Empty condos providing new dorm space

PROVIDENCE, R.I. River views, granite countertops, stainless-steel appliances, 9-foot ceilings. This is student housing?

When classes start this fall -- if all goes as planned -- about 300 students at Johnson & Wales University will be living in Capitol Cove, an upscale condominium project that had been languishing on the market.

"It's a great Band-Aid," said Irving Schneider, president of Johnson & Wales's Providence campus, which just signed a three-year lease for the Capitol Cove development. "This arrangement was good for the developer as well as Johnson & Wales."

Some universities around the country have found a silver lining to the real estate recession that has left condominium developers in the lurch. For less time and money than it would take to build a residence hall, universities in places including New York City and Ohio are buying or leasing entire condo projects.

For developers, such deals save their projects from being total washouts. The arrangements offer developers an exit strategy from flagging projects, allowing them to unload dozens of unsold units to a single buyer rather than piecemeal.

"They can't sell them, they can't mothball them, they can't bulldoze them," said Jack McCabe, a Florida-based real estate analyst.

Sales of condos in April were down 9 percent from year-ago levels and are off 46 percent from the frenzied peak in June 2005, the National Association of Realtors said this week.

Developer Robert Roth has built only one of five buildings planned for Capitol Cove's 5-acre site.

He began marketing the condos last fall for between $350,000 and $550,000 but got no sales.

Students at Johnson & Wales University will pay yearly rents of $10,383 for one-bedroom apartments and $9,249 for two-bedrooms -- comparable prices to on-campus dorms.

In New York, Columbia University last year paid $67.6 million for a residence hall for graduate students and staff in the Riverdale neighborhood of the Bronx after a planned condo development couldn't sell out.

In Ohio, Capital University bought a 30-unit building for $4 million in suburban Columbus that had been marketed as 55-and-older housing but is now reserved for about 60 upperclassmen.

Nichole Johnson, a Capital University spokeswoman said the deal made financial sense: The cost per bed at the new building was $65, compared with a $93-per-bed cost at a dorm that opened in 2006.

Back in Rhode Island, Roth said he intends to retake Capitol Cove in three years -- though the university has an option for an additional two years -- and resell to private buyers, hoping the market will have improved by then and that young professionals won't be turned off by living in former student housing.

-- The Associated Press