Irvine Co. Gives Tenants Rent-to-Buy Incentive : Housing: The plan offers credits to current and future apartment residents that can be applied to condo purchases.
In an effort to speed sales of its already fast-moving condominiums and increase demand for its rental units, Irvine Co. is offering residents of its apartments as much as $3,000 credit if they purchase one of the company’s condos.
Details of the plan were mailed late last month to residents of the giant land developer’s 11,000 apartments in Irvine, Newport Beach and Tustin.
Though this is the first time that the Irvine Co. has offered cash incentives, programs aimed at luring new-home buyers with price discounts, below-market financing, even free cars, swimming pools and vacations are nothing new in an industry that has seen annual sales drop by more than 50% since the recession began in mid-1990.
The so-called renter equity plan gives current and future tenants in any of the Irvine Co.’s 42 apartment complexes a credit of $250 for each month of residence up to 12 months or $3,000. The credits can be applied to the purchase price of any condominium in the five apartment complexes that the company converted to condos last year.
Prices of the units range from about $85,000 for one-bedroom, 575-square-foot units in the Tustin Ranch planned community to $450,000 for a three-bedroom, 1,820-square-foot townhome unit on the golf course in the gated community of Big Canyon in Newport Beach.
If unrelated roommates share an apartment and both names are on the lease, each person can receive the same credit if each uses it for purchase of a separate condominium, said Susan Dyer, Irvine Co.’s director of residential properties.
“Married couples could do it too,” she said, “so long as the husband and wife each bought different units.”
Last week’s mass mailing hasn’t generated any sales yet, Dyer said, but a number of renters have called the company’s leasing office to find out how to qualify.
The condo units are in five former Irvine Co. apartment complexes that were converted to for-sale condominiums between September, 1991, and January, 1992.
As of Tuesday, nearly half of the 1,323 units in the complexes had been sold, with 732 remaining on the market--many of them still occupied by renters and not yet upgraded for conversion to condos.
That sales pace of more than 10 units a week in the midst of a recession earned each of the developments a place high on the list of the best-selling residential projects in Orange County last year.
But the Irvine Co., which must pay the monthly condominium association fees for all unsold units, as well as the continuing costs of retiring the construction loans on the five complexes, wants to sell them even faster. The equity program “gave us a chance to get the word out in a direct mailing to 11,000 of our own renters,” Dyer said.
Only residents of Irvine Co.-owned apartments qualify, she said, “because we wanted to do something for people who already are renting from us.”
The rent-to-buy feature that extends the offer to future Irvine Co. apartment renters also provides Dyer’s division with “an incentive to offer people looking for an apartment to rent one of ours instead of one of William Lyon’s,” she said.
William Lyon Co., based in Newport Beach, is one of the few builders to open new apartment complexes in Orange County in the past year.
While the countywide apartment vacancy rate is hovering at 6%, according to a 1992 survey by the Apartment Assn. of Orange County, Dyer said the Irvine Co. has a lower rate: 3% to 4%. Still, that means the company has at least 300 to 400 units standing empty at any given time. In a market where rents have stayed flat for more than two years, company officials undoubtedly would be happier if that vacancy rate was back at the 2% level that prevailed in the booming 1980s.
Dyer said the company can offer the rent-to-buy incentive to future renters because it will not be able to sell out the five projects until next year, at the earliest, unless the recession ends sooner and a local recovery proceeds faster than economists and business executives are predicting.
Although originally built as apartments, each of the five complexes was developed to condo standards and “mapped,” or registered, with the appropriate local government agency as a condo project, Dyer said.
“We have been building most of our apartments to condo standards since 1989,” she said. Five other Irvine Co. apartment complexes also are mapped as condo projects, Dyer said, even though the company has no plans right now to turn them into for-sale condos.
Building to condominium standards, which typically require more parking space and involve use of higher-quality fixtures and appliances than typical in apartments, gives the company the flexibility to convert the rental units if it chooses to do so. The condo status was disclosed to residents of the five complexes in their leases, she said.
In the five projects being converted, the process generally involves painting, making minor repairs, replacing broken or worn out fixtures and installing new carpeting or other “upgrades” as ordered by the buyer.
