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Two Condos Fused to Solve a Space Crunch - WSJ February 2015

Two Condos Fused to Solve a Space Crunch

Combining two condos to make one large unit adds coveted square footage. But the combo-condo boosts property values as well.


Sometimes, the best next-door neighbor is … you.

The low inventory of luxury condos has owners looking for alternative ways to solve their space crunch. Increasingly, that means combining two smaller condos to make one large unit. In New York City, about 6% of condos and co-ops are now combinations, compared with just 1.5% four years ago, according to Jonathan Miller, president, Miller Samuel Real Estate Appraisers, which tracks the real-estate markets in New York and Miami. Right now, “it’s more affordable to overpay for an adjacent apartment than it is to go out and buy a new one,” Mr. Miller says. 

The extra square footage is a blessing on its own, owners say, but the boost in property values is an added bonus. Christopher Gentile purchased a two-bedroom condo in Bay Harbor Islands, Fla., for $475,000 in 2005. After an elderly neighbor died, Mr. Gentile and his partner, Gary Schwartz, purchased his unit for $135,000 and spent another $700,000 to combine and renovate them.

The six-month project, which was completed in 2013, bumped their living space from 1,900 square feet to 3,100 square feet, including a butler’s pantry, a spacious master suite and two guest bedrooms. The combined units “are really seamless,” says Mr. Gentile, 57, an online-education company founder. Today, he estimates the property is worth upward of $1.5 million. 

Combining condos is easiest while the building is under construction. In Dallas, for example, potential buyers in the Bleu Ciel luxury-condo building get to choose between two floorplans: one for a standard unit and another for a larger combined unit, says Alan Mark, who is the marketing adviser for the developer, Harwood International. “Right away we have more inventory to offer,” says Mr. Mark. When the high-rise opens in late 2016 or early 2017, prices will range from $800,000 for a two-bedroom unit to more than $1 million for a three-bedroom penthouse.

Homeowners in competitive housing markets, such as New York, Chicago and Miami, are most likely to combine condos in existing buildings. Growing families want to remain in prime locations, where the inventory of three- and four-bedroom units is limited. Rather than moving, buyers are creating “mansions in the sky,” says Susan Wachter, a real-estate professor at the University of Pennsylvania. “There’s a new need out there and supply hasn’t caught up,” she says.

In New York, prewar apartments divided into smaller units in the 1930s and ’40s are being put back together again. Designer Frederick Wildfoerster has worked on several of these projects. Before the renovation begins, he often looks back at the building’s original plans—which are especially helpful when tackling plumbing issues. Many buildings forbid “wet-over-dry” layouts in which a bathroom on one floor, for example, is located directly above a living room on the floor below. This restriction helps minimize damage in the event of a plumbing emergency. 

Mr. Wildfoerster says he tells clients to be upfront with condo boards about their intentions to combine units. “It’s a very bureaucratic process,” he says, and honoring the board’s directives will avert fines or the need to revert condos to their condition before the sale.

New York-based interior designer Damon Liss says he mostly discourages clients from combining units because it can often result in awkward configurations. And jobs done poorly—mismatched fixtures, wood tones, flooring and other finishes—may make it difficult to recoup the investment when selling. 

Richard Marx, a 48-year-old fashion designer, and his wife, Madeline, purchased a two-bedroom apartment in New York’s Greenwich Village in 2008 and the one-bedroom next door the following year. The couple and Mr. Wildfoerster designed the enlarged space to include laundry hookups in the kitchen, a home office and a master bedroom separated from the kids’ two bedrooms with a larger living room. Mr. Wildfoerster also negotiated the changes with the co-op board. To hide a doorway that would no longer be used and block noise from the public hallway, Mr. Wildfoerster reinforced the wall with foam and sheetrock.

In all, the project took one year, says Mr. Marx, who paid $1.1 million for the first unit and $900,000 for the second, smaller unit. Another $1 million was spent to join and renovate the entire home, an investment he says is worth it because similarly sized homes nearby sell for $5.5 million. “There aren’t too many large apartments in good shape,” he says.

In addition to money, homeowners should expect to invest a lot of time into fusing two units, says attorney Marc Luxemburg, president of the Council of New York Cooperatives and Condominiums, a nonprofit supporting co-op and condo buildings. Filing architectural plans and getting proper permits from the city can take months. And buyers who need to annex part of a hallway when combining two units can expect a lengthy approval process from the condo or co-op board, Mr. Luxemburg adds.

Once the bureaucratic hurdles are cleared, homeowners face the challenge of giving the units a singular feel. In Chicago, Laura Kofoid and her husband, David Ricci, own a unit with traditional décor in a 1927 condo building on Lake Shore Drive. They purchased a unit next door that had modern décor. To create a flow between two units, the couple hired designer Fred Wilson —aided by a surprise discovery. “We found a closet full of chandeliers and crystals downstairs” in the apartment, says Ms. Kofoid, chief executive of a custom handbag company.

The expense of combining units can catch clients off guard, says Mr. Wilson, who is based in Evanston, Ill. Finding the point where to break through the wall is often trickiest, since chimneys, stairwells or elevator shafts are often in the way. Ms. Kofoid declined to divulge the cost of her renovation, but Mr. Wilson says his charges typically range from $100,000 for a simple connection to $800,000 for a more extensive renovation, which includes construction costs. “We basically we want to make it look like we were never there,” he says.

The finished condo now includes a family room for their two children, a guest room and home office in a condo that now totals 6,000 square feet. The renovation doubled their space while allowing them to remain in their mid-rise, doorman building on the lakefront, she said.

The renovation took a year, and the family of four stayed in their home during the renovation. “We camped on different sides of the apartment,” Ms. Kofoid said.

Updated Feb. 26, 2015 10:53 a.m. ET