Memphis real estate is all a matter of timing.

After more than a decade of prosperous ruckus, the Memphis real-estate market has gone relatively quiet in the last year or so. It's not a situation unique to the city: Everybody everywhere is feeling the crunch. The real-estate market is holding its collective breath, and everybody's watching for when it's safe to exhale. It'll probably sound like a giant sigh of relief.

Thankfully, for most downtown Memphis real-estate developers, though times aren't in boom right now, they aren't in bust either. In the fourth quarter 2007, 50 units were purchased in downtown's 38103 zip code, according to figures from Chandler Reports. In the first quarter 2008, 64 units were purchased in the same zip code. Though these numbers are down from the same quarters from the previous year, they still indicate that stock is moving, albeit at a slower pace.

Tony Bologna is principal of Bologna Consultants and an all-around downtown real-estate maven. He sees potential buyers who are fence-straddling right now. Bologna says, "[There are] a lot of people waiting and seeing — if the interest rate goes down a little bit more or prices drop a little bit more before they do something.

"People that were marginal-type buyers, because of the credit crunch and everything else, can't get into a home now, where they might have been able to a year ago," he says.

The decrease in condo-sales rates has led some developers to change their strategies mid-stream. The Glenmary at Evergreen was a major condominium conversion project from the Gintz Group out of Tacoma, Washington. Formerly the Woodmont Towers apartments, the 11-story, 169-unit building was set to tower above North Parkway in Midtown with the kind of amenities and sight lines not normally associated with Midtown condo living.

Until it wasn't. In early 2008, the Gintz Group switched gears, though well into production. Because of sluggish sales and the promise for success out of the senior-living sector, Gintz sold the building to National Health Properties and then leased it back — all to the end of converting the conversion back to apartments, this time suited for assisted-living occupancy.

Other developers are using creative marketing to get people to keep buying. Case in point: Woodard Properties owner Phil Woodard. Woodard's downtown building 2 West (at 2 W. G.E. Patterson, natch) has featured for-sale-only condo units until recently, when Woodard made the decision to offer a rent-to-own option.

"I was trying to make it more comfortable to purchase," Woodard says. "If someone calls up and says they want to rent, I send them down to South Main [where Woodard owns a number of rental properties]. We're not looking for renters, per se. [At 2 West] I'm looking for potential buyers."

Under Woodard's plan, all of the rent from the first 12 months goes toward potential purchase. Residents can continue to rent after that, but a cap is put on that initial-year $6,000 accrual. It's like money in escrow.

click to enlarge The Glenmary at Evergreen
  • The Glenmary at Evergreen

Woodard sees a lot of people coming in from out of town who want to live downtown but who aren't necessarily ready to commit to ownership — even though they could afford it. "We screen them," Woodard says. "They still have to have a good credit rating. They've got to be able to afford to purchase something within 12 months."

It appears the downtown real-estate market is a waiting game. Buy too soon and feel some anxiety while your money is where your mouth is. Tarry too long and miss out on the bargain.

Woodard says, "People are starting to look, but with all of the negative press, they are still waiting. They're waiting for the market to bottom — but when it does, that means it's going to start going back up. When do they want to play that game? I'm pretty flexible right now, but when I see four or five or six serious people looking on the weekends, then I'm going to go back up [on prices].

"I don't think the dollar per square foot is going to get much lower than it already is," Woodard says. "Especially when this downturn goes back, it's really going to go up." At that time, Woodard says he'll go back to for-sale-only units.

Bologna sees that same philosophy at work elsewhere, too. "If someone went into a project as a condo [development] and they're renting right now, it would be a temporary step to keep the project going and generate cash flow while they wait for the market to turn around," he says. "And it's going to turn around, it's just when."

There's one great upside to the for-sale/for-rent question developers have to answer. For-sale not working out for you? "You've got a fall-back position," Bologna says.

"It's just a transition," Woodard says. "I've had six great years, so no complaints. The only difference is that my balance sheet is going to look a little different. It'll pass." ■

A version of this story originally appeared in the Summer issue of Memphis Business Quarterly.

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