Condotels Becoming Condo-No-Sells?

It's old news that Key West's real estate market has a glut of properties available for sale. Maybe most notable is the huge number of condominiums that are available while even more are currently being developed. Many of these developments are hotels converting into million dollar "condotels".

The question everyone should be asking is: "Will they sell?"

If Miami is any indication, the Key West condo craze may be in serious trouble.
Miami is Key West's closest South Florida major city. There, the condo craze of the past few years is going from boom to bust.

As condo prices in Miami went through the roof over the past few year with wild speculation and flipping, developers responded by planning thousands of new condominiums. Much of that demand and speculation was driven by record low interest rates. Now, with rates higher, Miami is quickly realizing that many of those units don't have real buyers who actually want to occupy the pricey condos. As a result, many projects are unsold and quite a few are being scrapped.

According to Miami city officials, 15 condominium developments have been scrapped totalling nearly 2000 units. Still in construction is over 75,000 units among roughly 300 different condo projects.

This steep downturn in the condo market in Miami is showing up in their sales numbers. In October, sales of existing condos dropped 31% compared to the same month last year. Prices are also headed south, falling 2% that month.

Developers in Miami are likely to panic if things don't improve soon - which is unlikely. According to Lewis Goodkin, a Miami economist and real estate analyst, it may be 5-10 years before condo prices hit bottom and start to rise.

Should Key West be worried? Certainly if you bought a condo at the top of the market and were hoping to "flip it".

But there is probably a greater threat to Key West. Many of the condos being developed today are Key West hotels which have historically been a major part of our tourist economy. If these new condotels don't sell, will the Key West economy suffer? As a tourist based economy, it is hard enough on local businesses trying to survive with the current 700 rooms offline during their conversions/renovations.

Have the developers put us all at risk?

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Time For Tom Tukey To Go?

According to a letter published on the Bahama Village Blog and allegedly written by Tom Tukey, the President of the Truman Annex Master Owners Association (TAMPOA), the TAMPOA Board of Directors is not backing away from his desire to control Southard Street and the new waterfront property outside of it's gates. The letter is dated December 7, 2006 and is addressed to "Fellow TAMPOA Owners".

In that letter, Tukey lashes out at City Commissioners while imploring Truman Annex residents to continue funding his battle with the city (and the County, Navy, NOAA, and the general public).

The letter details upcoming special assessments that the residents of Truman Annex must pay: "The Board decided to adequately fund the association budget to allow for costs associated with litigation. This means that the quarterly assessment will increase to $1150.00 and the special assessments will be $400.00 each in January, April and July."

Tukey details the many problems that will befall upon the beloved Truman Annex motherland if they don't prevail. For some reason, Tukey thinks that his fellow residents won't be able to fully enjoy "extensive pedestrian, bicycle and roller blade activity" if TAMPOA can't control traffic. Makes one wonder how the rest of the world manages to do these things without gates and controlling traffic. Maybe he didn't learn the childhood "game off" and "game on" method of playing. Maybe he just does not play well with others.

But the most astounding thing in the letter is the admission that Tukey wants to control property outside of his development. I am not talking about putting in a factory, industrial facility, or airport next door. I'm talking about a working marina, waterfront restaurants, bars, shops, and whatever else belongs in Key West and makes this place so fun and special. In the letter, Tukey supposedly wrote: "Gates enhance nighttime security for our residents, prevent late night access from the waterfront and act as a suppressant to the development of restaurants, bars and other retail establishments."

And this Key West, is what TAMPOA may really be up to. TAMPOA wants to control property outside of its gates, the Truman waterfront given to the City of Key West from the Navy. Some residents of Truman Annex will lose the greenspace that exists between them and the water. But you know what, THEY DID NOT BUY THAT PROPERTY! It is the City's and the citizens, and that is who should be deciding what should be done with it.

I want to see the Truman Waterfront, which is a very large open space, have a mixture of green space/park (this must be part of the plan), working marina (the Florida Keys are losing their working marinas due to redevelopment into yacht clubs), and bars, shops, and restaurants (for the enjoyment of everyone).

Citizens of Key West and City Commissioners, make the Truman Waterfront a vibrant addition to Key West. Please don't let TAMPOA control the Truman waterfront. REJECT THE RISING TIDE OF CONFORMITY. Don't be afraid to use eminent domain...this is what it was made for. Let TAMPOA know that if they won't play nice, then they may lose all the gates.

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Local Humor: Captain Conch Battles Cat-Napper Tim Turkey

I came across a funny local cartoon strip called The Adventures of Captain Conch & Stock Island Boy, published in the free local bar guide Key West Bar Tab.

In this issue, Captain Conch and Stock Island Boy are battling the treacherous Tim Turkey in their effort to "get to the bottom of the cat-nappings taking place in Key West".

I'm guessing many will miss this, so I'm reprinting it here, thanks to Key West Bar Tab.

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Rumors of Fidel Castro's Death

The island rumor mill in Key West is buzzing with talk about Fidel Castro.

Some are saying that Fidel Castro may have died and that his death may be announced soon.

Local politicians, the Coast Guard, the Navy, and other departments of the US government have supposedly created complex plans to deal with the possibility of Fidel's death. Will there be a massive flood of Cubans landing on our shore? Or will hundreds of boats head for Cuba hoping to pick up relatives and friends like during the Mariel Boat Lift of 1980?

Either way, it is acknowledged that Key West is on the front line of any change and will likely see a big impact. Key West is only 90 miles from Cuba, directly across the Straits of Florida.

Personally, I can't wait for the day when the people of Cuba are free from oppression and can create whatever future they envision for themselves. They are a beautiful culture and deserve much more than Castro's rhetoric and dictatorship.

Viva Cuba Libre!

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Florida Keys Paying the Price for Selling Off Hotels

Its cold up north and the weather in Key West is balmy and perfect. So where are all the tourists?

Although tourism is normally a bit slow in Key West between Thanksgiving and Christmas, many local businesses are grumbling that things are slower than normal.

Alarming statistics show that bed tax revenues are at a ten year low! (the country charges a 4% "bed tax" for lodging). Why is this happening? Maybe because , as I have pointed out before, the City of Key West and Monroe County are allowing their economic engine to be sold off to the highest bidder.

During the insane go-go-go-go real estate market of the past 5 years in Key West & the Florida Keys, hotels, guesthouses, and RV parks have been bought up by developers and are in the process of converting them into million dollar condominiums. Currently, there are over 1200 "rooms" that are not available due to converting into condos/condotels. As a result, with fewer hotel rooms available to rent, the average price of a hotel room in Key West has risen. Yet that does not explain why occupancy rates have not been full.

Supposedly many of these converted hotel/condos will be rented out once again. I think it is unlikely that they will. Let's look at the rational behind this arguement. For example, suppose someone buys the "condotel" room/unit for $1,000,000 (one million dollars). The mortgage on the property, with 20% down, would be over $6400 per month, plus taxes and insurance and condo fees (and electricity, water, sewer, garbage utilities etc). Let's call it $9000 per month. For the room to just recoup the expenses, it would have to be rented out every night of the year for $300 per night. And that would only get you to break even.

So the question is: Can Key West regularly get $300 per night from a huge number of tourists? Today's Tourist Development Council President, Harold Wheeler, said that he thought that our bed tax numbers are at 10-year lows because the price we are charging for hotel rooms it too high. So why should anyone think that our tourist market will be able to support even more expensive lodging?

But what about the reality that most people who buy a million dollar property are unlikely to rent it out to strangers. For them, it is a second home...maybe an "investment". Then again, I think it is nuts that anyone would buy a hotel room for a million dollars. At that price, it surely can't be a "flip", something that hyper-inflated housing prices recently and is now starting to unwind/deflate.

The City of Key West and Monroe County should be very concerned about what is happening to the main engine of our economy - tourism. The mayor of Key West said he wasn't worried and attributed the bad bed-tax numbers to Florida's ranking number one in the nation for foreclosures. I have a feeling that our Mayor has been too dependent on real estate and is missing the boat about tourism. As the real estate boom goes bust, the financial stability of the Florida Keys will be upended.

And yet, through it all, nearly nothing is being done for affordable housing. Workers are leaving in droves, and I suspect that this year will be make-or-break for many Key West businesses.

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Praise for Conchette & Her Tampon Blog

I just wanted to post some praise about the great job Chonchette is doing at her blog Tampon Blogger (which stands for "Truman Annex Master Property Owners' News").

I don't know her personally, but I applaud her coverage of the Truman Annex versus the City of Key West battle over the control of Southard Street - a.k.a. the gate issue.

Conchette clearly has some deep connections within Truman Annex, and she has brought to light several documents, for example here and here, that show TAMPOA's position on the gate is not unanimous within the Truman Annex community.

Plus, Conchette has had to suffer the slings of anonymous comment posters who have tried their best to discredit and insult her. I praise her ability to remain level headed and keep the attention on the issues. Good work Conchette.

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Is Florida's Housing Bubble Imploding?

Statistics recently published reveal that the Florida housing market is in serious trouble.

After years of wild speculation, enormous home sales and price gains, and record numbers of new homes and condos constructed, it now appears that Florida real estate market may be in serious trouble.

While the nation as a whole saw a year-over-year decline in October housing prices, some of Florida's communities were among the nations biggest decliners. Meanwhile, the foreclosure rate for Florida has significantly spiked upward, foreshadowing continued problems for the real estate market.

Here are some of the details of the statistics recently released:

Three Florida metro areas were hit hard by price drops. In Sarasota, the median home now sells for $320,700, off a whopping 9.4 percent from last year; Palm Bay/Melbourne/Titusville prices sank 9 percent to $193,600; and Cape Coral prices plunged 8 percent to $255,400.

RealtyTrac, an online marketplace for foreclosure properties, reports that 115,568 properties entered into some stage of foreclosure in October, a 42 percent increase over last year and an incidence of one for every 1,001 U.S. households. The comparison with October of 2005 was particularly dramatic because that month in 2005 recorded the highest foreclosure rate last year, according to James Saccacio, chief executive officer of RealtyTrac.

The newest data continued a strong trend from the past three months that shows foreclosures definitely moving upward, according to Saccacio. That puts more pressure on an already strained housing market.

In the month of October 2006, Florida had 11,413 foreclosure filings. That equates to 1 in 640 household - a fifty percent increase over the past 12 months.

Here in Key West, the housing picture looks bleak. The speculation of the past 5 years has driven many local residents off the island, as affordable housing vanished from the Keys. This is the county's number one problem, yet unfortunately they seem to have been unable to find a solution. With a record number of residential properties on the market in Key West (and more continue to be built), and nearly none of them selling, prices will have to fall much further before finding solid footing.

Maybe I was right: everyone in America cannot suddenly afford a second home. The aberration was caused by banks loosening their lending practices (remember interest-only payments?) - eventually building up a pyramid that required new buyers to pay every higher prices. Once prices had reached their peak, a cascade of sellers glutted the market. It was a bit of financial trickery led by aggressive lending practices, and it very well may shake the banks themselves. They have lent too much money for too little equity.

It will be a long time before this housing bubble collapse is over.

Now where are the realtors that were practically promising their customers huge gains? I believe more than one said "You can't lose".

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Reef Relief Holiday Auction

This year's Reef Relief Holiday Auction is underway! This year's auction has great items - plus, by bidding, you'll help out an important cause, saving our coral reefs. You might find that perfect holiday gift too.

Thanks to generous donations by over 100 business including many from Key West, you can bid on art from Key West artists, exciting boat trips, excursions, and other wonderful items. All proceeds will benefit Reef Relief's efforts to save the coral reefs and educating the public about our marine environment.

Check out the desirable items and get in on the bidding action at http://www.reefreliefauction.cmarket.com/

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Key West: Highest Rent Does Not Equal Best Tenant

Whoever told the City of Key West Florida that the best tenant is the one who can pay the most has done the community a disservice.

The City should view it's tenants as partners - and should do what is in the best interest of both.

Just because someone else will pay more rent for a property does not mean they are the best tenant. They are unproven and don't necessarily have a good business plan. Plus, are they displacing a business that is loved by the community and that loves the community?

The City should look down the road to the possibility of a rent deficit when these highest-rent-paying businesses fail. Then who will take their place? How will the City deal with a shortfall then? Raise taxes of course.

Should the mom-and-pop businesses in this town have to pay a ridiculously high rent because a big box retailer is willing to pay more? I say no way. And who wants big box retailers in Old Town Key West? I do not.

One by one, the City of Key West is squeezing mom-and-pop businesses out, and I am worried that the City is sacrificing the community's character and amenities in the pursuit of maximum rents.

I mention this because the local beloved grocery store The Waterfront Market has been in a protracted lease negotiation (10 months and counting) with the City of Key West. The market is located at the Key West Bight, which has been raising rents through the roof on many businesses, forcing many to shut their doors. The Waterfront Market is a true community resource, supplying fresh fish to local restaurants and citizens, along with the island's most impressive grocery selection.

If the City stays on this course, they may one day lose their stable tenant base. This is a far greater cost than the benefit of temporarily higher paying tenants.

The value of a tenant cannot simply be viewed as the rent he can pay. Instead it is a combination of the value to the community + the rent the business can afford. The Waterfront Market adds a lot of value that isn't reflected in the rent numbers, and the City should recognize this and work with Buco (the owner of the Waterfront Market), view him as a partner, and charge a rent that does not force him out of business.

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Navy to TAMPOA - Gates Are Not Acceptable

The local press today reports that the Navy opposes any plan to place gates on Southard Street in Truman Annex. On the morning radio show, the second in command for the Navy in Key West said that they will not show identification to TAMPOA nor will they allow gates that restrict access. This is good news for those in the general public that are concerned about restricted access.

The Truman Annex Master Property Association (TAMPOA) has been battling the City of Key West over control and ownership of the portion of Southard Street that runs though their Truman Annex neighborhood. That street is used by the Navy for access to its property. The public also uses the street to acces Fort Zachary State Park and the Truman waterfront property. TAMPOA has stated that if they don't gate off that street then their wealthy-yet-conformist neighborhood will no longer be considered a "gated community" and therefore lose value. Looks to me like TAMPOA is in a lose lose situation.

It is time for TAMPOA to recognize the importance of the street to the Navy, the citizens of Key West, and the general public. TAMPOA, please stop planning to restrict access. Either that, or face the wrath of the public, the will of the City of Key West Commission, and the bottomless pockets of the US Government.

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