Top Real Estate Stories of the Year for Palm Coast and Flagler County

Not a good year for the local real estate business – top stories summarized.

December 29, 2007 – Palm Coast, FL – The biggest story of 2007 was the overall collapse of the local residential real estate market and the economic stagnation brought on by the decline in construction. There was a surge in new commercial construction but not enough to offset the decline in the residential sector. I’ll provide a statistical summary and some predictions in an end-of-year newsletter next week. But there were several stories within the big story this past year. I’ll summarize them here and comment on the ones that I feel were the most significant or newsworthy.

By all measures, the local residential market is substantially lower than at the start of the year. Each month this year, the number of single family homes sold, their median selling price, and total sales volume were down from the same month of the previous year. Some builders have departed Flagler County. Those that remain have scaled back drastically. Very few spec homes are under construction. Some projects, like The Preserve condominiums on Colbert Lane, have simply been halted, awaiting an improvement in market conditions. The roads are in. The stop signs are visible. But the gates are locked.

Centex stopped development of Palm Coast Resort condo/hotel, along with two remaining condominium towers, and closed the Palm Harbor Golf Course. Centex also sold off their commercial construction business. Palm Harbor residents rose against the unexpected action in heated town meetings. In the end, Centex donated the Palm Harbor Golf course to the City of Palm Coast. The city began working towards renovation of the course with the goal of creating a municipal golf course. Centex is seeking buyers for the remainder of the project as well as for Marineland, an entitled but undeveloped oceanfront condominium project along route A1A at the northern boundary of Flagler County. Another local project, Bulow Shores, was sold to the Ginn Company in April.

Construction was completed on several Intracoastal condominium units in Tidelands, another Centex development. The project was sold out earlier at “pre-construction prices.”  But in early 2007, with the market showing definite signs of a decline, some buyers went ahead and closed on their contracts. Others walked away from their deposits, leaving Centex with unsold inventory. Through the year, with aggressive pricing and attractive amenities incentives, they sold out the remaining units. They’re now offering reservations for additional units (yet to be built), offering similar pricing and amenities incentives. Meanwhile, Centex faces disgruntled owners who paid the original contract price only to see identical units selling at far lower prices only months later.

The Ginn Company seems to have weathered the storm better than most other developers, but not without some painful corrective action. Bobby Ginn was flying high at the beginning of the year, fresh from the acquisition from Centex of the Ocean Hammock Golf Course and Inn and a successful PGA Champions Tour event there. Bobby personally bought his own NASCAR racing team, spending time, energy and millions of his own dollars. Along the way, the company suffered from the market reversal and lack of oversight. Doing what investors do, Ginn’s major funding source, Lubert-Adler took steps to protect their investment. Robert Gidel, an experienced real estate investment pro with close ties to Lubert-Adler, was named president, taking over day-to-day operations of the Ginn Company. Two former Ginn associates have rejoined the company to head sales and marketing. With Gidel on board, the company has continued to move forward. Funding for the Gardens at Hammock Beach was affirmed. Bulow Shores was purchased, as was The BriarRose development in Georgia where a recent successful launch event produced 26 sales. The Conservatory will host a PGA Fall Tour event in 2008. The Ocean Course at Hammock Beach will repeat the PGA Champions Tour event. Bobby, who remains as CEO of the Ginn Company, sold his NASCAR team.  

On the flip side, the total lack of any lot sales in The Conservatory is troubling. Five lots have been foreclosed. Forty-eight have delinquent tax liens. As testimony to the complete lack of buyers, one bank-owned lot, originally purchased for $404.9 thousand remains unsold even though currently offered at $209.9 thousand (price effective 12/6). While Ginn successfully sold all the lots in The Conservatory and is proceeding with a planned opening of the $15 million clubhouse, the dead resale market for the lots has property owners worried.

In the past, public legal notices were things that occasionally cluttered up the local newspaper. In 2007, they became cocktail party conversation topics. Today, everyone knows more about foreclosure notices, foreclosure sales, delinquent tax certificates, and delinquent tax sales. The media and politicians were quick to place the blame on predatory lenders and exotic mortgages, but evidence is surfacing that there were other forces also at work. In the end, the blame for the crisis will be spread around to include inexperienced speculators, politicians, lax regulatory oversight, and mortgage fraud, along with escalating property taxes and insurance premiums. The highest profile foreclosure of the year was The Players Club. Once a premier tennis facility, the club was acquired by the developer of European Village who ran into financial trouble.

The commercial sector of the local real estate market did rather well in 2007.

• Cobblestone Village was completed, anchored by Belk and Lowe’s. Both stores had successful openings. A Golden Corral restaurant will break ground soon.
• Town Center showed lots of progress. The perimeter (big box) retail center, anchored by Target is well underway and construction has begun on a Hilton Gardens Hotel. Plans for the multiplex Epic Theater complex have been submitted. The roadways through Town Center are now open, adding another east/west crossing of I95.
• City Walk is nearing completion but after three different general contractors, it’s two-years late.
• Construction of Roma Court, with 55,000 square feet of retail and restaurant space commenced at Commercial Drive and Palm Coast Pkwy.
• A Kohl’s retail complex, to be located on Palm Coast Pkwy and Belle Terre, is in the final stages of permitting.
• The SR100 at Interstate 95 interchange and bridge replacement are nearly complete.
• Site development work began for Palm Coast Park, Palm Coast Holdings’ large mixed-use development astride US 1 north of Palm Coast Pkwy. Lowe finalized permitting for Sawmill Creek, a combined commercial and residential golf community within Palm Coast Park.
• Site development commenced at the corner of Roberts Road and SR100 for another Publix anchored shopping center.
• Benton Village, a senior living rental retirement community on Magnolia Trace Way, just off Belle Terre, began construction. The complex will be open in early 2008.

Some major builders with ties to Flagler County suffered financial reversals in 2007.

• Levitt and Sons, which owns a large parcel of land in Flagler County south of the airport, declared bankruptcy after more than 60 years building homes.
• WCI, the developer of the Hammock Dunes tower condos is facing the possible expiration of their credit facility in January. Financial analysts have place them on a bankruptcy watch list.
• Whitehall Homes has suspended activity at two 12-unit condos in Grand Haven due to lack of funding. Their future is uncertain.

Politicians affect the real estate market so I’ll report on them as well. Locally the arrival of a new city manager and the turnover of some council and commissioner seats made for a more convivial relationship between the county and city. But they have failed to address the crying need for economic development within Flagler County.

• The industrial segment represents only eight tenths of one percent of the total county tax base putting an inordinate share of the tax burden on residential and commercial property. White papers have been written. Various groups, authorities, task forces, etc. have been formed and a lot of hot air has been spewed. But nothing much has been accomplished because the groups are not funded, nor are they given any authority to do anything without the approval (interference) of elected officials.
• The county airport represents the best near term opportunity for economic development. While I applaud plans for a new control tower and long range plans for runway expansion, progress is too slow and our needs too immediate. Councilman Darby needs to stop micromanaging the airport as if it were his own. The benefits of a customs office at the airport would be enormous, but Darby is unwilling to make it a priority.
• The local economy’s major component is construction, which is currently anemic. But in 2007, the county, city, and school district raised impact fees on new construction.
• Only the quasi-public Enterprise Flagler and the Chamber of Commerce, under new leadership, seem to be effectively carrying the economic growth initiative forward. But they are limited by the feckless support of most local officials.

Our elected officials in Tallahassee promised property tax reform. They let us down. The measure they are placing on next year’s ballot for our approval is worth voting for only because it offers a few crumbs and may offer a small spark to real estate sales. But it does not address the real problems and inequities in our present property tax structure. They also failed to accomplish much in the way of insurance reform. It’s scary that the largest insurer in the state is now the state itself. If you think the legislators bent over too far for the insurance industry in the past, watch out for next year.