Dialing for Dollars: 17 Conservatory Lots on Flagler’s Tax Deed Sale Schedule

Its Tax Deed season with three separate sale dates scheduled over 33 days. The lists include 17 lots in the Conservatory, two of which sold at previous Tax Deed sales in 2009.

Palm Coast, FL – July 25, 2013 – It’s Tax Deed season in Flagler County, FL. The Clerk of Court is hosting three sales over the next 33 days. That is not unusual for this time of the year. Tax Certificate holders can apply for a Tax Deed Sale after holding tax certificates, typically issued in June, for two years. What makes this year’s schedule unusual is the fact that 17 vacant building lots in the Conservatory are included in the sale. Two of these are repeats, having been sold at Tax Deed sales in 2009.

Bobby Ginn envisioned The Conservatory at Hammock Beach as an exclusive community of 340 multi-million dollar homes surrounding a Tom Watson signature golf course and featuring an opulent 43,479 square foot clubhouse. Following the record setting Hammock Beach Club and Reunion Resort launches, Bobby’s sales and marketing machine was on a roll. At the lavish Conservatory rollout, all the building lots were sold to eager buyers/investors for prices between $329.9K and $529.9K. A combined total of $141 million went to Ginn and his financial partner, Lubert-Adler (LA) when those sales closed in 2005.

The market had turned sour quickly. When the music stopped, all the chairs were gone. The anticipated flipper transactions never happened. Values plummeted so fast that there were literally no sales. The golf course and clubhouse were completed in 2007-2008, but a PGA Fall Tour tournament at the Conservatory in 2008 did nothing to revive interest in the community. Over half the lots went into foreclosure. A market price was finally established when two lots were sold at Tax Deed sales in 2009 for $15.2K and $20.1K respectively. Ironically, those same two lots are again on the Tax Deed sale schedule.

For the next three years, lot sales ran mostly in the $15K to $25K range, including 11 more Tax Deed transactions. The assessed value of most lots fell to a low of $15K in 2012. That number rose to $20K in 2013.

Clearly, the lot owners took a bath. But the developer was not unscathed. The Conservatory golf course and clubhouse property tax assessment was $12.3 million in 2009. It has fallen to $3.9 million. The main dining area in the clubhouse has remained essentially closed for years. Without the anticipated membership participation at the course and clubhouse, the club needed ongoing subsidies from Lubert-Adler.

Like the original lot buyers’ investment, Bobby Ginn is long gone. Lubert-Adler remains as owner of the Club assets. Salamander Hotels and Resorts joined LA as an equity partner and manages both Hammock Beach and Reunion Resorts, including Conservatory’s Golf Course. Front Door Communities represents LA from the developer perspective.

Until recently, only the four original lavish builder model homes and a more modest private home were constructed. Something went wrong. Neither the current market nor the market in the foreseeable future would support Bobby Ginn’s vision.

LA, Salamander and Front Door have worked together to down-size the Conservatory vision to position it in the same market segment as Grand Haven, another Palm Coast development. Grand Haven features a Jack Nicklaus signature golf course, a less opulent clubhouse, the Intracoastal Waterway and homes for much less than $1M.

Front Door reduced the Conservatory’s architectural and landscaping requirements to lower homebuilding costs. The homeowners association has reduced the services provided through the HOA, thereby reducing assessments. Salamander created new and more affordable club membership options. LA continues to subsidize the golf club financially.

In a June 2012 event, house/lot packages were introduced in the $330K to $450K range. To understand the magnitude of this market repositioning, think of it this way. The lots are being marketed again at roughly their original price, but this time the price includes a house. I’m told that the house/lot packages are priced assuming a lot value in the $60K to $75K range

How is it going so far? Two new homes are under nearing completion. Another is under construction with a few close behind, but sales have not met expectations. Seventy-four (22.2%) of the undeveloped lots in Conservatory are for sale through MLS. Prices range from $35K to $125K. One of them, 349 Hibiscus Way, is listed for $49K. It’s also on the July 30th Tax Deed sale schedule. Twenty-seven Conservatory lots were sold through MLS within the past year. The median selling price has been $28.5K, well below the lowest current listing price. By comparison, 61 Grand Haven lots sold during the same period. Their median selling price was $65K. And there were roughly 20 new home starts.

Grand Haven enjoys some advantages over Conservatory. It was about 60% built out when the bubble burst. It was an established community while Conservatory still looks barren. Except for the ill-fated launch of the second phase condominiums, Grand Haven avoided the hype and pumped up pricing that surrounded Ginn’s sales launches. But more importantly, Grand Haven did not undergo a dramatic market repositioning.

Can Conservatory thrive post-repositioning? Some marriages succeed in spite of age, ethnic, religious, political and social differences. But such differences put additional strains on the relationship, especially when a critical financial situation arises. Is there too much disparity between the original Conservatory buyer profile and its new target buyer demographics?

Compare Conservatory to Grand Haven. Both communities have great golf courses designed by prestigious golfers. The Conservatory course is certainly more spectacular and arguably more difficult to play. It’s also more expensive to maintain. Its clubhouse is magnificent (also more expensive to maintain) but it remains largely closed. Yet, Conservatory golf memberships are competitively priced when compared to Grand Haven. That’s due, in part, to the play the course receives from the Hammock Beach Resort guests and Ocean Hammock residents. Golf membership in both Grand Haven and Conservatory communities is optional. Both clubs offer outside memberships.

Home prices are comparable between the two communities. The average sales price for an existing Grand Haven home year-to-date is $332K. New home prices have tended to be higher since most new construction is in Grand Haven’s more exclusive Wild Oaks section with its estate sized lots.

The startling contrast is at a level over which the developer has no control; HOA fees. Conservatory’s HOA is controlled by property owners. Conservatory HOA fees (assessments) are $410 per quarter ($1,640 per year) for undeveloped lots. The association assessment for developed lots is $740 per quarter ($2,960 per year). The fee covers common area insurance and maintenance and street lighting. Improved lot fees cover a home’s landscaping maintenance.

Grand Haven does not have a separate assessment level for undeveloped lots. All lots pay approximately $2,140 per year. But at Grand Haven, the assessment includes gated security, two clubhouses, two pools, seven tennis courts, two croquet lawns, bocce, shuffleboard, a play area and horseshoes in addition to common area maintenance, insurance and street lighting.

Do you want to roll the dice on one or more of the 17 Conservatory lots listed in the upcoming Tax Deed sales? I think, in the long term, that Conservatory will attract more new construction which will become self generating. Prices are likely to rise when that happens. But the HOA needs to take another look at assessments. That side of the formula is too unbalanced.

Lubert-Adler has other properties. Yacht Harbor Village has seen some new construction. Roberts Road properties (formerly known as The Gardens and Bulow Creek) may come on line as the market continues to improve. Hammock Beach is doing well with continuing new construction. LA still has developable property along A1A in the Hammock. All this potential activity will help support Conservatory’s golf club and reduce its dependence on developer subsidies.

It’s your choice; a Grand Haven lot or a less expensive one in Conservatory. What’s your risk v. value position? Here are the 17 lots and their scheduled sale dates. All sales are at the Clerk of Court’s office. They start promptly at 9:00 A.M.

July 30, 2013

• Lot 1 – 211 Conservatory Dr
• Lot 70 – 120 Marsh Elder Square
• Lot 165 – 349 Hibiscus Way
• Lot 222 – 101 Aspen Way

August 13, 2013

• Lot 7 – 223 Conservatory Dr
• Lot 16 – 808 Loblolly Court
• Lot 155 – 329 Hibiscus Way
• Lot 160 – 339 Hibiscus Way
• Lot 161 – 341 Hibiscus Way
• Lot 173 – 403 Bourganville Dr

August 27, 2013

• Lot 46 – 665 Mahogany Run
• Lot 82 – 694 Mahogany Run
• Lot 225 – 107 Aspen Way
• Lot 259 – 185 Aspen Way
• Lot 297 – 434 Bourganville Dr
• Lot 299 – 430 Bourganville Dr