Paterson, N.J.—While other condo developments languish around it, the Condominiums at Cooke Mills are still selling well, thanks to relatively low prices. The developer employed all the tricks in the book to keep costs down and build a project that met the region’s large market for workforce housing.
By early August, half of Cooke Mills’ 20 condominiums were under contract to sell. That’s just two months after the project was completed—fast sales for a slow market where developers typically do not pre-sell units.
The condos range from a $195,000, 620-square-foot, one-bedroom unit to a $412,000, 1,509- square-foot, three-bedroom unit. The average price is $275 per square foot, said Michael Antuono, a partner with developer Silk Mills Ventures.
Cooke Mills is priced to sell to singles earning $50,000 to $60,000 a year and couples earning $60,000 to $70,000, said Antuono. These buyers can hardly afford the more expensive condos now languishing unsold in Northern New Jersey, where comparable units are now priced from $400 to $500 per square foot, said Annemarie Uebbing, vice president and regional director for the Community Preservation Corp. (CPC), lender to the project.
Some of these Northern New Jersey condo projects recently cut their prices by up to 10 percent as sales slowed, Antuono said.
Silk Mills spent about $5 million to create the condominiums at Cooke Mills, or about $250,000 a unit. To keep costs low, the company gambled that some construction costs would fall as the condo market softened. Silk Mills could have locked in all of its construction costs when it closed its construction financing in 2005. Instead, it kept taking bids to paint and finish the units through August 2006, as prices for this work dropped.
“We basically strung a few guys out,” said Antuono.
Silk Mills also paid just $850,000 for the old vacant building, compared with prices of $1.1 million or more for comparable buildings in surrounding towns.
“The back of the building was collapsing,” said Antuono. “There were trees growing out of the middle.”
Silk Mills constructed 15 units as part of a new addition and created another five as part of the renovation of the old building.
To cover the $5 million development cost, Silk Mills used its own equity plus a two-year, $4.3 million construction loan from CPC with an interest rate floating at 380 basis points over the London Interbank Offered Rate.
Silk Mills expects to reap a yield of between 10 percent and 20 percent on its investment in Cooke Mills, on par with other workforce developments financed by CPC.
By not aiming for the wealthiest buyers, Silk Mills gave the project a wider pool of potential residents, and more chances to succeed.