Waterfront developers taking the long view
Developer Joseph DiGangi credits Kevin White for the epiphany he had about Revere six years ago.
In a nod to Boston's former mayor and his role in the transformation of the North End in the 1970s, DiGangi is convinced Revere has made itself attractive to upscale developers in much the same way that Boston's waterfront did 35 years ago.
The difference is that today's weak market has led to record-high foreclosures, auction sales of condominium units, delays to long-awaited developments, and dropped project plans.
But despite the real estate slump, DiGangi and other developers say there is a future in Revere and other waterfront communities like Chelsea and Winthrop for upscale developments.
In Revere, construction of the Ocean Club, an upscale condominium development of 242 units, will begin next month. Even though the project won't be completed for two years, 41 percent of the units have been presold, said developer Steven Fustolo. In Winthrop, the Atlantis Marina luxury condominium and marina development has sold 25 out of 44 units, including two for $1 million, said Bill Swanson, project manager for the developer, RCG.
Swanson said developers are creating a luxury market outside of Boston for people who still want to be close to the city but have been priced out, or those who want to leave the urban lifestyle for ocean views.
"The bedroom communities changed the zoning to get condos built," Swanson said. "The communities are boosting the economy for this type of development once they adopted the mixed-use concept. Now you're getting high-end buyers purchasing at 30 to 40 percent discount than what they would get in Boston."
For the most part, luxury condominium developments have been able to withstand previous sluggish markets, but this time even the Boston market is showing signs of fatigue. Financing snags might have put the skids on the $800 million Columbus Center project over the Massachusetts Turnpike, luxury condos at the Longwood Towers in Brookline are scheduled for a foreclosure auction next month, and a Boston developer cited the economy for his decision last week to drop plans for luxury condos on Commercial Street in the North End.
DiGangi, whose firm, Eurovest, voluntarily auctioned off 15 of 20 unsold condominium units at the Atlantica on Revere Beach, said the city piqued his interest when he saw government officials taking steps that would affect future demographics, such as planning for new schools, a new police station, addressing flooding problems, and designating the beach as a national historic landmark.
"This is what is happening in this community - education, safety, quality of life," DiGangi said, noting projects already at, or slated for, Revere Beach. "When you go back and think of the North End, it's a walking community, and because Revere Beach is a walking community, you can put in the Ocean Club, the Atlantica, the Eliot Circle development, our development, Waterfront Square. Now you're creating that walkable neighborhood that attracts the merchants."
DiGangi said company officials initially intended to bring all 20 of the Atlantica's remaining units to the auction, but cut it to 15 based on the number of registered auction attendees. All 15 were sold for an average of 18.2 percent off the original asking price, which ranged from $300,000 to $460,000, he said.
Of the remaining five units, DiGangi said, two have been sold since then at prices higher than auction. Based on the interest, DiGangi said six ocean-view, developer-owned units that are being leased will be put back on the market.
"We feel strong about what we did, the market value that we set," said DiGangi, whose company is also developing Waterfront Square, the $500 million, mixed-use project that will connect the MBTA's Wonderland station with the beach and surrounding communities and that served as the model for the state's announcement on transit-oriented development.
While luxury condo sales may be slowing down nationwide, luxury as a niche north of Boston is doing well even in this down market, Fustolo said, adding that his is one of the few developments of its type able to get financing.
Insisting that he is not being overly optimistic, Fustolo said that five to 10 years from now, there will be more luxury development in Revere and, "we will say, 'I told you so.' "
Winthrop-based real estate consultant John Vitagliano said lenders are being cautious, even with prime waterfront developments. Revere developments are being helped by the recently completed, state-funded, $11 million beach improvement project.
"Very few isolated upscale developments are getting financing," Vitagliano said. "With the severe collapse of the real estate market these days, and it continues to plunge, the financing isn't there anymore, except in extremely limited cases."
It's not just Revere that is attracting developers. In Winthrop, the developers of Atlantis Marina are planning the Crystal Cove project along Shirley Street, which may feature more than 100 condo units, a health club, and a harbor walk. Other planned developments include luxury condos at the site of a former school and a condo conversion at the former Winthrop Hospital.
Developers are going to Chelsea to build affordable residential projects, but also state-of-the-art, "green" developments, such as the Parkside Commons rental units, and the Forbes Park development, which recently erected a wind-powered turbine in the old industrial site.
Lorri Krebs, who teaches economic geography, travel, and tourism at Salem State College, said the combination of progressive thinking by government officials and community leaders and a desire to bring developers to the table accounts for the increase in the type of upscale development that attracts the desirable young, urban-professional market.
But the biggest factor is the proximity of each locale to Boston, Logan International Airport, public transportation, and the water.
"That's why a lot of them are holding their own, like Salem, Beverly; the house prices have declined somewhat, but they've held their own because they're along the water," Krebs said.
"I know Revere is pumping in money; they've hired someone in tourism to redevelop their beachfront.
"It's the lure of the water and the vision of what it's going to be in five to 10 years. That's a big draw for people."
Jai Singh Khalsa, president of Khalsa Design Inc., the architectural firm behind many of Winthrop's new developments, including Atlantis Marina, said there are differences in each community's waterfront.
"Part of the difference is that Winthrop is an oceanside community, and you have a lot of waterfront uses because you have a lot of protected coves," he said.
"In Revere, you have the oceanfront, a long, nice, imported-sand beach, but you don't have the protected coves and smaller areas of the ocean, so it's a different type of experience of neighborhood as well."
Khalsa said past risk-takers deserve credit for paving the way for upscale development in the area.
The construction of Admiral's Hill in the 1970s proved that Chelsea was ahead of its time in attracting that waterfront condo market.
In Revere, the numerous failed attempts to transform the beach's image served as an educational tool for developers and city officials alike, he said.
"It used to be a knee-jerk reaction that an auction meant distress," Khalsa said. "It doesn't mean that anymore. It's a viable and valuable marketing tool.
"Waterfront is always going to be at a premium because God only made so much water, right?"
Katheleen Conti can be reached at kconti@globe.com. 