Construction of the first phase of the Capitol Cove condominium project in Providence is under way on a parcel bounded by Canal Street, Park Row and Smith Street.

The Providence Journal / Andrew Dickerman

The first phase of the Capitol Cove project now under construction near the Amtrak station in Providence, 96 residential units, will be condominiums.

But the developer will wait to see how the real estate market fares next spring before building the second phase, 153 units, and deciding whether they will be apartments or condominiums.

Under ideal market conditions, all the units at Capitol Cove would be condominiums, according to the developer, Robert S. Roth, of Massachusetts. Earlier projections called for the first phase to be ready in June and the second phase completed by the end of this year. But Roth now says that the first 96 units should be ready for occupancy by the end of this year. After they are sold, decisions will be made about the rest of the project.

“We’re hopeful for a turnaround in the market next spring,” he said. “We won’t have a big rush, but we only have 96 units” to sell.

Roth admits that the downturn in the housing market is the reason for the slowed development schedule.

And turning from selling condominiums to renting apartments during this market downturn is a tactic that other developers in Providence have employed.

Boston developer Intercontinental Real Estate Corp. announced in January that it may convert one of the two condominium high rises in Providence’s Waterplace Park into rental apartments until the real-estate market improves. And some of the unsold units at The 903 Residences downtown have been offered as rentals at the same time they are marketed as condominiums.

But Roth said the style and price of the Capital Cove condos — which will cost from “the high 200 [thousand] range and go up to, say 500 [thousand]… should be the right fit for the Providence market.” Roth said the project offers an alternative to the high-rise, high-price condos in downtown Providence.

“The key word here is moderately priced,” said the architect of Capital Cove, Hans D. Strauch, of HDS Architecture in Watertown, Mass. “Every architect’s dream is to do a high-rise and create an ego statement,” Strauch said. But Capitol Cove’s 4½-story, brick-façade buildings were designed to “relate to College Hill” and the “pedestrian experience that Providence has been working on for so many years.” Strauch said Capitol Cove’s proximity to the Amtrak station and Kennedy Plaza qualifies it as “an urban smart growth” development. Roth said it is designed to appeal to professionals in their 30s and 40s — “GTech people, Citizens people, college people, Fidelity people, people from the state, people from the hospital” — as well as empty-nesters from the East Side who are “selling the big house” but want to keep a home in Providence.

Recent activity in the Providence condo market shows that units at all price points have been hard to move in recent months. An ad this month for the landmark downtown high-rise, The Residences at the Westin, touted “tremendous spring incentives for 17 select residences through May 31, 2008 only.” A price cut has also been made. Last year, the price range for the Westin’s 103 condos was $425,000 to $2.6 million, but a recent ad noted that Westin prices are starting at $399,900.

Ralph Izzi, spokesman for the owners of the Westin Hotel, would not say how many units have been sold so far. But he said that last week a penthouse unit sold for $2 million, the highest price ever paid for a condo in Providence.

And the owners of The 903 Residences cited slumping sales as the reason for their recent decision to look for an investment group to buy them out. Only about one-third of the 330 units at The 903 have been sold since the owners, the Athena Group of New York and Rhode Island-based Paolino Properties, bought the complex for $81 million in October 2005. The 903 was built as an apartment complex in 2004. A recent ad for The 903 announced a “limited-time offer” valid through April 30, in which buyers could save $30,000 on one-bedroom condos and $40,000 on two-bedroom units. Condos at The 903 are priced from $190,000 for a studio to $462,000 for a two-bedroom, two-bath unit with a loft.

This month, foreclosure notices were published for a unit in The 903 that was sold in 2006.

According to The Warren Group, a real-estate data collection company in Boston, the median price of a condo in Providence last year was $226,000, down from $232,250 in 2006. The number of condos sold in the city also declined last year, from 454 in 2006 to 418 last year.

Roth said of the first 96 units at Capital Cove, most will be one-story flats; 70 percent will be two-bedroom, two-bathroom units; 25 percent will be one-bedroom units, and 5 percent will be three-bedroom condos. Six units will have direct access out onto the Riverwalk and their own private entries, Roth said.

“We think most Providence people prefer the mid-rise versus the high-rise,” Roth said. “There’s going to be a fair amount of greenery that will be surrounding the project. The Riverwalk … will be heavily landscaped.”

“Being on the fringes of the downtown and the fringes of the East Side gives us the ability to bring in some residential flavor, but it’s not suburban,” Roth said. “…We do have some advantages in the marketplace, and I really think that the Providence market is at the end of 300, 400 for a condominium.”

A new mixed-use project on Federal Hill includes 24 new condos, with prices starting at $380,000. The Cathedral Development Group project will include 28,000 square feet of residential space and 18,000 square feet of retail space at 321-327 Atwells Ave., 333 Atwells, 144 Spruce St. and Murphy Street. A new Walgreens pharmacy opened this month at 333 Atwells Ave., below some of the new condos.

cdunn@projo.com