Builder revises condo project

Plans for The Lafayette are delayed; it could have fewer condos and more hotel rooms

RALEIGH -- A 22-story hotel-condominium tower proposed just south of the city's new convention center could be delayed as long as five months as the developer tweaks plans to protect itself in a shifting real estate market.

Empire Properties of Raleigh got city permission to reduce the number of condos and add boutique hotel rooms to The Lafayette, which is planned for a 0.51-acre city-owned lot bordered by Salisbury, Lenoir and South streets.

The building now could have as many as 200 hotel rooms and as few as 20 condos when it opens by May 2010, five months after the previous target. It previously was allowed as many as 150 hotel rooms and as few as 40 condos.

Greg Hatem, Empire's managing partner, said designing the project has taken longer than expected, as has environmental testing on the former gas station site.

The schedule and scope changes required the blessing of the city, which agreed to sell the land to Empire for $1.44 million if the developer met certain development deadlines.

An amended agreement, approved this week by the City Council, requires construction to start before November. If not, the city will seek another developer, Mayor Charles Meeker said.

Meeker doesn't have much in the way of precedent. He has supported development-agreement extensions for several projects, including those for a proposed 25-story tower at Hillsborough and Dawson streets. Construction on that project, which was conceived in 2001, has not begun.

Meeker stressed urgency, however, in the case of The Lafayette: The convention center opens this year. "We need the hotel rooms there ... [because of] the convention center and all the bookings that are coming in," he said Friday.

Long-term projects typically go through design changes as market demands shift. The Lafayette initially was to include an 80-room hotel with 40 condos. It was later expanded to 150 hotel rooms and 80 condos.

In September, when downtown-office demand was particularly high, Empire added 13,000 square feet of offices to the $85 million mix, the developer's most ambitious project.

Harder to get financed

Hatem said he still expects the building to include 150 hotel rooms, 80 condos, the offices and ground-floor shops and restaurants. But it was important to build more flexibility into the plan, he said, as commercial lenders become more cautious about financing projects that include condos.

"The fundamentals of the Raleigh market are strong," Hatem said. "I think the banking environment might be what's skittish. The national trend away from financing condominium projects is a reality."

Last year, 117 condos were sold in the center city, down 8 percent from 2006, according to Downtown Raleigh Alliance data. About 100 units were added to downtown's stock of 550 condominiums last year. At least 600 are under construction.

Adding hotel rooms would be a safe alternative, considering the project's proximity to the convention center.

The project, which would compete with other proposed hotel and condo buildings, would have valet and concierge services and a 200-seat restaurant, rooftop swimming pool, bar and glass elevator. Some suites will be able to accommodate 35-person cocktail parties.

The condos, which could go on sale by June, would cost $450,000 to $1.8 million. They would range from 950 to 3,500 square feet.

Empire has become downtown's biggest landlord in total properties owned, snapping up and renovating dozens of small buildings that line center-city streets. The Lafayette would be Empire's second from-the-ground-up project.

The company is building The L Building a few blocks northwest of The Lafayette. Construction on that 133,000-square-foot office building is to finish in 2009.