Condos crop up across valley as market soars, lawsuits ease.

Just a few years ago, you couldn't pay most developers to build condominiums in the San Fernando Valley.

That has changed.

There are currently at least 3,000 new condominiums or conversions under way, more than half the number that sold last year. And the market is awash with those searching for new opportunities.

"The No. 1 call I probably get these days when I get a listing is does it have a condo map," said Dean Zander, a partner with multifamily real estate specialist Hendricks & Partners. "The demand is overwhelming."

So what's different?

First, the cost of constructing or investing in an apartment property has risen so astronomically it's difficult for many of these projects to pencil out, and developers and investors are seeking alternatives.

Along with that, the price of single-family homes has risen sharply--as of January the median price in the Valley exceeded $450,000--creating a market for condominiums in the $300,000 to $500,000 price range that never existed before.

"It's still an alternative to people who can't afford a single-family house," said John Battle, a partner with Lee & Associates--L.A. North/Ventura Inc. "Most developers assume the housing demand is going to continue, and if you can offer a higher end product in a good area like Warner Center people will be willing to pay whatever a reasonable price is."

For years, developers were unwilling to build condominiums because state laws held them liable for potential construction defects for 10 years. That in turn drove many insurance carriers away from the California marketplace, and the few who were left were charging exorbitant rates.

But new legislation has alleviated some of the risk by requiring owners to allow a builder to repair the problem before filing suit. Developers report that some insurers have returned to the California market, increasing the competition among these carriers and easing premiums. And even higher premiums can be absorbed more readily because selling prices for condos have surged.

In January, the median price of a condominium rose to $315,000, up 5 percent from 2004 and 72 percent from 2002, according to the Southland Regional Association of Realtors, in Van Nuys.

"We made a decision last year that we were committed to the industry and the local community and since the insurance market was coming back and there's been some favorable legislation providing a fix-it period, we made a decision to get into condominium product," said Todd Pratt, executive vice president at Chandler Partners, a 30-year old development firm in Burbank.

Investors who have operated apartment properties find that selling their buildings as a condominium conversion can yield a much higher price.

Consider the recent acquisition of Warner Center Apartments, a 1,279-unit complex that sold for $325 million. Had the complex been bought for an apartment rental, the price would likely have been about $220 million.

"It became apparent to the apartment acquisition people that yes, they could bid on it, but they wouldn't be anywhere close to the final and best offer," said Charles Macbeth, a general partner in the joint venture that ultimately acquired the property, Warner Center Condominiums LLC.

Not all apartment owners can switch gears so easily. Converting an apartment building to a condominium requires specific permitting, a different parking ratio and other features.

Most condominium converters are unwilling to take on a project not already equipped with those features because the risk is too great. They may not get the necessary permitting or the required land to build the additional parking, for instance, and if that happens, they are left with a property purchased at a price that won't cost out.

The large number of new condominiums and condo conversions coming into the market in the next several years is not expected to dampen the demand.

"There are very few condo opportunities for first time buyers," said Macbeth. "Generally, the older product is bought up in the first day, and they're usually bid up. So we're not competing with anybody. And there is a lack of first-time buyer type homes in the area. So we felt all the stars lined up."