Pressure from investors or banks could have led to the action, which has become increasingly common as developers aim to fill their properties with buyers eager to capitalize on low interest rates, and state and federal tax credits that can reach a combined total of $18,000, said Paul Habibi, professor of real estate at the UCLA Anderson School of Management.
When projects like the Americana at Brand and the Burbank Collection are completed, the developers’ obligations to pay off banks or investors can grow exponentially if sales are slow, Habibi said.
In that case, developers have only two options, he said.
“They can either unload [units] into the for-sale market, albeit at a discount, or they can unload them into a rental market,” he said.
Some recent area developments have already abandoned the condo market in favor of leasing apartments.
Glendale’s 416, named after its address at 416 Broadway, converted all of its 115 residential units to rentals in January. And Verdugo Village, at 1717 N. Verdugo Road, took the same route with its 126 newly constructed units last month.
But the Excelsior and Burbank Collection properties opted to wait out months of slow sales in an attempt to draw eager home shoppers with bargain deals as the market begins to show signals of rebounding, sales representatives said.
Lilanya Curtis, community sales manager for the Burbank Collection, hoped a recent string of sales would bring an end to a roller coaster of a year for the development.
The 118-unit property was 90% sold before the financial crisis began in the summer of 2008. Since then, all but 25 of those sales fell through, Curtis said.
Representatives had no success with sales until mid-April, when the developer cut prices, she said.
