Key West Condo Listing Prices Rapidly Declining

The residential real estate market continues to show worsening deterioration in the United States.

Statistics released Monday reveal that sales of existing homes dropped by more than expected while inventories of homes for sale have continued to increase. The inventory of homes is up 23.5% above the past year - and increased another 5% from April to a record 4,430,000 properties. According to the National Assn. of Realtors, this is equal to 8.9 months of supply at the current sales pace.

In the face of swelling inventories and dropping demand, median sales prices have fallen 2.1% nationally. This is the 10th straight price decine compared to a year ago, the longest stretch on record. Meanwhile, home prices in 10 major U.S. cities dropped at the fastest pace in 16 years during the 12 months ending in April, according to Standard & Poor's Case-Shiller home price index released Tuesday.

South Florida's housing market is especially suffering. Most notable is the overbuilt condo market - where developers are abondoning projects and prices are rapidly falling. Here in Key West, the condominium market is seeing huge price listing drops.

Here are a few condo price reductions listed in the current Key West listings for the past 14 days:

• 3930 Roosevelt Blvd w101 - Original Price: $325,000 - Listing Price: $215,000
• 3930 Roosevelt Blvd S-104 - Original Price: $350,000 - Listing Price: $249,900
• 3314 Northside Dr 35 - Original Price: $499,000 - Listing Price: $299,000
• 2521 Fogarty Ave 4 - Original Price: $324,000 - Listing Price: $299,000
• 3314 Northside Dr 124 - Original Price: $449,000 - Listing Price: $335,000
• 173 Golf Club Dr - Original Price: $399,000 - Listing Price: $335,000
• 3314 Northside Dr 35 - Original Price: $499,000 - Listing Price: $299,000
• 3314 Northside Dr 124 - Original Price: $449,000 - Listing Price: $335,000
• 2601 Roosevelt Blvd 307 c - Original Price: $430,000 - Listing Price: $355,000
• 11 Whistling Duck Ln - Original Price: $669,000 - Listing Price: $399,000
• 1332 Seminary St 101 - Original Price: $525,000 - Listing Price: $410,000
• 1402 Olivia St 4 - Original Price: $598,876 - Listing Price: $499,000
• 21 Kestral Way - Original Price: $815,000 - Listing Price: $550,000
• 620 Thomas St 174 - Original Price: $729,000 - Listing Price: $595,900
• 1616 Atlantic Blvd 9 - Original Price: $1,212,500 - Listing Price: $905,000
• 2609 Gulfview Dr - Original Price: $1,270,000 - Listing Price: $923,200
• 31 Seaside south Ct - Original Price: $1,195,000 - Listing Price: $1,095,000

Currently there are many more condominums in development throughout the Florida Keys and Key West, and unless demand rapidly increases, prices are likely to further suffer.

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Florida is Epi-Center of Real Estate Meltdown

Don't blame me for the real estate meltdown. I didn't create it, and I surely cannot fix it. If you have been reading this blog for a while, you have seen that I warned about this real estate bubble and its negative effects on Key West.

With that said, I think it is in the best interest to tell it like I see it - and hopefully people will gain from it. (Oh, and by the way, if you need real estate values to skyrocket in order for you to enjoy Key West, then, frankly, you moved here for the wrong reason. But, to each his/her own - its not my money you blew).

Recent statistics released by bargain.com show that for the month of May, Florida leads the nation in foreclosures.The reasons are abundant - but mainly tied to the irrational speculative activity that persisted for the past 6 years. Basically, people gambled like crazy and developers responded to this increase in demand by building like crazy.

Here are some of the stats bargain.com reported for Florida:

• 1st in the number of homes entering the foreclosure process (29, 530).


• 1st in the share of homes entering foreclosure that were either condos or townhomes (14 percent).


• 2nd in the proportion of homes entering foreclosure (1 in every 245).


• 4th in the rate of increase since April (22 percent).

Other statistics are confirming Florida as a main epi-center of the real estate meltdown.
For example, three of the nation's largest van lines moved more customers out of the state than into it last year, reversing a decades-long trend.

The bad real estate market here is taking its toll on residents and people contemplating moving here.

School enrollment is declining statewide: Public school enrollment, expected to climb by nearly 49, 000 students last school year, dropped by 3, 571, the first decline in 24 years.
And now, more Florida drivers are seeking licenses from other states compared to out-of-staters seeking a FL license.

All of this is part of the national real estate picture which is getting worse. Rates are rising (the Fed is likely to raise rates too), the glut of homes on the market continues, and foreclosures are spiking.

U.S. foreclosure filings surged 90 percent in May from a year earlier as more homeowners fell behind on their monthly mortgage payments, according to RealtyTrac.
There were 176,137 notices of default, scheduled auctions and bank repossessions last month, led by California, Florida and Ohio.

Prices have fallen in Florida (and nationally), but more substantial declines are likely. South Florida is still vastly overvalued, according to statistics compiled by National City Corp/Global Insight. According to their data, Naples is 63.4% overvalued and Miami is 59.2% overvalued (Key West was not in their data).

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What $850,000 Gets You in Key West

How out of touch is the real estate pricing in Key West?

How far will this housing market fall? Expect prices to fall at least another 25%.

This is due to:

• the wave of interest-only loans expiring over the next 15 months
• tighter lending standards
• huge oversupply of houses currently on the market
• many more houses/units currently being developed and offered by developers
• the real possibility the Fed may raise interest rates as inflation worries bloom
• the possibility of a recession. Historically, any time there were 4 fiscal quarters that showed less than 2% GDP a recession occurred within the next 4 quarters.

Real estate values are tumbling across the United States and will continue to suffer for a long time. Depending on who you believe, the real estate market will not recover for the next two to ten years. I tend to think that in 10 years, people will be lucky to sell their home for what they paid for it two years ago.

Florida is one of the most affected states. Many homes are in "weak hands" - vulnerable to foreclosure due to the adjustable rate loans.
Key West is seeing its share of declines - but if this house is any indication - homes are still overpriced.
Here is what $849,000 will get you in Key West (this is in the current MLS):

Looks like paradise, eh?

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Florida's New Eminent Domain Law

First, I'm not a lawyer (hurrah!). Fortunately, it appears the City of Key West has a good one.

Eminent domain is defined by wikipedia as:

Eminent domain in common law legal systems is the inherent power of the state to seize a citizen's private property, expropriate private property, or rights in private property, without the owner's consent. The property is taken either for government use or by delegation to third parties who will devote it to "public use." The most common uses of property taken by eminent domain are public
utilities, highways, and railroads. Some states require that the government body
offer to purchase the property before resorting to the use of eminent domain.

Eminent domain is a constitutionally protected power given to municipalities. The rule of eminent domain is the governmental power to take private property for public use. The Fifth Amendment of the U.S. Constitution states, "... nor shall private property be taken for public use without just compensation." The framers of the Constitution included this clause as a safeguard to property owners in recognition that the government would at times have a public need for private property, but at the same time assuring property owners that they would be paid for its’ taking.

Property owners have long realized and accepted that the government has this power. Most property owners although distressed are not surprised that the government can force a sale of their property if the property lies in the path of a proposed public highway or public building.

In response to a US Supreme Court ruling a few years ago, States began enacting laws to further define and limit the abuse of eminent domain. Florida was the first state in the US to pass such legislation.

Let's look at Florida's eminent domain law - which became effective this year. I highly encourage you to read the law - especially any of you barristers out there. Please feel free to comment to this post.

In short, the law:

"Prohibits the transfer of private property acquired through eminent domain to another private entity with certain exceptions, including for use by common
carriers, public transportation, public utilities, or where the private use is incidental to a public project. Prohibits the use of eminent domain to eliminate blight conditions or to generate additional tax revenue. Authorizes the use of eminent domain under the Community Redevelopment Act if it is necessary to remove a threat to the public health or safety"

So, the law says you can't take private property and give it to someone else unless there are certain exceptions. Mainly, the law restricts taking property for private endeavors. But this is a street that will remain a street (not turn into a commercial project). I couldn't find anything in the law that said the street could not lead to a commercial businesses. After reading much of the law, my understanding is that a street would be allowed for eminent domain. Actually, the law seems to me to clearly allow this to happen. The city of Key West would have to compensate Truman Annex for the taking, but with my plan of gating and fencing along Southard Street, Truman Annex would still be a gated community (so far, the bulk of their damage claims comes from losing a "gated" status). Plus, the law provides for eminent domain for community redevelopment, which may or may not apply here.

Some commenters to this blog have attacked me and anyone who believes that eminent domain is a viable legal option.



For example, a commenter signed as Harvey J. Keck wrote

The issue is that the city does not have the necessary rational to succeed in this endeavor. 1. Bad faith in negotiations with a signed and enforcible agreement (with the issue of police powers removed). It looks very bad when the city unanimously signs an agreement (which they freely did) to obtain land and
then once it gets the land abrogates that agreement. What will the courts say
about that, I wonder? 2. Already existing public roads which allow access to the
property and are presently used for traffic both private and commercial.3. Recent Florida laws restricting eminent domain to further commercial development especially when there are alternatives already in place.4. The requirement for the city to pay for both sides of this legal dispute. (Where's the money for
this going to come from especially after the Duck Tours gets their payments).There are other arguments but these need to be addressed with legal arguments and not just fantasy rationalizations.

In response,

1. forget the agreement. that has nothing to do with eminent domain. if it makes you feel better, you can believe you won the case and got the contract enforced. NOW THE CITY FILES EMINENT DOMAIN. THINGS CHANGE. If a municipality needs a street for the common good - the law says they can do it. and since it is already a street, they could simply seek an EASEMENT - and Truman Annex would still own the street and the public could use it as the City sees fit
2. yes, we know about the streets. but it is up to the municipality to decide what is the best plan. and with a growing waterfront usage, Southard Street makes sense.
3. You keep saying this is a commercial endeavor. But that doesn't sound right to me. The eminent domaining of Southard Street would KEEP IT A STREET. And it would be leading to a property that is 75% park. It would not be difficult for the City of Key West to prove that this project is for the public good.
4. Yes, Harvey. We know. You're going to make the City pay. And pay big. Are you looking forward to making the citizens (AND YOURSELF) pay? I'm not so sure it will be as expensive as you warn - especially given my idea. Heck - What does an easement cost? And what if the Navy declares a need for an easement? Anyway, I don't think you know what any of this will cost. Bringing up the Duck Tours as a final salvo is lame. Your FEAR is not working on me.

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Rose Colored Eyeballs

With two big bottles of contact lens "juice" on my shelf I hear the news that AMO Complete Moisture Plus contact lens solution is being recalled. Not just some manufacturer lots. No, the entire product line. China has already banned the product - a notable move given the US's scrutiny of Chinese product safety (dog food, toothpaste). Amusing world.
If you have some of the product, the company has set up a "hotline" (not so hot) to receive a return package - allowing you to get your money back. Call 888-899-9183.
It is recommended that you don't use any more of the product, AND throw out any lenses that have come in contact with the solution.
Thought you should know.

Here is the story from the AP wire:

By MIKE STOBBEAP MEDICAL WRITER
ATLANTA -- Government officials are warning people to throw away a contact lens solution after an investigation linked it to a rare eye infection.
The warning concerns AMO Complete Moisture Plus Multi-Purpose Solution, used for cleaning and storing soft contact lenses, said a spokeswoman for the U.S. Centers for Disease Control and Prevention.
The solution seems to be a factor cases of Acanthamoeba keratitis, a painful eye infection that can lead to permanent vision loss or blindness.
The CDC and the U.S. Food and Drug Administration are investigating 138 confirmed cases.
The solution is made by Advanced Medical Optics Inc., a publicly traded company based in Santa Ana, Calif. The company issued a statement Friday night saying it was "immediately and voluntarily recalling" the solution.
"There is no evidence to suggest that today's voluntary recall is related to a product contamination issue and this does not impact any of AMO's other contact lens care products," the statement said.
The confirmed infections have been reported since January 2005, the company said.
CDC officials said people should discard the solution, throw out their current contact lenses and toss the lens storage case. All of them may harbor the infecting amoeba, said Michael Beach, team leader in the CDC's division of parasitic diseases.
An estimated 85 percent of U.S. cases of Acanthamoeba keratitis occur in contact lens users, but it's extremely unusual - the estimated prevalence is one to two cases per 1 million contact lens wearers. Contact lens wearers who practice proper lens care and people who don't wear contact lenses can still develop the infection.
It's hard to diagnose and treat - and some of the drugs used to fight the infection are available only overseas or from compounding pharmacies.
Doctors first suspected a problem in 2004, when a University of Illinois-Chicago ophthalmologist, Dr. Elmer Tu, noticed more than a dozen cases of the infection. Normally, he might see only one or two in a year, Tu said.
UIC doctors saw 35 patients with the condition from May 2003 through September 2006. About 55 percent used the Advanced Medical Optics product exclusively, Tu said.
UIC investigators think the infection is not originating in the manufacturing process, but that the cleaning solution is not protecting people from the infection, which they get in their eyes through showering or swimming, Tu said.
The amoeba that causes the infection is naturally present in soil and water. Wearing contact lenses while swimming or in the hot tub appears to increase the risk of infection.
The cases were reported to the Illinois state health department, which notified the CDC. A CDC investigation in about 35 states led to Friday's announcement.
The solution is not marketed to protect against the amoeba. But "it's supposed to be free of any type of microorganisms. It's not supposed to result in anyone getting an infection," said Julie Zawisza, an FDA spokeswoman.
The FDA will take information from the CDC investigation and try to discern what about the solution - or how people were using it - could be responsible for the infection cases, she added.
Health officials have interviewed 46 patients so far. Of those, 36 wore contact lenses and used some form of solution, and 21 used the Advanced Medical Optics solution within a month of onset of symptoms, Beach said. It was a strong enough association to cause health officials to issue Friday's warning, Beach said.
Dozens of cases of this rare condition can be significant, eye experts said.
"It's a large number if it's happening to you. It's a large number if there is a little pocket of it. It's not a large number if you consider there are 35 million contact lens wearers in the United States," said Dr. William Ehlers, a University of Connecticut Health Center ophthalmologist.
The company said in its statement that consumers who believe they have the recalled solution should call (888) 899-9183. It is contacting retailers, customers and distributors on return and replacement instructions, it said.

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Solution to Southard Street?

Depending on the outcome of the TAMPOA vs City of Key West (and the United States too), eminent domain may become necessary for the City for control of Southard Street.

TAMPOA has claimed that losing Southard Street would cause that community to lose a large amount of value. The reason, according to TAMPOA, is that Truman Annex would no longer be a gated community, and gated communities, according to TAMPOA, are worth more than non-gated communities.

But what about a smart solution?

Here is what I suggest.

Erect fences and gates along Southard Street - thereby keeping Truman Annex gated. The street and sidewalks/greenspace are wide enough that fences would fit. (I've include an artists rendition of what this might look like. Also, since the guardbooth would no longer be necessary, I thought it nice to show what Southard Street might look like without it).

If the City incorporates an idea like this into their eminent domain proceedings then they could show the judge that there are not significant damages to Truman Annex. Remember, unlike many eminent domain proceedings in the United States, no one is losing a house here. Its a street and it will remain a street.

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TAMPOA President Leaving Truman Annex?

Tom Tukey, president of the Truman Annex Master Property Assn. (TAMPOA), has his and his wife's Truman Annex house up for sale.

List price is $5.3 million. The house is described in the MLS as:

"Stately, showcase home. Grandly placed at the heart of the finest street in the most elegant enclave on the Island yet within walking distance to dining, shopping and entertainment. Built with an eye to historic aesthetics but with the most demanding modern construction; far above current code. 10' ceilings, crown and base moulding, mahogany floors throughout. Six bedrooms; all with walk in closets, full baths, French doors and porches. Seventh full bath near living area and office/library. Enormous great room. Solar heated pool. Double carport. Large Captain's walk with spectacular water views. Over 1000 SF of decks plus over 1000 SF of storage in addition to the 4572 SF of living space. Simply the pinnacle of Key West living."

The offering price equates to $1,159.23 per square foot.

Included in the listing are photos of the interior, exterior, and water views. The water view photo (included in this post, above) is interesting: according to the photo the Tukeys had a view of the water, the Navy's outer mole, and the Truman Waterfront property. This view would certainly change when the City begins to redevelop the Truman Waterfront.

You can view the listing at http://keywestmls.com/search/ under listing #104548.

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Truman Waterfront Plans Taking Shape

Yesterday's "Naval Properties Local Redevelopment Authority Workshop" unveiled a preliminary master plan for the Truman Waterfront property, conveyed to the City of Key West with stipulations.

I've included images of the plan which were presented to the commission and public (click the images to see larger versions)

The plan appears to balance the communities desire for greenspace with the obvious value to the City of this important piece of waterfront. In my mind, it looks very good and will be a vibrant, enjoyable, and interesting new addition to the City of Key West.

The plan creates a large park out of most of the land 75%-80% greenspace. Also included in the plan is a "Bahama Village Square", marina, harbor walk, public pier, flexible greenspace that accommodates a soccer field (also for events, concerts, etc), public gardens, an interactive children's' fountain, maybe a restaurant, and an assisted care living facility. Planners were quick to point out that none of these particulars have been decided, and will require public input and voter referendums. The plan is an outline of what general uses each area might be designated.

Many ideas were mentioned for the various spaces - many for community organizations with very worthwhile causes. Some good ideas included a culinary institute for our hospitality industry, spaces for Bahama Village residents to have cottage businesses, art spaces, and trade instruction.

Also included in the plan is 86 residential affordable housing units, retailing directed to those affordable housing units, nearly 200 parking spaces, butterfly/bird attracting plantings, bocci courts, and plenty of shaded areas.

Ed Swift spoke at the public input and believes that Cuba is likely to open sooner rather than later (though he conceded that he's been saying that for 30 years). Swift pointed out that high-speed, ocean going ferries will want to operate out of Key West to travel to Cuba. He implored the City officials to consider this future need while designing the property and design with Cuba in mind.

Norma Jean Sawyer, executive director of the Bahama Conch Community Land Trust, was inspiring - and an excellent leader for her community. She reminded the commission that the conveyance of the land by the Navy was for the purpose of "economic development". Her plans for the Bahama Village Square, approximately 6.6 acres, will greatly benefit her community. Removal of the fences bordering Bahama Village and the waterfront will immediately benefit Bahama Village, and she (along with other speakers) requested that the City move quickly on taking down the fences.

Commissioners seemed all over the place in their comments.

Rossi thinks there is already too much vacant commercial space in town, and does not we need anymore. And, he said that without the traffic issue worked out (thanks to TAMPOA), and the Admiral's Cut issue, there is probably little that is worth planning for now.

Menendez spoke passionately about the needs of children.

Verge moaned that this project would cost a fortune - stating that the cost projection made 5 years ago of $20 million was now probably more likely $100 million. I can't imagine how the numbers could change anywhere near that.

In the end, the Commission directed City staff to look into removing the fences, placing some sod, and starting the very long process of planning with special meetings.

This plan, no matter what it is, is likely to take a very long time. After all, as Norma Jean Sawyer mentioned, this whole thing began over 10 years ago.

TAMPOA is likely to have a fit over this - and I won't be surprised if they fight the City over every minute point, making the residents of Key West wait and wait for their new park and amenities.

It should be clear to TAMPOA that Southard Street is part of the City plan. Fight in court all you want - the City will need the street, and eminent domain is fair if the City does not prevail in the current litigation. TAMPOA claims that they'll lose value - but the City may be able to make the claim that the improvement to the neighboring property will benefit them - offsetting their "loss".

Either way - TAMPOA, you may think you live in an investment - but in reality, you live in a community. Threatening to make the City pay tens of millions of dollars because you lose your "gated" status is sad. We are islanders - in this together. I'm sure you could enormously repair your image in the City if you simply ended your claim to the street. All islanders may even rejoice, and head down to Truman Annex and thank your for helping to make our island a better place.

Your comments are encouraged. What do you think?

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How Much is Your Key West Home Worth?

With the national residential real estate underway, many in Key West are wondering how much their house is worth.Forget appraisal numbers. Many properties are selling below those estimates.

A better indication of current home values - and the temperature of the real estate market - is recent sales data.

Following are the residential real estate transactions for Key West during the month of March, according to the Key West MLS. I have excluded the "sales" of the Santa Maria Condominiums (Sally O'Boyle wrote an excellent post about the Santa Maria numbers). I've calculated price per interior square foot for a better sense of where buyers are meeting sellers:

Listing Date: 12/4/2006 Selling Date: 3/20/2007 Original Price: $690,000 Listing Price $625,000 Selling Price: $565,000 Address: 803 Virginia St Interior Sq Ft. 1,000 Price per Sq Ft.: $565

Listing Date: 1/10/2007 Selling Date: 3/19/2007 Original Price: $515,000 Listing Price $515,000 Selling Price: $475,000 Address: 3685 Seaside Dr 206 Interior Sq Ft. 798 Price per Sq Ft.: $595

Listing Date: 3/3/2006 Selling Date: 3/16/2007 Original Price: $355,000 Listing Price $315,000 Selling Price: $319,725 Address: 419 William St 5 Interior Sq Ft. 369Price per Sq Ft.: $866

Listing Date: 10/20/2006 Selling Date: 3/16/2007 Original Price: $899,500 Listing Price $899,500 Selling Price: $797,000 Address: 1105 Washington St Interior Sq Ft. 1,374 Price per Sq Ft.: $580

Listing Date: 1/12/2007 Selling Date: 3/16/2007 Original Price: $425,000 Listing Price $424,900 Selling Price: $400,000 Address: 900 White St 1 Interior Sq Ft. 650 Price per Sq Ft.: $615

Listing Date: 2/2/2007 Selling Date: 3/16/2007 Original Price: $525,000 Listing Price $525,000 Selling Price: $456,000 Address: 3727 Flagler Ave Interior Sq Ft. 1,392 Price per Sq Ft.: $327

Listing Date: 3/7/2007 Selling Date: 3/16/2007 Original Price: $1,895,000 Listing Price $1,895,000 Selling Price: $1,750,000 Address: 635 William St Interior Sq Ft. 1,670 Price per Sq Ft.: $1048

Listing Date: 1/12/2007 Selling Date: 3/15/2007 Original Price: $519,000 Listing Price $519,000 Selling Price: $519,000 Address: 1126 Stump Ln Interior Sq Ft. 610 Price per Sq Ft.: $851

Listing Date: 1/31/2007 Selling Date: 3/15/2007 Original Price: $719,000 Listing Price $719,000 Selling Price: $699,000 Address: 3713 Pearlman Ter Interior Sq Ft. 2,122 Price per Sq Ft.: $329

Listing Date: 11/17/2005 Selling Date: 3/14/2007 Original Price: $550,000 Listing Price $350,000 Selling Price: $315,000 Address: 2601 Roosevelt Blvd 508 A Interior Sq Ft. 750 Price per Sq Ft.: $420

Listing Date: 9/5/2006 Selling Date: 3/14/2007 Original Price: $595,000 Listing Price $569,000 Selling Price: $555,000 Address: 1106 Elgin Ln Interior Sq Ft. 1,490 Price per Sq Ft.: $375

Listing Date: 8/14/2006 Selling Date: 3/9/2007 Original Price: $649,000 Listing Price $569,000 Selling Price: $510,000 Address: 1714 Seminary St Interior Sq Ft. 1,512 Price per Sq Ft.: $337

Listing Date: 9/25/2006 Selling Date: 3/9/2007 Original Price: $549,000 Listing Price $399,000 Selling Price: $350,000 Address: 808 Virginia St 2 Interior Sq Ft. 1,031 Price per Sq Ft.: $339

Listing Date: 2/2/2007 Selling Date: 3/7/2007 Original Price: $1,100,000 Listing Price $1,100,000 Selling Price: $1,000,000 Address: 314 Margaret St Interior Sq Ft. 1,156 Price per Sq Ft.: $865

Listing Date: 1/28/2006 Selling Date: 3/6/2007 Original Price: $825,000 Listing Price $695,000 Selling Price: $637,500 Address: 1301 Newton St Interior Sq Ft. 1,368 Price per Sq Ft.: $466

Listing Date: 10/11/2005 Selling Date: 3/5/2007 Original Price: $1,495,000 Listing Price $1,095,000 Selling Price: $950,000 Address: 1329 Duncan St Interior Sq Ft. 1,884Price per Sq Ft.: $504

Listing Date: 1/9/2007 Selling Date: 3/2/2007 Original Price: $649,000 Listing Price $649,000 Selling Price: $569,000 Address: 1700 Seminary St Interior Sq Ft. 2,682 Price per Sq Ft.: $212

Listing Date: 12/27/2005 Selling Date: 3/1/2007 Original Price: $1,525,000 Listing Price $1,495,000 Selling Price: $1,325,000 Address: 908 Packer St Interior Sq Ft. 2,086 Price per Sq Ft.: $635

Listing Date: 11/17/2006 Selling Date: 3/1/2007 Original Price: $475,000 Listing Price $399,000 Selling Price: $385,000 Address: 1901 Roosevelt Blvd N-107 Interior Sq Ft. 938 Price per Sq Ft.: $410

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Has Cay Clubs Bit Off More Than It Can Chew?

Reports in the local press last week revealed that Cay Clubs is laying off employees companywide.
Here in the Keys, it was reported that 80 employees have been let go.

The vice president of operations, Frank Rego, made the layoffs sound like they were more closely tied to their upcoming merger with Keys Hospitality Acquisition Corp. ( a "blank-check" company formed to acquire assets). Rego was quoted as saying: "We are reorganizing to get structured as we need to operate as a public company," he said. "There are certain ways a company has to act as a public entity. We need to get things in a way that will be accepted by shareholders."

But later in the same report, Rego seemed to be pointing to bigger problems in the real estate developer arena. He was quoted as saying, "It is a down market. Several developers across the country are going out of business," Rego said. "We need to make sure we can prosper through a down market so we're one of the companies that stay in business."

No doubt that the real estate market has become treacherous for developers. Widespread reports of overbuilding of condos and condo prices crashing in South Florida have scared and bankrupt some developers. Projects that failed to get pre-construction buyers have been cancelled or abandoned on the mainland. And here in Key West, the change is evident as well. Major condo-conversion projects, like the Atlantic Shores, Hampton Inn, and others have found that they will be better off as hotels - and have, as I have heard, cancelled plans to go "condotel".

Cay Clubs is now among the largest developers in the Florida Keys. The question that we should be asking: "Have they bitten off more than they can chew?. And what effects will it have on the Keys should Cay Clubs and it's new parent company become financially unstable?"

Cay Clubs, only recently formed in the past decade, is betting that people will continue to buy expensive second homes, boat slips, and condominiums. Plus, they recently acquired the Turtle Kraals, Half Shell, and A&B Lobster House restaurants.

Remember, during the go-go-go real estate craze of the past few years, hotels in Key West were being bought up, closed, and turned from transient rentals to condominiums. Now that buyers are nearly non-existent, what will happen to the hundreds of hotel rooms stuck in limbo? What if the whole enchilada goes belly up....will we be left holding the bag?

With most of the Cay Clubs holdings in Florida, aren't they particularly sensitive to market shocks? Since Florida is suffering the biggest declines in real estate, should we worry about one of the largest developers here in our backyard? Think about this: in only the past 2.5 years, Cay Clubs has acquired at least 8 Florida Keys locations.

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