Tacoma's Esplanade condos back on market

Less than three months after foreclosure sale of building, condos generate some interest

By John Gillie
The News Tribune
November 14, 2009

The housing bust’s most visible Tacoma casualty, a nine-story, 162-unit waterfront condominium, has quietly been put back on the market.

The Esplanade, a building whose size and timing doomed it to financial peril, is being shown to buyers who previously had shown strong interest in purchasing a condo unit. The resumption of the sales market comes less than three months after the building was sold at a foreclosure auction on the Pierce County courthouse plaza.

The building’s financing bank bought the structure in foreclosure when the only other bidder stopped at $6.1 million, less than 15 percent of the $48 million the bank had lent on the structure.

The building’s original developer, Mark Ossola, who now works for the bank that financed the $80 million building at 1515 Dock St., said he’s optimistic the building will sell out within 12 to 18 months. The new building owner, IStar Financial, counts 10 prospects who have made commitments to buy in recent days.

The crucial difference between now and when he owned the building is the availability of ready financing for potential buyers, Ossola said.

Met Life has agreed to provide financing for qualified prospective buyers, and the Federal Housing Administration has agreed to begin offering financing guarantees once the building is 30 percent sold. That’s down from the traditional 50 percent requirement for FHA loans.

Judy Mayfield, a real estate agent who marketed the building from early 2007 through last June, said she had signed purchase and sale agreements with 119 buyers, but the collapse of the housing market made completing those deals almost impossible. Before the building went into foreclosure, only 10 units sold.

Once the housing market softened, she said, banks were unwilling to finance individual condo buyers because the building had made too few sales. But without banks’ willingness to take a risk that the building would sell up, the building didn’t.

An additional complicating factor was that potential buyers were unable to sell their existing homes without wholesale price discounts after the housing market went comatose.

The bank is reducing prices for the units, another factor that is bringing potential buyers back, Ossola said. He declined to say how much the prices are being cut. The units are not yet officially listed on multiple listing sites.

“We’re doing a kind of soft reopening now,” Ossola said. “Once we get past the holidays, we expect we’ll start a big sales campaign.”

Real estate sales people say they expect the price reductions will have to be substantial to spur new interest.

When she was selling the units, list prices ranged from $278,000 for a smaller unit to $989,000 for a penthouse, said Mayfield, though buyers did negotiate some lower.

Mayfield said she has no inside knowledge about the new pricing, though she wouldn’t be surprised if asking prices were 20 percent to 30 percent off previous list prices.

“That’s not a reflection on the building. It’s an excellent building. It’s just the market,” she said.

Seventeen unsold units at the Marcato, another downtown Tacoma condo, recently sold at auction for an average of 55 percent of their original asking prices. That building, though a quality structure, didn’t have the waterfront views that make the Esplanade especially attractive.

Ossola said he’ll likely seek a zoning change to allow the use of some of the building’s ground-floor commercial space for offices. Present zoning allows only retail and restaurant operations.

The four corner commercial spaces likely will still be reserved for restaurant use, Ossola said, but other spaces could become professional offices. The building had seen considerable interest from lawyers, doctors and accountants to rent some of the waterfront commercial spaces, but the zoning forbade it, he said.

Several restaurants had expressed interest in the waterfront commercial units, but they remained hesitant to commit until more people live in the building.

“It’s a numbers game. When we have more people living down here, I think we’ll see more restaurants,” he said.

Ossola said the building was a victim of bad timing.

“Had we got it on the market a year earlier, I think it would be sold out now,” he said.

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