Monday, January 22, 2007

Subdivisions Sprouting Near the Gulf

Some building put on hold as availability outstrips demand

Published By Mobile Press Register
Sunday, January 21, 2007
Real Estate Editor

"Isn't it amazing?" Claude J. O'Connor said as he drove along Baldwin County 8 and pointed to the endless row of new subdivision signs.

A former Realtor who served as mayor of Gulf Shores in the 1960s, O'Connor remembers when Gulf-front lots were listed for $5,500, and he still had a tough time finding a buyer. Today, more than 2,340 residential lots are set to be developed on land north of the Dr. W.C. Holmes Bridge and 12 minutes from the beach.

There are more than 21 single-family subdivisions and nine condominium complexes under construction or in the land-clearing stage on Baldwin County 4, 6 and 8 in Gulf Shores, according to city records.

What was once farm land, a golf course or old commercial sites is now bustling with construction of homes and condo units with price tags ranging from the $150,000s to $1 million-plus.

City leaders had anticipated the residential growth north of the Intracoastal Waterway, and have the zoning and utilities in place to serve more rooftops, according to Robert Craft, a Gulf Shores city councilman.

But he didn't think it would happen so fast, he said.

"It's a countywide phenomenon," Craft said, citing new subdivisions going up from Gulf Shores to Spanish Fort.

The additional homes are a welcome sight for the resort market, where employees in the service or tourism sector have struggled in the past to find "affordable" homes, condo units or apartments, according to Craft and Realtors.

Orange Beach has 330 single-family homes planned or in the works as of December, according to city reports. The resort town remains known more for its condo complexes, according to Griffin Powell of the city's planning department.

In 2006, the Foley Planning Commission gave preliminary approval for subdivisions that included 2,227 lots on 723 acres. Many of those lots have not been developed, with city officials saying that developers are waiting for the market to improve.
The glut of condo units for sale at the Gulf has caused some subdivision developers and builders to pull back, slow down or just stop until the inventory is sold, agents said. December saw 2,764 houses and 2,904 condo units on the market, according to the Baldwin County Association of Realtors.

An unused building permit expires after one year in Gulf Shores, according to Steve Foote, city planner for Gulf Shores. "Some developers have asked for an extension, and the City Council has been pretty responsive about granting those," he said.

"As we became over-inventoried on the Gulf, we continued going north to build subdivisions," said Sandy Baas of ERA in Orange Beach. "Now a lot of people are sitting with lots. We get phone calls daily asking, 'Should we build or sit on it?' What looked like a good investment two years ago may not be today."

Baas had sold almost 25 lots in Crimson Ridge on Baldwin 8 in Gulf Shores to various builders who later backed out, she said. "They want to wait for the market to turn around."

The lots average $92,500.

She's marketing 20 homes in the $155,000 range in the Kendall Brook subdivision on Baldwin County Road 12 in Foley. "The lots get more affordable as you head into Foley," Baas said. "But a lot of people are adamant about wanting to get in the Gulf Shores school district, and County Road 8 is the cut-off."

All 106 new-home lots in the first phase of Craft Farms on Baldwin County 6 were sold within 24 hours in December 2005, according to Kellie Gressett of Prestige Realty. But some of the builders who bought in the second addition have canceled, saying they have such a huge inventory of lots, she said. The lots are priced from $85,000 to $225,000.

"That scenario is happening all over," Gressett said. "Builders haven't used all the inventory up yet, and some are sitting on 10 or 11 lots."

Still, she said sales activity has increased.

"I don't think it will ever be where it was in 2005, but we're getting back to normal," she said.

The homes in Craft Farms' new subdivisions range from patio homes starting at $389,000 to homes priced at more than $1 million.

Construction of the 490-unit Emerald Greens golf community on Baldwin County 6 is "is full speed ahead and is being built no matter what happens with the market," said Chris Harrell of Lindsey Real Estate Co. in Gulf Shores. More than 100 units have sold in the past year at prices from $179,000 to $399,000, he said. The project includes a nine-hole executive golf course.

"The market will come back, it's just a matter of when, and our product will be ready to be moved into when it does," Harrell said.

Emerald Greens buyers include second-home buyers, long-term investors and folks who just love golf, he said. "We don't see the flipper anymore."

The developers of Vintage Oaks, a 246-unit condo complex on the Foley Beach Express south of U.S. 98 in Foley, sold enough units to start construction, but they recently put a hold on building until some of the inventory is absorbed, according to Chuck Norwood of REMAX of Gulf Shores.

"It's all about supply and demand, and you have a lot of supply that you didn't have a year ago," he said. He predicted some of the inventory will be sold or rented when new retail projects nearby are open or completed.

The Wharf and Colonial Pinnacle will need a great number of employees for retail, restaurants and other venues, according to Craft, and "finding a place for those workers to live is crucial." The Wharf is a retail, entertainment, marina and condo complex on the Intracoastal Waterway in Orange Beach, and Colonial Pinnacle Craft Farms on Alabama 59 in Gulf Shores has a movie theater, Target store and more retail planned.

"Our bigger problem is unskilled labor," Craft said. "They can't necessarily afford" a house or condo, even in the affordable range, he said.

"Not everybody can afford to be in a condo or live across the street from the beach," Baas said. "We're building some affordable homes; we've just got to get the people down there."

Longtime Gulf Shores resident O'Connor prefers more development to having to drive to Pensacola or Mobile for medical facilities or retailers.

And he likes the neighbors, he said. "The developments bring different people here with different talents."

Wednesday, January 17, 2007

Gulf Shores Developer Asks for Special District

Status would allow tax-free construction of public improvements, bonds for construction

Published By Mobile Press Register
Wednesday, January 17, 2007
Staff Reporter

GULF SHORES -- Developer Rick Fine has asked the City Council to form an improvement district at the Fort Morgan property where he has approval to build a 260-room hotel, which would allow some of the work to be financed tax-free.

The council approved Fine's plans for The Sanctuary in July, allowing the Daphne-based developer to build an eight-story main building and four smaller "villas," each with a dozen rooms on about 12 acres adjacent to the Bon Secour National Wildlife Refuge. As part of the deal, Fine pledged to spend up to $1 million to expand city bike paths about eight miles along Fort Morgan Road.

On Monday, Fine, accompanied by his lawyer, David Cherniak, and Merchant Capital Executive Vice President Ken Funderburk, initiated talks with the council about creating the legal districts that would allow him to finance parts of the construction with tax-free bonds and also to impose an extra tax on his hotel rooms to help pay off the debt.

Though Fine wasn't precise with what exactly he wanted, Mayor G.W. "Billy" Duke III asked him to put a proposal in writing and indicated that city officials would consider his request.

"The reason a municipality would want to do it is it helps the developer finance the work at a lower interest rate," the mayor said. "But at the same time it creates revenue for the city in lodgings taxes."

Permitted under a 1999 state law, improvement districts, among other things, allow cities to extend their tax-exempt status to private developers as an incentive to build revenue-generating projects.

Municipalities don't pay taxes, and in an improvement district that benefit is extended to landowners who pay for expensive infrastructure projects -- from installing sidewalks and parking lots to drainage, lighting and sewer work -- that might otherwise be funded by taxpayers.

While some developers might seek the tax break on materials, such as asphalt and pipes to build roads and sewers, Fine said he wishes to issue tax-free bonds through an improvement district.

With the proceeds of a tax-free issue, the developer couldn't build the actual hotel, but he could finance work on his and nearby public property -- such as sidewalks, driveways, parking lots and water and drainage improvements -- said Funderburk, whose firm has worked on other improvement district deals in Spanish Fort and Orange Beach as well as Gulf Shores bond issues.

"If the public enjoys the benefit of lighting from that lamp post in the parking lot, then it can be financed tax-exempt," Funderburk said. And by going tax-free, Funderburk said, "the interest payments are, of course, dramatically less than market financing."

More complex arrangements, called cooperative improvement districts, allow developers and municipalities to work out revenue-sharing deals and make it possible for developers to self-impose taxes on their projects -- an extra penny of sales tax, say, or an additional 2 percent levy on hotel rooms -- to help pay their bond debt, Funderburk said.

Fine first said he wanted the city to share a portion of its lodgings tax to help make the hotel happen. Councilwoman Carolyn Doughty said that she wouldn't be interested in letting a developer dip into municipal revenue, and Duke said he would listen to revenue-sharing proposals provided it was the hotel's revenue that would be shared.

Abandoning that proposal, Fine said he would instead ask in his request that the city set up the district to allow him to impose an extra tax on his customers.
Previously Fine has proposed a bay-front condominium tower called Cypress Point in Daphne -- designs for which he later withdrew -- and has had plans to redevelop the storm-damaged Romar Lakes condo complex in Orange Beach with a high-rise residential project called Marqueza.

Duke asked what might happen if the project failed and the tax-free bond debt was to be repaid with the extra tax. Funderburk said the city would have no obligation.

"That's between the developer and his creditors and does not affect the city in any way," Funderburk said. "It's not actually a city obligation; the investors are buying on the strength of the developer."

Said Fine, "The bottom line is the city's not on the hook for anything. You're not sharing revenue, you're not responsible for the debt. I mean really and truly there's not any reason to say no.'"

With that the mayor asked Fine to bring a written proposal to City Attorney David Whetstone, who court-tested several similar deals throughout Baldwin County when he was district attorney.

Monday, January 08, 2007

Gulf Shores - Beaches Are Back on Top

Very positive article about why the strong demand for tourism is expected in 2007.

Published By Mobile Press Register
Monday, January 08, 2007
Staff Reporter
ORANGE BEACH -- After a storm-driven dip, Baldwin County has regained its No. 1 tourism ranking among the northern Gulf Coast's counties with beach destinations, according to a new study.

Baldwin County collected $227 million in lodgings tax revenue through October for a 24 percent share of the $947 million generated among it and five Florida panhandle counties during that time, according to a Alabama Gulf Coast Convention and Visitors Bureau report.

Hurricane Ivan struck a devastating blow to Baldwin's beaches in 2004, but until the September storm it had been a benchmark year for tourism. The next year was mired in Ivan cleanup and two close calls with hurricanes Dennis and Katrina.

By 2006, the beach was, for the most part, back and ready for tourists, and, measured in lodgings tax revenue, amounted to 92 percent of 2004's high.

"Our goal for'07 is to increase by 15 percent over'06," said Mike Foster, vice president of marketing for the Alabama Gulf Coast Convention and Visitors Bureau. "It's a huge challenge, but it's one, as we look forward, we think we can do. We've got a lot of very, very positive factors going for us."

Among those: the anticipated opening of three major commercial developments that will add millions of square feet of retail and restaurant space, a record-setting 1,346 condo units and hotel rooms hitting the rental market, and an advertising campaign that is expected to top $1 million.

The restaurants, movie theaters, shops and other attractions that are planned as part of the large commercial projects under way -- The Wharf and Bama Bayou in Orange Beach and Gulf Shores' Colonial Pinnacle at Craft Farms -- will help lure more-affluent visitors and give them places to spend their money, Foster said.

The 1,346 condo units and hotel rooms expected to open this year are a part of a larger two-year boost in rooms that will see the total available along Baldwin's beaches grow from 14,436 available at the moment to 16,724 by the end of 2008. That number, according to Convention and Visitors Bureau data, put Orange Beach and Gulf Shores ahead of international cities including Sydney, Australia; Copenhagen, Denmark; and Vancouver, British Columbia, in tourist capacity.

Foster said the Convention and Visitors Bureau only counts units in buildings that are under construction and those which allow vacation rentals. The figures do not account for beach houses that are rented short-term or hotel rooms, which number in the hundreds, located in Foley.

While the way that visitors book their trips is changing -- more make reservations online and more wait until the last minute -- their numbers, in the end, are growing, said Sarah Kuzma, corporate relations director at Meyer Real Estate.
It may be hard to predict occupancy rates for the 2,000 rental properties the Gulf Shores company manages, but Kuzma said, "We're really optimistic about'07."

Marie Curren, director of marketing and reservations for Brett/Robinson, said that revenue-wise the company had the best year in its history last year and expects to beat those benchmark numbers. Already bookings in the conglomerate's 1,889 condo units are up 15 percent this year.

A new Orange Beach condo tower, Phoenix on the Bay II, will open this year, boosting Brett/Robinson's rental stock by about 5 percent, Curren said. The company, she said, is confident that it will be able to maintain high occupancy rates with the added inventory because of the local business culture in which competing firms, such as Brett/Robinson and Meyer, are more focused on pushing Alabama's beaches, often referring customers back and forth, than they are at putting one another out of business.

"The more everyone works together, it benefits the community so much more than being at each other's throats," Curren said. "Rather than have them go to Destin, let's keep them in the neighborhood."

And to get them, the well-heeled tourists, to Alabama's beaches in the first place, the Convention and Visitors Bureau, a quasi-governmental agency funded by a portion of the state's lodgings tax take, will embark on an advertising campaign that will reach out to golfers, outdoors enthusiasts, Midwestern retirees and residents of the major Southeastern metropolises.

Foster said that in the next two months the Convention and Visitors Bureau will continue an idea begun last year to give out wads of postcards to snowbird clubs, asking them to send word back home -- which is typically the Midwest -- that Alabama's beaches have recovered from Ivan and are back in business.

About 10,000 postcards have been printed with beach scenes and are ready to be distributed among winter visitor organizations.

"The snowbirds that came last year said, 'Wow, you guys have really made progress," Foster said. "And they went back and told their sons and daughters and grandkids, 'Boy, that Gulf Coast looks good,' and so then you saw a rise in our spring break business and some of that was reflected in our summer business."

In spring the Convention and Visitors Bureau's Gulf Shores/Orange Beach logo will be prominent on the Atlanta Journal-Constitution's special Web site for April's Masters Golf Tournament, Foster said. For $18,500 the bureau secured a top sponsorship for what it hopes will be the most viewed Web site in the golf world.

Other efforts, according to a draft of the bureau's advertising plan, include a full-page ad slated to run in 600,000 circulation Oprah magazine in April; multimedia campaigns in Atlanta, Baton Rouge, Birmingham, Nashville and others; and a presence in convention meeting programs and well-known magazines such as Southern Living, Good Housekeeping and Readers Digest.
"We feel like we're on this upward spiral that really is feeding itself," Foster said. "Because in addition to the marketing that we all do, we also have happy customers who are going home and telling their friends and neighbors, 'It's great, go on down.'"


Through October, Baldwin County collected a greater market share of the $947 million in lodgings tax revenue generated along the northern Gulf Coast's beaches in 2006 than any of the five Florida counties it competes with for visitors.

Baldwin County: 24.01 percent

Walton County: 23.98 percent

Okaloosa County: 20.22 percent

Bay County: 18.79 percent

Escambia County: 11.03 percent

Santa Rosa County: 1.97 percent

Source: Alabama Gulf Coast Convention and Visitors Bureau

Gulf Shores - More Gulf Bargains?

This article confirms there are deals out there.
One thing it left out is that I was the selling agent for the Gulf Front lot:>)

Published By Mobile Press Register
Sunday, January 07, 2007
Real Estate Editor

A75-front-foot beachfront lot on Fort Morgan was purchased for $800,000 at the end of December -- less than half the price commanded by similar lots that changed hands in June 2005.

Three adjacent lots of the same size on Ponce de Leon Court sold for $1.675 million each, according to Larry Powell of Meyer Real Estate on Fort Morgan. The 75-foot by 400-foot lots are zoned for duplexes.

Does this beachfront sale signal more bargains at the Gulf? Yes and no, say Realtors.

With so much inventory on the market, it's a buyer's market. But what had been a falling market has leveled off, and unless a seller is desperate, most owners are holding on until values increase, Realtors said.

Powell's seller made a $250,000 profit on the Fort Morgan lot, which the seller had purchased about four years earlier, he said.

"My seller smiled at the end of the year," said Powell. "He freed his half a million dollars up and put a quarter of a million in the bank."

"I don't think this is where the market is," Powell said. "People are ready to buy, but are waiting on the market to bottom out. If something is $200,000 to $400,000 undervalued, someone is going to take it off the market.

"I think the real price (for the lot) is somewhere closer between $1 million and $1.3 million. The guys who paid $1.675 million got caught holding."

Pricing property at the Gulf today is often a moving target, according to appraisers and Realtors. Waterfront prices in Gulf Shores and Orange Beach averaged $10,000 to $12,000 a front foot in the spring of 2005, and agents estimate those prices have dropped about 20 percent.

A two-bedroom, two-bath unit directly on the Gulf that is in good condition used to sell for $650,000 to $750,000, according to Realtors. Today, it's $550,000 to $625,000.

In November there were 3,008 condo units on the market and the average sales price was $623,457, according to the Baldwin County Realtors Association.

"It's great that we have buyers coming into the market, but now is one of the worst times to sell," said Bob Shallow, owner of REMAX Paradise in Orange Beach. "People that are looking for deals are finding them. Some say it's a terrible market, but if you're a buyer it's a great market because there's so much inventory."

For example, there are 300 three-bedroom, three-bath gulffront condo units for sale at the Gulf, and 13 of those are under contract, he said. "In the spring, hopefully 100 of those will be sold."

Some areas of the market have seen price increases and demand, according to Shallow, who offered rent-restricted units and higher-end, new units as examples.

Other segments have yet to find a demand, include Gulf-front housing and rental condos, he said. But that should change when the spring and summer season starts, he said.

Last year a lot of large, new condo projects came on the market, but in 2007 there are mostly small projects coming on line, according to Patrick Daily, owner of REMAX of Orange Beach. That should help sales of some of the existing inventory, he said.

"But if you're looking to sell at 2004 or 2005 prices, then your price is out of whack and you're not going to sell it," he said.

A total of 1,611 condo units were scheduled to open at the Gulf in 2006, but several hundred did not come on the market, according to the Alabama Gulf Coast Convention & Visitors Bureau. About 1,081 new units are scheduled to open in 2007, according to the bureau.

The Fort Morgan sale is an isolated incident, said Allen Cox Jr. of Ono Realty. "You'll see those people that need to get out or want to get out," he said, "but I don't think that's the norm."

The home prices on Ono Island have dropped about 25 percent since Hurricane Katrina hit in August 2005, according to Cox. There are 100 homes and almost 30 lots for sale on the island, he said. The average price for homes on the main waters of the island range from $1.6 million to $2.2 million, and homes on the canals average $1 million to $1.2 million, he said.

"The advantage we have on the island is that we're not dealing with 4,000 condo units," Cox said. "These people aren't strapped for cash and have a lot more staying power. They are sophisticated sellers and have seen this happen before and are willing to wait two or three years."

Market prices may be leveling out, said appraiser Claud Clark in Magnolia Springs, who added that the "bottom feeders" or dealmakers have already hit town.

He knows of several instances where investors bought up 30 houses in Foley and a builder unloaded a bunch of houses at a 20 percent discount in Fairhope.

Realtors may rattle off predictions about when the market will improve or some of the huge inventory sell off. But those are just guesses, according to Shallow.

"All we can say is what's happening today," Shallow said. "Interest rates are very low. The buyers coming into the market are a little nervous and looking for deals or necessity units. Developers are building better buildings and buyers are seeing the improvements in the quality of construction, and that will make a big difference in the market."

And no one can dispute that the Fort Morgan lot sale was a good deal for both parties.

"The seller still made a quarter of a million dollars," Clark said. "And you can't go broke with that kind of profit."