The firm now relies on presales, and has yet to start construction on the condo, which is a conversion of an old warehouse.
In our particular case, there was a tightening up of lenders' standards from when we started discussing financing with banks," said Belew, noting that Fifth Square was able to secure an acquisition loan for the Steelworks property, but that its lender is requiring presales for a construction loan.
While Belew would not say how many presales the bank was requiring in order to dole out the construction loan, he noted it's "not a large number" of the total number of units slated for the project.
The presales for Steelworks involve prospective buyers putting down deposits of 10 percent for the units.
Another developer, Muss Development, is also using presales.
Jason Muss, a principal at Muss Development, said presales on the second tower were driven more by demand than lender requirements.
Muss said that the sales center for Sky View has spurred presales.
We've found the center really helps with presales because it gives people a real idea of what this huge project is going to look like," Muss said.
He said presales "make sense" for large-scale projects, and that the firm used them for its Oceana development on Brooklyn's Brighton Beach, a 15-building, 865-unit gated community built in the late 1990s.
With Oceana, people who bought presales got a better value than buyers who waited until we completed construction," he said.
Fitch believes that while start-up CCRCs do not possess the credit profile to be rated in the investment-grade category, the development, finance, and construction team and the good
presale and low cancellation rates should allow Santa Marta to succeed.
