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For those who wonder why developers don’t build condominium buildings instead of apartment buildings, this story offers the answer: lucrative profits. Built at a cost of $37 million barely five years ago, it sold for just under $41 million when just two years old. Now, three years later, it again is changing ownership for $57 million – $20 million more than its construction cost, which roughly translates to an annual appreciation of $4 million a year. For what it’s worth, the tax assessment for the five year old. property is under $38 million.
You have to keep in mind that you could not build that same property for $37 million due to significant increases in construction materials in the last 2 years not to mention cost of capital
The capital formation for condominium construction is significantly more complicated and costly than capital formation for building apartments. Also, construction costs are typically higher and timelines longer. In all, these factors add risk to the developers, builders, banks and even the buyers.
The tenants of the Coil will be recoiling when the rent increases to pay for this.
It will happen 100%. It’s the nature of these bigger multi-family deals.