June 19, 2009
Lease. Own. Evolve. (Which Shouldn’t Have Come As Any Surprise)
The Millennium’s new "Lease. Own. Evolve." campaign shouldn’t have caught any plugged-in people by surprise. It’s the rental program we broke the news about in May. As we wrote at the time:
Less than 10% of the building is expected to be made available for rent, with target rents ranging from around $3,500 to $15,000 a month and the majority in the $10,000 to $15,000 range.
As their campaign now officially outlines: "Lease monthly for $3,500 - $15,000."
And while we added a comment about the official program to our May post a few days ago and figured that would do the trick, we were rather wrong. Since then we’ve received more tips and inquires about this program than any other (considering our readers' demographics, however, perhaps we’re the ones that shouldn’t have been surprised).
We’ve received pdfs of scanned snail-mailers (cheers). We’ve received forwarded email announcements (cheers). We’ve received cut and paste copy and reader’s summaries (cheers). And we’ve received links to the program’s website (cheers).
We’re not complaining. We simply underestimated our readers’ interest. And as such we offer this post and discussion redux. Cheers.
First Published: June 19, 2009 7:30 AM
Comments from "Plugged In" Readers
My wife and I talked with a Rep and are touring this weekend. The pricing SS has is close according to what we heard on the phone. Even though we all know the Millennium has a 20% + premium over other SoMa condos, we still think this proposal is pretty nice (1/2 rent going towards down payment later).
Posted by: Jim at June 19, 2009 8:55 AM
I am only a few days from going through with this as opposed to buying from Infinity. Does anyone have any experience with lease to owns that they would like to share?
Personally, I don't really care about the lease to own price being protected. I have no intention of purchasing at the "protected" FMV price I can exercise the option at. I will negotiate it down when the option expires or walk away. However, I really like the particular unit and want to hold it for a year to test it out.
My other question is about discounts from the Millenium. I had a real hard time trying to figure out what kind of discounts we could get from them. Looking online at sfgate.com the prices do not seem too much off from asking prices. Is there a way that those listed sales are inaccurate or that they only include the ones that received a favorable price (for them)?
Posted by: renter/buyer at June 19, 2009 9:31 AM
FYI, $3500 is for a 688 sqft 1 bedroom...probably in a lower floor...IMHO not the best deal.
Considering 1/1's are going for 2000-2500 range in that area of SOMA, the lease-to-own is really a gimmick designed to get the developer some cash flow while the building is empty.
Even if 1/2 is going towards your down payment ($1750), what you're really doing is paying a slight discount on the rent, and sending the rest of your deposit to the developer in case you want to buy.
The only persons who benefit are:
1. those who want to live in that building eventually
2. think they are getting a good option price today
3. don't want to fork the down payment now.
I don't imagine the market is big for those who have all 3 checked off.
Posted by: Rincon Hill Billy at June 19, 2009 9:42 AM
It's a losing deal for the buyer. It will have been an expensive rental if you walk away at the end. If you decide to buy, it'll be harder to bargain since you have tens of thousands to lose if you walk away, and they know it. I'd just rent one at the market rate and then buy one there if I like it.
Great idea for Millennium though, given all those units sitting idle. This program not only generate marketing interest, it also brings in income.
Posted by: Fishtarian at June 19, 2009 9:54 AM
Thanks for the input Rincon Hill Billy. I know that SOMA 1 bedrooms are around the 2000-2500 range. However, looking at craigslist the Infinity units I see are close to the 3000 range. I don't mind paying an extra 6-8k to try out the goods before I live there.
Also, for a 600-700 sqft bedroom I was quoted 3000 with parking included. I was quoted 3500 for a more desirable unit still 1 bedroom.
Posted by: renter/buyer at June 19, 2009 10:05 AM
beware of the fine print in the millennium tower rules & regulations:
None of your guests can use the gym / pool, etc:
"If a Residential Unit is rented, only the tenant as the Unit’s occupant may use the Club Level facilities."
Watching a movie with some friends will cost you $250:
"A non-refundable cleaning fee of $250.00 will be assessed for each special event."
You can't move in or out on weekends:
"Moving hours are between 8:00 a.m. and 5:00 p.m. Monday through Friday excluding legal holidays"
Posted by: jduncan37 at June 19, 2009 10:12 AM
This reminds me of the car salesman's mantra:
There's an ass for every seat.
Posted by: OneEyedMan at June 19, 2009 10:14 AM
What are they asking for a 2/2 in this building? Does anyone know? What percentage of the building is still unsold? Thanks!
Posted by: jd at June 19, 2009 10:21 AM
I was quoted $980k for a 2/2 on a lower level on the phone. Obviously, that price doubles on the higher floors. I did not ask about a 1/1....
Also, I have some friends that purchased/live in a unit on a high floor. They say they really love the place...but I did not talk with them about pricing (too personal). They say about 10-15% of the units are sold to date.
Posted by: Jim at June 19, 2009 10:27 AM
Posted by: jd at June 19, 2009 10:30 AM
I give this Triple E Rating
Barring Corporations putting up their over-paid and under performing CEOs, CFOs, who in their right mind would rent at 10 to 15K a month when they can drop that on a mortgage payment on a million dollar home w. 20 percent or more down... ??
Posted by: Chad at June 19, 2009 11:08 AM
I hate to be dense here but is Lease.Own.Evolve. high end marketecture speak for rent-to-own (or for the finance types, lease with an option to purchase at the end of the term). I've not actually seen the lease with purchase option on their website (or did I miss it?); it's only SS posters that have mentioned it. Have they resorted to speaking in code words to mask desperation?
Posted by: EBGuy at June 19, 2009 2:17 PM
@ EBGuy--use the second link above...the offer doesn't appear on their regular website, but the website accessed by the above link includes a link to their regular site.
Posted by: jd at June 19, 2009 2:46 PM
I'm going to go Lease.Own.Evolve. me a new T.V. and sofa down at
Rent.A.Center. this weekend!
Posted by: Stu at June 19, 2009 4:37 PM
I think you're on to something there. Anyone with a bit of common sense would compare the rental prices and the asking sale price and would find out that owning wouldn't be a bad option after all...
That's stealth sales marketing I think. Make the overbloated wish price look better by showing you an overbloated wish rent.
I like the fact though that 1/2 of the rent goes into a downpayment. The question is: what will be the sale price? Is it set in advance of will it be the future market price? By having cash locked in a downpayment (it will be use it or lose it I guess) you'll be more pressed to "save it" by purchasing. Tricky decision depending on the condition.
Posted by: San FronziScheme at June 19, 2009 5:11 PM
use the second link above
Thanks jd, you think I could read the copy :-) I just reread it and there is is in blue & white: Our flexible terms and customized leasing programs make it easy to acquire one of our three unique residential styles. Textbook Robert Bruss advice.
Posted by: EBGuy at June 19, 2009 6:13 PM
People has been using lease to own sale tactic since the beginning of time. How can that possibly work out ? Say you paid $3500 a month for a low floor no view 680 ft 1/1 and lived there for two years. You paid out $84k and has a $42k credit for "down-payment." When come time to buy in 2011, the asking price for the 650 ft 1/1 is $650K and they refuse to reduce the price. So you are buying the no view 680 ft 1/1 for $608k. Is that a bargain ? Plus side: 1. It's the Millenium. Minus side: 1. You paid $4k a month for a tiny 1/1 for 2 years. 2. Insane HOA 3. No deeded parking 4. Terrible location - Think 42nd & Broadway (Time Square) 5. Most banks will NOT finance mixed rental-owned buildings.
As a comparison, you can probably buy the same size no view 1/1 at The Infinity for $450k and can deduct another 100k if you sell the deeded parking back to the developer. So a tiny, no view 1/1 at The Infinity with no parking for $350k compared to a tiny, no view 1/1 with no parking at The Millenium at >$600k and at least $20k overpayment on rent...
Posted by: GoodEarth at June 19, 2009 6:58 PM
Since when is rent to own a gimmick for the high end? Shouldn't this be reserved for people who can't afford a $300 couch? Seriously? Are they that deluded? Open your eyes, realize you're in a terrible market, dump the units, move on to the next (hopefully) profitable project. They're only going to lose more money trying crap like this. Dump 'em and go. When I say dump 'em, I mean dump 'em. $400k for a 1BR. $500k for a 2BR. Cut your losses, build up the massive tax credit and move along. These developers might have excelled at architecture but failed intro finance.
Posted by: scurvy at June 19, 2009 9:13 PM
So I guess no one has any info on actual sales prices for Millenium. I wish the Millenium owners were as forthcoming as Infinity owners.
Does anyone know how the sales prices depicted on sfgate.com are calculated? Are they accurate or can the Millenium team just submit the high prices and hide the low prices where the buyers got a discount?
Posted by: renter/buyer at June 21, 2009 10:23 PM
I chatted with a Salesperson at Millennium this weekend and scoped out a few units. To answer some of your questions:
1. Only a "small portion" of the building is available for "lease-option-to buy". My guess is 10% (on top of the 10% which are already purchased).
2. There are at least 3 types of 1 bdrm plans ranging from 600 sqft to 1800 sq ft. Most of the 1 bdrm plans are on the lower half of the building. Surprisingly, some have pretty good views.
3. 1 bdrm starts at $3000/month lease (for 1 year). Parking is $155/month. However, most of the 1 bdrm are much higher than $3000! For purchase, you are looking at $700k to $2M depending on size and floor.
4. Since anything over $1M is way over my budget, I did not inquire about 2/3 bdrm or higher floors. However, their salesoffice is on the 55th floor with impressive views.
Bottom line, this really is a premier property. Both the units and the shared facilities/services are top notch. If someone is already paying comparable monthly in rent and wants to see how the market is going to be in a year, this lease option really is something to think about. Yes, it is expensive, but it depends on what type of lifestyle you want.
Posted by: Jim at June 22, 2009 8:17 AM
For the lease option to make any sense, you would have to believe that prices have started rising or at least stabilized.
At the end of a 1 year lease, they are willing to credit about 1.5% of the unit's price towards the down payment. If you believe that the prices, in a year, will be lower by more than 1.5%, the lease option is worthless. I wouldn't pay anything to own such an option.
Posted by: chuckie at June 22, 2009 8:40 AM
"As a comparison, you can probably buy the same size no view 1/1 at The Infinity for $450k and can deduct another 100k if you sell the deeded parking back to the developer."
This is a brilliant idea....only completely unfeasible! First, you can't get a one bedroom at Infinity for that price. Second, I have owned a condo with deeded parking and its overated. Although I have seen people sell parking spaces, it is usually if they have an extra one. If there is only a single space, you cannot really detach the parking from the property because it diminishes the value of the remaining unit you retain. Although there are people that might buy without parking, it is a very small % of the market and you greatly reduce your prospects when you try to resell.
Posted by: itsknotme at June 22, 2009 12:08 PM
itsknotme: Think $450k will get you a small 1/1 on a low floor at The Infinity. Possibly less. I think Goodearth was trying to compare apples with apples - since Millennium's 1/1 do not come with parking. The developer at The Infinity will indeed buy your parking spot for 100k. Think some large penthouse buyer may want more than one parking. It is easily done as the parking spot is recorded on a separate deed. You are absolutely right about the lower value without parking. But you have already made it up by paying that much less for the condo unit to begin with. I personally would never consider a condo without deeded parking such as lower price units at Millennium, The Montgomery, 199 New Montgomery, SOMA GRAND etc. By the way, SF BLU will buy your parking right (stacker) for $60k...
Posted by: Outsider at June 22, 2009 10:48 PM
@ scurvy, the sales staff has indicated that the developers have Very deep pockets and would rather let the units sit empty and sell at their own prices rather than reduce or look at lower offers. I don't think we will be seeing any more reductions as they have already made a good faith 15% overall price reduction. This property isn't for everyone and is priced accordingly. There will always be someone willing to pay to get in... ;)
Posted by: Rich&Famous at June 23, 2009 6:00 AM