New condos selling at a loss

The developer who rebuilt Windsor's old downtown as a showcase community for live/work design is now being forced to sell condos at a loss to keep the pioneering project moving forward.

The discounts are helping builder Orrin Thiessen clear a backlog of unsold condos, a task that must be completed before lenders will give him money to start the next phase of the Windsor Town Green project.

Despite the worst housing slump in his 35 years as a builder, Thiessen remains optimistic that he will obtain funding to put up a 15-unit building next year. That would leave construction of a final 10-unit building to complete Sonoma County's most prominent mixed-use project, which combines commercial and residential units in the same space.

"Lenders just don't want too much inventory. Once we get the inventory down to the last few units, then they will probably let me start the next one," Thiessen said.

Thiessen Homes and other developers have been forced to slash prices and delay construction to survive a housing downturn now in its fourth year.

Like Thiessen, a growing number of developers must sell homes for less than they spent on land and construction costs, said Nick Dunlop, a longtime Sebastopol appraiser who tracks sales and price trends across Sonoma County.

"They're having tough times. They keep dropping the prices. They have to move them. The carrying costs are huge and they've got bank loans," Dunlop said.

Lenders must approve one type of discounting, known as a short sale, when it means they will receive less money than a builder owes on a construction loan. With foreclosures soaring to unprecedented highs, lenders are increasingly willing to make deals with borrowers to avoid the risk of bigger losses in the future, Dunlop said.

"It's just budgeting. They (the homes) are going to be worth less tomorrow, so let's get rid of them today," he said.

With urging from one of his lenders, Thiessen slashed prices on residential condos at the Windsor Town Green in July. The lender agreed to take less than Thiessen owed on 11 residences to help clear a backlog of unsold condos, he said.

"We had a lot of inventory and the bank said we need to clear some of this out," Thiessen said. "We weren't behind on our payments, but everyone realized we were behind on our sales. Things were kind of frozen there for a while."

Before the latest price reductions, Thiessen was selling about one residential condo a month at Windsor Town Green. Now, he has sold all but one of those condos, at an average price of $330,000 -- about $20,000 less than what it cost to build them.

By generating greater buyer interest, Thiessen sold an additional dozen condos at prices down more than 25 percent from a year ago, he said.

Housing's wide swings have taken Thiessen for a roller coaster ride with the Town Green project. He sold the first condo in 2001 as home prices began soaring to record highs over the next four years. The subsequent fall in prices has been dramatic, but Thiessen has not pulled the plug on the project.

"You can't just walk away from this stuff. You would be out of business," he said.

Thiessen, a builder whose specialty is historic renovation, has become a local leader in the movement to combine residences, retail spaces and offices in the same buildings. The goal is to get more building on less land and encourage residents to live closer to where they work.

With the Town Green to wrap up and other mixed-use projects in the works in Occidental and Forestville, Thiessen said he is doing what he can to survive the housing downturn.

Aiding his efforts is steady demand for retail and office space, either for sale or lease, at Windsor Town Green.

"The commercial is carrying us. We're selling commercial properties and keeping things going to get us through these hard times," he said.

Of the 100 commercial condos built at the Town Green, all but nine have been sold or leased.

On the residential side, 172 condos have been built, nine have not been sold, and another seven are under construction.

You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.