Monday, October 08, 2007

Condo Sales: Saxon Court

My interest in Saxon Court was piqued by an article in the Real Estate section of the Examiner's October 5 issue [sadly, the article isn't on the Examiner's web site]. Samuel Goldreich wrote about a couple who'd done what I've thought of doing: they'd bought two condos and combined them into one unit, #504 at Saxon Court.

Saxon Court was one of the first condo buildings built on the 1400 block of Church Street. The developers repurposed an existing structure for condos and were soon joined by Lofts 14, Lofts 14 Two, Rainbow Lofts, et al. Unfortunately, the new neighbors helped transform that block of Church St into a narrow canyon of condos whose units most likely rarely see the sun. However, it's fair to say that the building was an early contributor to the revitalization of the Logan Circle area, as stated in this 2002 article:

Saxon Court, a unique condominium project at 1440 Church St. NW, includes an industrial-style facade incorporating the existing Church Street garage building, distressed brickwork and walls of glass. Homes here will range from $250,000 to $700,000, with the average two-bedroom home costing between $400,000 and $500,000.


"In a couple of years, I think the city will look to the P Street area as an example of the perfect restoration project of a neighborhood, with its mix of retail and residential properties creating a true community," Mr. Earle [of PN Hoffman] says. "Our Saxon Court project will create another anchor for the neighborhood on the corner of 14th Street."

As described by another real estate site:

Completed in late 2002, Saxon Court was one of the first conversions of a warehouse into condos on this two-block long street that now houses nothing but upscale condos. Saxon Court is a 46-unit, six-story building with bamboo flooring, granite counters, stainless steel appliances, nine foot ceilings, "industrial" style, stylish furnished roof deck with gas grill, balconies and patios, and underground parking available. Developed by PN Hoffman, located about a 10-minute walk to the Metro. Like many of the old warehouses in the vicinity, this catered to the auto as the "Enby and Saxon service station", which vacated well before the riots of '68 destroyed much of the area.

According to this source, the building was developed by PN Hoffman and SJG Properties at a projected cost of $20MM; it has 85,480 sq ft, 10,000 of that for retail. By my calculation, total sales to-date sum up to $23.95MM, a nice 19.75% return on the investment.

Back to unit #504. I looked at the condo via the link I've provided below. I have to say it's quite spectacular - those folks aren't hurting for money and they've done a very nice job with the unit. But, given that it was a combined unit, I wondered whether it could fetch the list price based on comps in the building. I understand that the renovation performed by the owners would add a certain je ne sais quoi when it comes to truly pinning a value on the property, but I wondered what a comps-based value would be [maybe I could get a job with this TV show].

So here's where the left side of my brain took over. I took the sales of all condos in blocks 0208, 0209, and 0210 [roughly, the area bounded by 14th and 15th St NW on the east and west, and by Q St NW and Rhode Island Ave on the north and south] for the past six months to determine maximum, minimum, and average sales prices per sq ft. I then focused on those units that had 2 beds and 2.5 baths.

The average price / sq ft for all 2 bedroom units was $625.63; those with 2.5 baths sold for $661.58 / sq ft. While the unit's listing states it has 2300 sq ft of space, the District only shows 2167, so I went with the District's data when calculating the comps. Using those figures, unit #504 would be valued at between $1,355,740 and $1,433,634, roughly $150-240K less than they're asking, but a decent bump from the purchase price. It translates to a 4.42-5.89% CAGR for the unit.

Yes, I ignored all the granite and the custom cabinetry and all the other extras added during the unit's renovation. But my limited experience as a real estate agent and home buyer/seller shows me that, eventually, it all comes down to price / sq ft. The rest is je ne sais quoi.

Saxon Court 1440 Church St NW, DC, 20005

Sales Through August 2007

The District has recorded 50 sales of Saxon Court's 46 units through the end of August. Two units, #101 and #503, appear to be owned still by the developer; thus, 44 of 46 units have been sold.

The table below details the average price, average price per square foot, average unit size, and the number of sale for each unit size [1 and 2 bedroom units] at Saxon Court.

The distribution of sales prices on a price per square foot basis is depicted in the chart below.

For example, 26 units sold for prices between $401-$500/sq ft.

Rental / Resale Activity

Six units have been resold since 2002. This building's appraisal data is available so I've been able to calculate price per square foot for each sale.

You may recall I began calculating each sale's CAGR to determine its return to the seller. Each sale beat my informal IRR hurdle rate, i.e., the sale has to return better than a one-year T-bill yielding 4.03%. Each resold unit had been purchased no later than mid-2003.

Of course, the CAGR omits all transaction and carrying cost considerations.

As of October 7, I cannot find any units advertised for rent. Three are listed for sale:

  • MLS DC6536200: Unit #504, listed for $1,595,000. A 2/2.5, advertised as 2300 sq ft although the District's appraisal data states 2167 sq ft. Using the District's data, the list price is $736.04 / sq ft. According to the District, it was purchased in March 2003 for $1,140,456.
  • MLS DC6555662: Unit #603, listed for $995,000. It has 2/2 and 1441 sq ft per the District. Using the District's data, the list price is $690.49 / sq ft. According to the District, it was purchased in June 2005 for $951,000. At this price, the seller will be taking a loss on the sale after an assumed 6% real estate commission is paid.
  • MLS DC6556556: Unit #604, listed for $889,000. It has 2/2 and 1476 sq ft per the District. Using the District's data, the list price is $602.30 / sq ft. According to the District, it was purchased in January 2003 for $619,930.


gbnsca said...

So, is it worthwhile financially to combine two combos into one?

Keith said...

I'm sure it's nice to live there, whether it was a good investment will be determined if/when the unit sells.

Anonymous said...

I took a walk to check out the bldg. I was not impressed at all. For 1.5 million I'd rather be in a house. In order to sell these units, the prices have to come back to reality. A 60% or more reduction in price MAY produce a sale!

Anonymous said...

The owners purchased two condos and made it into a super condo. This was done during construction (not after the fact) so it looks really nice.

The price of the property also includes three parking spaces (most of the owners in the building have one parking space) and a storage unit (not all owners have a storage unit).

Unlike the other properties in the building, this one does have better stuff (refrigerator, range, etc.).

This property really is unique.