A Prius With Your Loft at Dogtown Station

In mid-June, when Curbed LA reported on a price chop at Dogtown Station, a 35-unit loft development at 700 Main Street in Venice, 17 units were still available. Today, that number has dropped to 12, an absorption rate of approximately one unit per month, which seems fairly typical for the market and product type.

But apparently not quick enough, because in the last week, the entry price has been lowered to $819,000 for a second-story flat of 1,383 sq. ft. (or $592 PSF).

I actually interviewed with the developer, Bob D’Elia, back in January 2008, as an internship-seeking graduate student. At the time, I had produced a mock pro forma for Dogtown Station, estimating its construction costs, revenue from condo sales, IRR, and presented it at the interview.

D’Elia was impressed by the accuracy of my estimate for sales revenues, $41.3 million, which took into account both pre-sales and the planned release of remaining units at escalating price points. With the development totaling 57,869 sellable sq. ft. (excluding common and outdoor areas), that translated into an average sale price of approximately $714 PSF. D’Elia would not verify the accuracy of my cost estimates but boasted of a project IRR in excess of 20%.

Overall, this newest price point, $819,000, represents a 17% decrease (on a PSF basis) from the early 2008 peak average…without counting the additional incentive of a 36-month lease on a new 2010 Toyota Prius with the purchase of any unit (valid until December 31st).

Dogtown Station has lowered its price and and is offering an additional buyer's incentive.

Assuming a 2010 Prius base sticker price of $23,370 with monthly  lease payments of $341, this incentive is worth around $13,000 by my calculations, meaning that the effective price PSF is closer to $583, or about 19% off the original ask. This percentage drop is, perhaps not coincidentally, in the zone of the developer’s originally projected IRR, which means that Dogtown Station may have hit rock bottom in terms of the price decreases its investors can absorb before erasing profit margins entirely.