Projects in Downtown Fort Myers
Feb 2008
Last night Gail and I joined my brother and his wife Dot in downtown Fort Myers for drinks at the Sky Bar overlooking the Eddie Money Concert at Saturdays' Light up the Town Block Party. We started at The Bar Association, had an appetizer of Drunk Shrimp, and then wandered though Patio De Leon. After visiting the Sky Bar we dined at H2. It was a perfect evening, the weather was cool and breezy and live music was everywhere we turned. The crowd was a mix of young professionals, middle age couples and groups of singles out on the town. Prices were reasonable, parking easy, and spirits high.
But it was not crowded. There were not enough people enjoying this wonderful downtown. I spoke to Harold Balink for a few moments when we arrived at H2. His place was jumping on Saturday, but even Harold conceded things could get better. Not enough diners consistently.
When Bill and I were leaning on the rail up at the Sky Bar, he asked me what was going on with all the projects downtown. Good question and one I have not visited for you in a while. We could see Northstar across the river, High Point to the left and Oasis up river and St. Tropez and Beau Rivage near by.
The short story is that the completed projects are not full and the condominiums not started are either in a holding pattern or have been halted completely. Many buyers walked away from deposits and didn't close on their "investments". Oasis, getting ready to close, will have many contracts drop out. Northstar is closing contracts now and experiencing mixed results, but with generally a good closure rate, although they were not originally all sold out.
The old Holiday Inn on West First Street has been razed and there is a sign for One West, but no activity either on the lot or in the marketplace. Cammerata Properties is completing the phase of their project anchored by Publix (which is now open), but has told buyers it has put the rest of First Street Village on hold. The liner buildings around the Publix parking lot are being completed. Mark Sullivan's project by the Winyah Hotel just received an extension but there is no activity there. Phil Hugh's Indigo hotel is going up at a fast pace. In fact Phil hired Laurie Hill (formally a top sales agent with Homes for America) to begin marketing the hotel rooms. Phil is also planning a new office building with liner retail just down the street from our new office on Hendry Street. Dominic Gertz is still working on plans for his car loft project next to Harold's but no immediate plans for construction.
Sunset at Riverwalk, next to Caloosa Harbour Assisted Living has not broken ground or taken down the old motel yet. Cypress Club, being marketed by the ever energetic Barbara Perez, is in a holding pattern, I have seen no activity either there or at Prima Luce on the River, a project spearheaded by David
Nasiff. There are other land parcels on the river that are available for sale. The old Palm Pont land in North Fort Myers is for sale as well as another large tract further up that side of the river. Market America is offering a marina piece on route 31 opposite .Sweetwater Landing, High Rise land across from Oasis is also offered by Market America. There are a few other parcels down river from North Star and I am certain that there are discussions by some of the developers that have not come out of the ground about selling their interests.
What does all this mean? Well, it depends who you are and what your interests are.
Number one; let's talk about it from buyers' standpoint. The buyers have several advantages.
- The cost to build the condos that are already completed are way below cost of replacement.
- The land load (cost of the land that each condo is built on) is also well below many of the un-started projects' land load.
- The buyers can now SEE and tour the condominiums they are thinking of buying. This is a luxury that the current owners of these new projects did not have. Now it is possible to compare quality, views, and features.
- They can buy what "IS" not what is "Going to Be".
- Interest rates are low and money is cheap.
Are there disadvantages for the new buyers? I can think of two possible negatives. One: If the developer is not strong enough to carry the debt PLUS the expense of paying the condo dues and taxes on the empty homes. - a financial institution may take over - one that knows nothing about managing or marketing a condominium project. I do not see this problem with any of the developers that I mentioned, however.
The other potential negative is the difficulty of getting a mortgage in a project that is less than fifty percent occupied. This is not an insurmountable problem, but one that needs to be addressed,
Now let's talk about the developers that have existing projects and look at their perspective. What are their challenges? The biggest one, of course, is economic. When the developer starts closing on condos, the bank that loaned the developer the money gets paid first. Sure there will be some checks that come to the developer to cover his overhead; but the developer makes his profit after the bank gets paid. So if a developer builds a 100 condo project, he may make his profit on the last 10 or 20 condos closed. Fortunately the banks understand this and rather than put the loan in default, will support the project while the developer completes the sell-out. But the bank will pressure the developer to sell out units at or below cost - just so they can get there loan repaid.
Another challenge the developer has is one of management. He is now in a long term sellout situation, competing for end users, not speculators like he has been accustomed to. He also can't turn the project over to the residents because there are not enough of them; and therefore he will remain responsible for maintaining empty units. Water has to be run, air-conditioning serviced, appliances maintained, windows to wash.
The other stakeholder here is the condo owners that did close on condos but need to sell them. These owners, like the developer, have challenges. But make no mistake, they are not victims here. They were in it, as was the developer, for the profit. They need to understand that they share in the risks as well as the potential rewards. Now they are paying the piper. They have choices to make: take a loss; carry the costs, and/or rent.
What about downtown? Downtown is gong to make it... As Phil Hugh said to me not long ago, "If you are not betting on downtown, what are you betting on?" We will get thought this absorption. Residents will move downtown, restaurants will be filed, hotel rooms booked, and new projects will come. There is a cycle here. Before the new condos were built we were counting in the condos to bring downtown to life. Downtown now is lively. I think the vibrancy of downtown now will bring those buyers for condos to the table.
What about new projects? The interesting thing is that there are developers now coming to town and looking at taking over the undeveloped parcels. Some of them are existing developers now more familiar with what the market really wants. After all, they can examine what is built, what sold and what the market is demanding. In this ability they have a big advantage over the gamble that the pioneers took..
I also believe that preconstruction sales will return. Buyers like the time lag from commitment to when they actually have to fork over the money. If we started a project today, we probably would not be able to deliver a condo for three years.
Downtown. Try it. You'll be back, and you just might buy a home here. Call us if you want our help. Our office is right at 1635 Hendry. 239-277-9309
www.ma-realty.com www.eandvflorida.com www.investinriverfront.com
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