When condos don't sell downtown, just rent 'em

Almost 1,800 apartment units will be added to the downtown portfolio in 2010, or more than half of the units opened in all of L.A. County, according to Marcus & Millichap (via blogdowntown). Much of the action is probably coming from properties that were originally pegged as condos - and for owners of those buildings, the switchover to rentals is not especially attractive. Here's a snippet from my February 2009 piece in Los Angeles magazine:

Buyers are always preferable. They pay for their units up front and are more likely to stay awhile. Renters tend to be transient, which means apartments can sit empty for months at a time and not generate enough cash to pay off the debt service. Higher turnover also results in heavier wear and tear. A building owner wanting to convert to condos when the market improves might end up paying $25,000 to $30,000 in renovation costs per unit. "No one knows what a condo is worth today versus tomorrow," says real estate attorney Eric Rowen, a shareholder with the firm Greenberg Traurig and chief counsel for the Los Angeles County Economic Development Corporation. For that reason, he says, "a lot of these projects will end up in foreclosure and traded down one or two times before there's enough equity to support the debt."