Friday, Sept. 5, 2008 | The biggest residential building ever to be built in downtown San Diego will celebrate its topping-off early this month, as construction teams pour concrete for the top floors of the building. And soon its construction crane, one of the only ones left in the air downtown, will come down.

The achievement at Vantage Pointe, a 40-story project comprising 679 residential units and some retail and commercial space, is an extremely rare one in the slumping downtown real estate market. There are already so many unsold condos on the market that the supply could last for several years, a reality that has halted construction in places and has sent developers back to the drawing board to change emphases of some projects from for-sale to rental or hotel space.

With the imminent addition of hundreds of more condos to the supply in the city core, market analysts have affixed their eyes to the project, which encompasses the entire block between A and B streets and Ninth and Tenth avenues. They see the project as a kind of bellwether for the downtown market, which is experiencing acute troubles after a period of great growth and revitalization.

“This is the project that everybody’s looking to see what’s going to happen,” said Robert Martinez, director of research for MarketPointe Realty Advisers. “It could be a giant success story, or it could be a disaster.”

Vantage Pointe is a colossal project. It has far more units than any other condo building in downtown San Diego. It represents a bold, unprecedented effort — to build nearly 700 units in one building amid a market in the throes of a downturn. One veteran real estate analyst said the $210 million construction loan for the project was probably the biggest private sector loan for a single building in county history.

The sales team reports that 289 buyers have signed contracts and paid $5,000 to reserve a unit at Vantage Pointe. There are nearly more units still unspoken-for at Vantage Pointe — 390 of them — than exist in total at The Grande twin towers on Pacific Highway, the next largest project in downtown with a total of 442 condos.

Some of those Vantage Pointe buyers have been waiting a long time to move in, many having first placed dibs on their units in the heady days of spring 2004. The project encountered several delays after breaking ground, including discovering contaminated soil, said Brian Stoddard, the president and chief operating officer for Calgary-based Pointe of View, the building’s developer.

Still, buyers reserving in 2004 imagined gazing at the views from their new living rooms by late 2006. Now the developers say the building will be ready for move-ins in mid-2009. In the meantime, downtown’s real estate market has gone from frenzy to slump, with sales slowing, prices falling and foreclosures representing a significant portion of what’s selling every month.

Brad Willis, one of the first people to reserve a unit in the building, said he and other potential buyers may seek discounts when they move in, but that in general, he understands the developer’s situation.

“They don’t control the real estate market, and that’s a given,” he said. “But from ’06 to ’09 — that’s a pretty substantial delay. … I’m guessing that most people who are still in the game are a lot like me. They want to live downtown, they want a fair price, that given the slow market, that this is going to turn out OK.”

Willis has deposited $5,000 to reserve his one-bedroom unit on the 31st floor, for which he’s committed to paying $330,000. He’s a homeowner already but wants to move downtown. Many new projects typically see some buyers lose their deposit in a change of heart. Some may choose that route rather than paying for the unit they’ve reserved, especially when they’re nervous about the market.

The delays and market conditions have wreaked a sense of nervousness among future buyers and on-the-fence prospects, about 180 of whom belong to an online community Willis started to connect with his future neighbors. The group has given the buyers a “somewhat more unified voice,” he said — a potential bonus as future Vantage Pointe owners seek answers to their questions about issues like amenities and the funding of their homeowners association.

Randy Klapstein, CEO of Pointe of View, said the developer will work with the buyers, but might not be able to lower prices past the point they committed to sell the units for already.

“I don’t know how much lower they want us to go,” he said. “We obviously care about them, but they have to care about us. If they think that a developer can actually build at a loss, then that’s not going to work. They have to realize that … in a lot of those cases, we’re in a very low margin.”

In the planning phase, the project was touted as an icon for density as downtown developed as a residential neighborhood. Sales at the building began with a blitz one weekend in March 2004, when 337 units — half of the building — were reserved in one day. Buyers stood in line, excited, their refundable $5,000 deposit in hand. While they waited, a projector broadcast a list of the units being snatched up by buyers.

“At one point there was almost a fight,” said Willis, one of the first people in line that weekend. “I had two fellas in line in front of me and there was some debate about who was first, and I stepped in and I said, ‘Hey guys, chill out.’ It was really kind of a frenzy.”

It was a such a frenzy that some buyers were turned away because the developer didn’t want to sell more than half the building in one day, said Donna Lutz, who’s been managing sales for Vantage Pointe since the beginning.

The project is built in three attached towers. One is 10 stories high and has a lap pool on its roof, one is 26 stories tall and one is 40 stories. The 1,000 parking spots for the building are underground. Homeowners association fees are expected to range between about $442 and $586 per month. On the 390 units yet uncommitted to buyers, prices range between $358,000 and $1.365 million. As an incentive, the developers have started offering a 7 percent discount that can be taken from the price, or used to upgrade features like counters and appliances.

The size of the building isn’t the only characteristic of Vantage Pointe that is unprecedented in San Diego. Last year, the developers announced netting a $210 million construction loan, most likely the largest private sector loan for a single building in county history, said Alan Nevin, chief economist at MarketPointe.

That such a bold project would be built in such uncertain market conditions has some analysts and developers scratching their heads.

“You just typically don’t build 650 units in one project, even in very optimistic times,” said Peter Dennehy, vice president of Sullivan Group Realty Advisors. “And definitely it was being started at a time when the market was recognized as being — mature.”

Though Klapstein acknowledges the difficulties in the San Diego real estate market, he said he’s hopeful the project will be fine.

“We’ve always felt like our development was well-positioned in the market — an overall development that was a good concept,” he said. “We’ve always felt quite strongly about it and confident that we were going to make it work. … Time will tell.”

After that first weekend blitz in 2004 netted 337 reservations, about 120 of them asked for their deposit back when it came to sign a contract in 2005, a fairly typical event in the days when buyers placed deposits on units in more than one project at once to choose from later.

About 220 stuck around and signed full contracts to buy, meaning the $5,000 deposit was no longer refundable. Now there are a total of 289 committed buyers, representing 43 percent of the building, Lutz said.

“In this kind of market, the project hasn’t had the big drop-off in contracts that you would expect,” Martinez of MarketPointe said. “You would think people would be bailing out, but they’re still holding a significant number of their contracts.”

“There’s a lot of concern about what’s going to happen when the building finishes construction,” Martinez said. “It constitutes the bulk of the inventory downtown; that’s where most of it sits.”

Stoddard saw that as a good thing — the chance to capture a majority share of the consumers looking to buy downtown real estate.

“If somebody wants to buy a unit downtown, I’ve got a 50 percent chance of selling mine to them,” he said.

Klapstein said the company was attracted to San Diego’s weather and water views.

“The weather is perfect, there’s a small-town feel,” he said. “It’s definitely one of the better places in North America.”

Stoddard said he’s heard surprise at every stage with this project — breaking ground, building 10 floors, 20 floors, soon opening the doors — and isn’t swayed, especially as construction comes close to completion.

“The naysayers are saying, ‘I can’t believe it, I can’t believe it,’” he said. “Well, believe — it’s standing right in front of you. It’s not an illusion. You can look up at it.”

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