The Astoria at Central Park West in Irvine has given up on sales and is converting to rentals until the next housing bubble.
Irvine Home Address … 401 ROCKEFELLER #805 Irvine, CA 92612
Resale Home Price …… $625,000
And when I lost my grip
And I hit the floor
Yeah, I thought I could leave
But couldn't get out the door
Aerosmith — Amazing
The investors who financed the Astoria at Central Park West lost their grip on financial reality. When prices hit the floor, they wanted to leave with their money, but they couldn't find the door. Now, they are stuck with a loser investment, and they have few good options to get out.
High density real estate costs
High density residential construction costs are the biggest variable in determining the type of construction a specific project can support. The income must be sufficient to provide a return relative to those costs for a project to go forward.
The first major cost barrier comes when a project goes from three stories built on grade to four stories over parking (aka podium construction). A typical apartment complex like those built by the Irvine Company are usually three stories of wood-frame construction built on grade. This is the most cost-effective method of producing housing units. Unfortunately, it is difficult to get more than 28 units per acre using this method of construction, so land values are limited.
Podium construction, typically four stories over a two-story underground parking garage, is the next step up the cost and density scale. Villa Siena and the Village at Irvine Spectrum Center are examples of this kind of construction. Densities exceeding 30 units per acre are achievable, but costs jump significantly. Projects must have significantly higher revenue potential to justify this kind of construction.
True high rise construction, defined here as five stories or higher, take another major step up in cost and require a commensurate increase in revenue to justify their existence. These units are generally confined to city centers in major urban hubs — not in low-density Orange County.
When prices rose so high so fast, rather than consider this price action to be a housing bubble — which it was — developers saw an opportunity to build high-rise condos. If prices had held at their 2006 levels, they would have made money. The developers of the North Korea towers did. The developers of the Astoria; well, they weren't quite so lucky.
The Astoria at Central Park West
I last wrote about the Astoria on February 11, 2010 in Free Wine, Food and Gifts Plus a Tour of an Epic Real Estate Disaster. Lennar was gearing up to sell units in this project with a big party. I thought I would give them some additional press coverage. I heard the turnout was good.
Lennar attempted some creative financing, but buyers didn't go for it:
Builders often buy-down the interest rate to artificially lower the payments for early years. Personally, I think the practice is egregious differing in no way from the subprime 2/28 programs that proved so disastrous. Lennar and their partner obviously do not care about the long-term viability of ownership of buyers; any who use their advertised financing will not be living there 7 years from now. The the builder bought down the interest rate on an ARM which is taken out at the bottom of the interest rate cycle; this interest rate is going to rise, and it is going to make future payments unaffordable. I suppose these will appreciate so much over the next 7 years that it won't matter, right? Bubble thinking is not dead.
I first wrote about the Astoria at Central Park West in August of 2009:
When you look back on the towers built along the Jamboree corridor, you see differing groups of winners and losers. The developers of the North Korea Towers (Marquee at Park Place) were winners. They sold the property out at peak prices and made a fortune. The buyers and the lenders who bankrolled the purchases there are the big losers. The other condos that came a little later have a mixed bag of winners and losers with both the developers and the buyers suffering.
Today's featured property, Astoria at Central Park West has a clear loser — the ownership entity that developed this property (Lennar has only a small investment). None of these units sold at the peak, and now that we are nearing a long, flat bottom, these units are hitting the market. The early buyers will be knife catchers, but in a couple of years, some of these units will be good buys — at about $300,000 to $350,000.
As today's featured property attests to, about half a dozen knife catchers did purchase units in Astoria in the 500s. With competition across the street at the North Korea towers selling in the 300s, rather than lower their price to sell more units, Lennar has chosen to convert this community to rentals.
Luxury Irvine condo towers go rental
By MARILYN KALFUS — June 21, 2011
The luxe new high-rise condos at Astoria in Irvine's Central Park West are no longer for sale — they're for rent.
In leasing the units, the upscale project follows the path of the 25-story Skyline at MacArthur Place in Santa Ana’s South Coast Metro district, which turned to apartments last year as the market for buying high-end condos eroded.
Several other less pricey O.C. condo projects also launched before the housing crash have gone the same route.
The apartments at Astoria, once priced to sell from $415,000 to $779,000 — along with homeowner association (HOA) dues ranging from $915 to $965 a month — now rent beginning at $2,590. The most expensive unit is a 14th-floor, 2-story, 3,185-square foot corner penthouse that can be leased for $20,000 a month.
At present, there is no rent-to-buy program, said Alicia Scott, national business development director for Alliance, the company brought in to manage and rent the units by Lennar Corp., the builder.
The 240-unit towers aren't entirely without owners. Six condos were sold as of February, according to a report we did then.
Astoria is alongside the I-405 freeway, but with the windows shut and the air on in one unit, there was no noise. In another unit, with no air on and one window open, some traffic was audible.
Last November, LuxeListHome.com CEO David Doyle told ocregister.com in a podcast interview that luxury apartments are a growing business even as the economy — and other housing markets — slowed. He credited people of means who don’t want to commit to home ownership in unsettling times, an affinity for resort-like living and renters who just aren't interested in owning.
Astoria’s highlights include:
- A concierge
- Free valet parking for guests
- Limestone and marble flooring
- Fisher & Paykel stainless steel appliances
- Electrolux appliances in penthouse
- Units with built-in surround sound and fireplaces
- A swimming pool, spa and fitness center, with access to Central Park West's junior olympic-size pool, and an 8,000-square foot recreation center with an additional gym
- A wine tasting room and 55-degree wine vault with more than 120 cages
- Pets are ok (but not all)
Prospective renters include international and bicoastal business people as well as Los Angeles residents who spend time in Orange County and want to cut down on commuting, Scott says.
Rent pending another housing bubble 
I heard through industry sources that Lennar projected sales of these units for about $750,000 back in 2006. With values in the North Korea towers at about half that price, how long do you think it will take for Lennar to hit their numbers? Forever is my guess.
These high rises should never have been built. The economics simply do not support it. The housing bubble sent a false price signal and builders responded. At $750,000 per unit, high-rises justify their construction costs. At $350,000 per unit, they don't. Twenty years from now — or sooner if we inflate another housing bubble — these units might make sense, but today, forget about it.
Renting these units out is admitting failure, but it is probably the wisest course of action in today's markets for real estate and money. The investors whose capital is tied up in this loser project can take a 50% haircut, or they can rent the properties out and get a 3.5% return. Given the options for competing returns, keeping their money tied up in this property is the best use of the money.
Perhaps if competing returns making 10% were widely available, dumping the property and putting the money to work in a better investment might be wiser, but since good investment returns are hard to find, making a small premium over Treasury bills with the potential for future appreciation is a gamble worth taking. Quite honestly, both of their options suck.
Greater fool wanted
Today's featured property makes a nice study in value based on rental parity. We know from the article above that Lennar is going to rent identical units for $2,590 and up. Even with the super-low interest rates and owner-occupant tax deductions, this property costs $3,291 to own. Why would anyone do that?
What would an owner get for the additional $600 per month in their cost of ownership? The potential to lose more value as prices continue to decline?
Sign me up for two….
Irvine House Address … 401 ROCKEFELLER #805 Irvine, CA 92612 
Resale House Price …… $625,000
House Purchase Price … $555,000
House Purchase Date …. 5/21/2010
Net Gain (Loss) ………. $32,500
Percent Change ………. 5.9%
Annual Appreciation … 10.2%
Cost of House Ownership
————————————————-
$625,000 ………. Asking Price
$125,000 ………. 20% Down Conventional
4.49% …………… Mortgage Interest Rate
$500,000 ………. 30-Year Mortgage
$108,448 ………. Income Requirement
$2,530 ………. Monthly Mortgage Payment
$542 ………. Property Tax (@1.04%)
$0 ………. Special Taxes and Levies (Mello Roos)
$130 ………. Homeowners Insurance (@ 0.25%)
$0 ………. Private Mortgage Insurance
$865 ………. Homeowners Association Fees
============================================ 
$4,067 ………. Monthly Cash Outlays
-$422 ………. Tax Savings (% of Interest and Property Tax)
-$660 ………. Equity Hidden in Payment (Amortization)
$208 ………. Lost Income to Down Payment (net of taxes)
$98 ………. Maintenance and Replacement Reserves
============================================
$3,291 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,250 ………. Furnishing and Move In @1%
$6,250 ………. Closing Costs @1%
$5,000 ………… Interest Points @1% of Loan
$125,000 ………. Down Payment
============================================
$142,500 ………. Total Cash Costs
$50,400 ………… Emergency Cash Reserves
============================================
$192,900 ………. Total Savings Needed
Property Details for 401 ROCKEFELLER #805 Irvine, CA 92612
——————————————————————————
Beds: 2
Baths: 2
Sq. Ft.: 1583
$395/SF
Property Type: Residential, Condominium
Style: One Level, Modern
View: City Lights, City, Hills, Mountain, Panoramic, Yes, Faces North
Year Built: 2009
Community: Airport Area
County: Orange
MLS#: S657365
Source: SoCalMLS
Status: Active
——————————————————————————
Astoria is Irvine's preferred newest High-Rise Luxury Urban Living. This dual master suite is located on the 8th floor with unobstructed 180 degree City and Mountain views, and a terrace for entertaining. The Gourmet kitchen features stainless steel appliances and granite counter tops. Dual full baths include pristine marble throughout, dual-vanity sinks, glass showers and separate soaking tubs. Over $85,000 in private upgrades: fully integrated 12-speaker home entertainment system with component/amplifier tower, 3 wall mounted touch screens, Lutron lighting & remote window shades! Resort-style landscaping featuring an elevated terrace with pool & spa, a private wine tasting room and wine vault, business center, grand fitness center, outdoor entertaining areas, Concierge service & 24hr valet parking. Live in Orange County's newest and most luxurious resort-style master planned community. .. Central Park West
I saw this linked at calculatedrisk a minute ago. Was going to post a link here 🙂
The circle is closing. Some of the most shocking price declines I’ve seen in FL ( > 80% down from peak pricing) were apartment to condo conversions. You had a company buy the complex from the original property manager. They usually did very well. Then the apt-to-condo converter sells to either investors or potential residents. There were a lot of multi-unit buyers that I think had to be investors. The apt-to-condo converter did pretty well, but they usually paid a high premium for the apartments. A few final buyers could unload the apartments to a greater fool, but most gave up.
Units foreclosed, and many now scooped up by real investors (LLC’s or registered investment groups). I haven’t checked, but thought that the best way to get value back out would be to buy all the units and convert back to apartments! Maybe the original owners can come out of retirement and buy them back at a fraction of what they sold for.
The area deserves this. Property is WAY too high and income low, not even the FCB can keep the prices up. I checked with a friend of mine and Laguna Altura has sold 7 units total, most if not all, are purchases from TIC employees.
I hope the Donald takes a huge bath on this development. As I had posted earlier, I believe The Donald saw the writing on the wall and tried to cash out before the HUGE pop….but I believe he is a little too late.
Are these shill purchases, are the TIC employee incentives on Laguna Altura really that incredible, or do the occupants on the floor below the TIC executives really just need homes that badly?
“rent identical units for $2,590 and up. Even with the super-low interest rates and owner-occupant tax deductions, this property costs $3,291 to own. Why would anyone do that?”
Poor math skills coupled with an ignorance of the state of the housing market? Is there still a bias towards owning?
Rents start at $2600 but that doesn’t mean a 2 bedroom larger unit wouldn’t for more. Curious what this floorplan will rent for as it will make a good rent vs buy comparison.
I would feel odd being an owner in a building full of renters.
Who will rent these apartments for the price of detached homes?
Name Beds Baths Price
Plan D 1 1.5 $2535-$3395
Plan B 1 2 $2635-$3505
Plan I 2 2 $3105-$3730
Plan A1 2 2 $3190-$4140
Plan H 2 2 $3220-$4230
Don’t believe everything you read… Skyline’s website shows 2-bdrm Plan D from $3400, but some (lower floors) have rented for $2400 and others with incentives (free month’s rent), etc.
You almost make it seem close to rental parity, which I know was not the intention, but your Net cost of ownership assumes a certain tax savings and equity payments (assuming the loan will be fully amortized). AND the buyer puts down $120,000!!!
This is precisely why I RENT at Skyline.
I’m glad this turned to rentals… More competition so maybe Skyline won’t raise my rent when the lease comes up 🙂
Why would it not be his intention to show the true picture? Let the record also reflect Larrys promise of a 50% decrease in rents in our future.
Where does Larry promise a 50% decrease of rents?
His stupid and inaccurate statements are confirming him as a blog troll desperate to undermine me. His credibility is on par with Planet Realty.
I’m guessing he’s a PR consultant hired by OCAr. After they screwed the pooch so badly in their ‘grievance’, they probably realized that they better pay up for professional help. Unfortunately for them, it looks like they picked the lowest bid. I wouldn’t be surprised if they’re pleased with his ‘work’, though. When you make a living on fantasy-based salesmanship for so long, you lose the ability to tell the difference.
-Darth
This is the harshest statement I have read on these comments. Just brutal.
Now, now, now IrvineRenter. Even Planet Reality occasionaly has some constructive posts. Can’t say the same for our troll Bill.
PR rocks and has the courage to stand up to the nut huggers. This infuriates the huggers as well as the hug-ee. Both are familiar and comfortable with their roles, just like a real work place!
Take PR out from the boards and watch the hits go down. Have the same ol’ view by the same ol’ people slinging the same ol’ bullsh1t, only goes so far.
Differences in OPINION are what makes the world go around. Last I checked not ONE of you has the complete understanding of truth, but y’all act like it.
That’s fair. PR isn’t annoying. He’s just coming here with a very optimistic viewpoint. A lot of the rosy things he says about Irvine are the same reasons I bought here, so he’s not too far out there.
Most visitors here are very pragmatic and financially savy. They aren’t going to over-extend themselves to finance a home and rightfully mock others who do so. Everyone here understands the enormous pressure Irvine housing is facing and the only question is, “How far down will prices go from here?”
The only beef I have with reading PR’s posts is that any point he/she tries to make is usually lost in a sea of sarcasm and snark.
I am afraid I am just not clever enough to decipher his/her wit.
What are you talking about, Bill? He clearly shows renting is less. I was just pointing out that at a glance he makes it look “close”, but for the reasons I stated it’s even further from rental parity than it looks (i.e., $120,000 down to be even near rental cost!)!
Bill, the phone ringing is a potential commision. Why are you wasting your time here?
You wouldn’t get this 1,500 sf unit at the lowest rent,
Agree…wonder what these units will rent for to make a fair rent vs buy comparison
I live in Ave 1 which is the 4 story condos a block from astoria and pay 1775 for 1200 sq ft 2b+loft. I can’t imagine paying double to live in astoria but would consider a few 100 more for all the amenities.
This is at rental parity at $625,000? Oh.
I can rent a 3BD, 2.5BA house in CDM with a 2 car garage for $3100. How does this 2/2 go for more than that? Plus you are taking the risk that HOAs don’t go up and the mortgage interest deduction isn’t yanked or limited. I saw from a previous post that someone is leasing a 2BD at Ave One for $1775. Shocking! I know someone who purchased a 1BD there in 2006 for only a little less than the asking price on the condo featured today (high $500ks if I recall). Why he continues to pay the P/I and HOA there eludes me.
Bill, you are confused and do not understand what is written in the post. At $625,000, this unit would need to rent for $3291 in order to be at rental parity. It does not rent for that much, so it is not at rental parity.
I’m so happy I escaped OC and California back in 2008. I used to laugh at the ridiculous prices. $750k (3/4 of a Million Dollars) for 1,500 sf? Where if there was a fire and you were stuck in your beautiful high rise?
I now own a 4,600 sf house and paid $375k with an unobstructed 180 degree view of the Rockies; and total PITI is less than the rent I paid renting from TIC. Sure it’s cold in the winter and I don’t have the ocean close by but I never really had time to enjoyed the beach anyway (because OC kept me working too hard). Because I have way more money left over at the end of the month I’ve been able to go on some great vacations (with beaches) and paid cash.
How much are your heating costs?
On par with Irvine AC summer cooling electric bills.
good for you. Sounds like you have a nice place. Escaping Kalifornia has always been in the back of my mind. North San Diego county is on par with the OC as it relates to expensive living.
where are you located? I may want to become your neighbor.
Don’t have to go that far. Sounds like my lifestyle just on the other side of hill next to Irvine. In Corona, my mortgage for my 2600 sq ft home is much cheaper than my 900 sq ft apartment from TIC. We also don’t nearly get the June gloom Irvine gets. To each their own, but I prefer the weather out here 8 out of the 12 months in the year compared to Irvine.
Is that really a stretched out bathtub, or is it the photo perspective? I’ll ignore leaning up paintings on the floor as a staging gimmick, though the implication is not enough wall space.
And the problem with holding it for 20 years for the price appreciation to maybe catch up, is that there will be serious special assessments for major maintenance and updating to the building and common areas, plus your own “investments” to keep up the unit as a high-end property.
No special view (ocean, park/wilderness) and minimal big-city amenities and attractions within easy walking distance. Why, why, why?
I was thinking the exact same thing. “Luxury” towers are supposed to be more than just some pretty kitchen appliances, floors, marble entrance, etc. To be “luxury”, the location itself has to have something special. Luxury towers make sense if you can walk in the good parts of a city (Manhattan), or be near the water (Coronado) or both (Lake Shore Drive in Chicago). You don’t just put up expensive high rise condos virtually in the middle of nowhere and call it a luxury tower.
but but, you can walk to…! wait, nevermind.
The remoseful buyer who is filled with hate should of read IHB. Most if not all her critism of the place were mentioned. The place is not likely to go to pot physically in the next year cause the selling point was to have 2years (?) of the HOA included in the purchase price/bonus. Since most was borrowed money, the taxpayers will need to eat the loss again and this time for the HOA. The squatters can just live off the downpayments without much negative impact on the quality of life. Stop gap loss limit was the downpayment. If they read IHB, the lower the downpayment the better. Road noise on the showing was covered by having music both on the outside common patio and inside of the units. Just the noise by opening the window was a stressor for me.
The noise is worse than in most major cities. Too close to I-405. I doubt if the HVAC filtration will fully take care of the car fumes and dust. How will be responsible for the filtration upkeep?
It was a great investmentment — for the seller, RE agent, loan officer and those working off commis.
For those that pushing paper and call it value added and wealth creation, all their “products” is a great investment — for them.
Gambling is a great investment but for whom?
“The most expensive unit is a 14th-floor, 2-story, 3,185-square foot corner penthouse that can be leased for $20,000 a month.”
The only people I know who do leasing at the price are corp. and fed. govt., who money is not coming out of their personal pockets.
One would be hardpressed to find more than a handful of people willing to spend that much for an Irvine apt. I would say $6000 would be more likely the 80%-tile point.
OC Builders do not understand high-density residential. It only works when you have surrounding development which supports the high-density residential use. That means you need supermarkets, restaurants, dry cleaners, movie theaters, etc. within WALKING distance of the high-rise. Otherwise the density doesn’t get you anything. In a good high-density living situation you can drive home at night, park your car, and walk to get anything you need. You don’t have a yard, but in exchange you get convenient access to amenities. OC high rise living is the worst of both worlds – you give up the privacy and space of a detached single family home, but you still have to drive to get anything you need.
Yep, you got it right. In LA there are locations that can support a high rise, not so much in OC.
Well at least some of these units get a prime view of the 405.
“In a good high-density living situation you can drive home at night, park your car, and walk to get anything you need”
In TRULY good high-density living, like where I live in Seattle, you don’t drive at all. You walk or take transit to work, as well as walk out your door for coffee, dry cleaning, shopping and restaurants. You save the car (if you have one) for trips to costco or weekend getaways.
I never understood the view aspect. What view?
405 FWY!!!
At least Ruth’s Chris steakhouse is nearby. Oh, and there’s valet parking there too, though not complimentary.
>fully integrated 12-speaker home entertainment system with component/amplifier tower
Do you know if it’ll be quiet in the units above and below this well-equipped room? Most walls in these apartments are paper-thin.
And so we have a bunch more luxury rental supply hitting the already-saturated high end rental market. How do people figure that rents are going to go up and up with so much of the housing supply that has been empty the past few years converting to rentals? Not just this property, but all the cash investors who are “knife catching” vacant properties and then renting properties out for cash flow. You can also add in the many people (possibly fewer now than 2 years ago, though) who rent out rooms to make ends meet?
The fact is, the more we have housing space sitting vacant, the more housing supply is restricted. There are a LOT of vacant properties right now. I don’t have the firm numbers on this, but IR probably does. This vacant supply can’t sit around being a drain forever. Economic pressures are going to force owners to cut losses and either take their loss with a sale, or rent it out. This keeps adding fresh supply to the market in a bad economy where the demand for high-end properties is much lower.
Higher supply (shadow inventory getting put back to use) and lower demand (unemployment, underemployment) mean high-end rental properties should continue being forced to reduce prices to maintain occupancy rates.
As IR pointed out, a lot of very nice housing was built in the last 5 years without the economics to support it. Putting it on the market with the economy bad and getting worse means a glut.
Am I wrong?
Are you wrong? I dunno.
I don’t keep close watch on the whole of Orange County, but I do keep a pretty close eye on the Coto housing situation, and it never ceases to amaze me how much homes rent for and how fast they rent.
All the folks who lost their home to foreclosure or short sale had to move someplace and chances are good that they are renting. Mustn’t that have increase the demand for home rentals substantially?
There have been over 125 homes in Coto have have wither sold to a 3rd party at foreclosure auction or gone back to the bank in the last 2 years, and there are probably about twice to three times that many that have sold short. That would mean that about 10% of the households in Coto have switched from owners to renters. I dunno, what do you think?
though I haven’t seen enough evidence to support it yet, you’re right the rental market could be the next bubble in OC (which would have a fun effect on the rental parity calcs, as two sets of prices playfully chase each other down to a true bottom). it would take a lot more than just a handful of these condo properties turning to rentals to do it, though. so it remains to be seen. will definitely become clearer by Fall and even moreso by years end.
personally I think there’s even more of a rental seasonality in summer than there is in homes for sale, which makes the market a bit harder to judge when so much is in flux.
So if this is being converted into rental, what happens to those properties that has actually sold like this one… Can you even have a high rise with part rental and part owned?
Who would rent these apartments for the price of detached homes?
http://www.forrent.com/apartment-community-profile/1000064755.php
Name Beds Baths Price
Plan D 1 1.5 $2535-$3395
Plan B 1 2 $2635-$3505
Plan I 2 2 $3105-$3730
Plan A1 2 2 $3190-$4140
Plan H 2 2 $3220-$4230
i’m sorry
i don’t think i heard correctly
u didn’t say monthly HOA fees of $900 a motnh did u ?