Condo Trial Ends Without Ruling

Wednesday, December 21, 2005
By RYAN DEZEMBER
Staff Reporter

BAY MINETTE -- A trial that will ultimately decide if developer Larry Wireman can build the second phase of his Turquoise Place condos -- and if so, what he might have to pay those who hold restrictive covenants on the Gulf-front site -- concluded just before noon Tuesday without a ruling.

Presiding Baldwin County Circuit Judge James H. Reid said he would have to rule on a separate civil case that went to trial during the summer before he could begin to sort out the one he'd heard over the last two days in Bay Minette.

Nine beach parcels make up the proposed condo site in Orange Beach. While not owning the site, the AmSouth Bank-managed estate of an Orange Beach family, and a surfside hotel, claim to control 40-year-old covenants that limit development of those nine lots to single-family homes.

They contend that if the restrictions are lifted, Wireman and the lots' owners will profit tremendously. For that reason, the lawsuit's defendants, the Carl T. and Jessie A. Martin estate and owners of the Island House Hotel, asked Reid to order compensation if he annuls the restrictions.

Wireman and the landowners contend that maintaining beach houses on the stretch is unrealistic. Two of Wireman's towers, slated to be 310 and 370 feet tall, are under construction to the west, while the 12-story Island House hotel sits to the east.

The restrictions are borne of "horse and buggy days" and are no longer relevant to that part of Orange Beach, Wireman said during the trial's first day.

The defendants contend that the restrictions, placed on the land by the Martins between 1955 and 1966, are still pertinent in protecting the defendants' other holdings in the area. But if the judge rules against such reasoning, then the restrictions are at least relevant in that their removal is worth millions to Wireman and the landowners who have contracted with the developer to sell their sandy lots for $55,000 per waterfront foot.

Appraiser Les Farmer was hired by the defendants' lawyers to determine the value of the nine lots if they were developed with condo towers versus their value if construction were limited to a single home per parcel. Farmer, who testified Tuesday, said that the land was worth about $22,000 per waterfront foot -- or about $20 million for all 928 feet -- with the development restriction, but would bring between $69,000 and $75,000 per front foot, or about $70 million, with high-rise condos.

Wireman's attorney, Dan Blackburn, tried to discredit Farmer's study by pointing out that in its comparable sales section, it listed a sales price -- $40 million -- for a tract that his client bought as the site of the first two towers of Turquoise Place. Blackburn said that was about $8 million too high.

The defendants' attorneys, who included Walter Cook, representing AmSouth Bank, and Robert Wills, representing Island House Hotel, were unsuccessful in getting Wireman to divulge the profits he expects to make developing Turquoise Place East. They had Farmer draft a hypothetical cash flow chart for Turquoise Place East that showed the developer's profits exceeding $103 million, but Reid did not allow that as evidence and Wireman gave no indication whether that figure was accurate.

The defendants never mentioned in court filings their estimate of the exact worth of the rights to the restrictions, but Wills said during the trial Tuesday that the restrictions had "tremendous value."

Wireman and Blackburn said that the defendants had asked for $22 million in settlement talks that preceded the trial.

"We told them we'd take $10 million and they never responded," Cook said after the trial. "They're trying to make us look unreasonable but they're making so much on this it's extraordinary."

Before closing the proceedings, Reid said that if he decided to lift the restrictions he may have to revisit the evidence to determine what price to put on the covenants.

In 1999, the hotel's owners paid the Martin estate $25,000 for the rights to enforce the restrictions on two lots adjacent to the building.

The hotel's general manager, Barbara Walters, said the restrictions preserved a wide western sunset view that made nine rooms along the side of the building among the establishment's most desirable.

"Those are the rooms that will be affected if Mr. Wireman builds his 300-foot towers," she testified. "I'm afraid we won't see the sun."

Ken Niemeyer, a trust officer with AmSouth, also testified and said that the towers would create traffic and density problems that would "denigrate" nearby property still controlled by the Martin estate and still restricted to single-family home development by the covenants.

Though Reid did not allow Niemeyer to respond to a question Blackburn asked about the bank's valuation of the restrictions, the witness said their worth would be "reduced or eliminated" if Turquoise Place East were allowed.

Niemeyer, under questioning from Blackburn, said the bank didn't record the covenants' value on any financial reports because they're "unique" and "not normally reported as an asset."