fla., and has worked on projects in Germany, Korea and Thailand and on high-density projects in New York, Boston and Los Angeles.

Now, he is planning the $150-million mixed-use development in Providence.

Mulcahey says the site near Waterplace, which would offer hotel guests and condo owners views of the downtown skyline, Providence Place, the State House and College Hill, is "one of the strongest sites in the Northeast.

"Being on the waterfront is obviously compelling," Mulcahey says. "Being adjacent to Amtrak is another key factor. And the proximity to the interstate makes it extremely well-located.

"It's one of the best sites on the East Coast for development. This site is a home-run site."

Morgan Helies, a principal of Eastman Pierce, which is the lead partner for the project, says it includes a "number of high net-worth individuals as well as some institutional investors who have worked together to develop 19 hotels up and down the East Coast.

"We were made aware of the site probably a year or so ago," Helies says. "Hilton Hotels asked us to take a look at the site. There had been a larger hotel planned by Hilton on the northern part of the site.

"When we looked at it, we felt in order to make the hotel viable and something we'd be interested in, we'd have to take the entire site. And in order to make the hotel something vibrant and successful, we'd have to mix some other elements with it, not just have a monolithic hotel there.

"Obviously, we've determined there is a market for a high-end (condo) project in Providence," Helies says. "We're not relying on Providence specific. There's going to be trickle-down from the Boston market because of the sheer high barrier to entry to housing in Boston.

"Condos in Boston are selling anywhere from $800 to $1,500 a square foot. We'll be $300 to $500 a square foot."

IT WAS RKG Associates, of Durham, N.H., that conducted the market analysis for Eastman Pierce that determined that there is, in fact, a market for luxury condos in Providence.

RKG vice president Craig Seymour says he looked at existing housing downtown, and at the "influence of housing on the East Side.

"We also look at demand, based on population growth, household growth and job growth. In the case of Providence, we feel the demand is quite strong, particularly in the middle-and upper-middle income brackets.

"Empty-nesters, for instance, on Blackstone Boulevard. Their kids are gone, the house is too big, they want the same amenities. And young professionals — they like the urban experience. They enjoy urban housing as opposed to the two-or three-deckers on the East Side or the suburbs."

The paucity of residential units downtown combined with the city's remarkable resurgence make a traditional approach to market research difficult, Seymour says.

"You can't look at the past, but rather at qualitative factors that go into market research. You talk to people through focus groups and surveys."

Paolino Properties, of Providence, last summer proposed a 12-story, $60-million hotel-condominium project on a parcel of land near the downtown post office.

Joseph R. Paolino Jr. says he is devoting most of his time to the project, much of it trying to put together a complicated financing package.

"Condos and hotels together are getting to be a new thing," Paolino says. "We're doing it because if we pre-sell the condos, they can be used as equity in the hotel deal.

"I believe I can do it, but it's not a slam dunk. It's not a slam dunk for anybody. All the projects announced are wonderful. Now let's see who gets into the ground first."

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