Thursday, November 22, 2007

Here Comes the EXCLUSIVE Neighborhood?

Key West is traditionally regarded as very inclusive - welcoming all walks of life.

Residents mingle - unaware of income strata, occupation, accolades, and sexual preference.

And that is why it is so strange that the new, uber-wealthy McCondos and McMansions currently being built here in Key West are usually marketed as EXCLUSIVE.

The Associated Press released a story this week about this new phenomenon - which was published in USA Today and the Orlando Sentinel.

Meanwhile, Key West is dealing with falling real estate prices, foreclosures, and a glut of properties on the market. Yet the building of EXCLUSIVE developments seems unabated. Developers are like steamships - they take a long time to change direction or stop.

Hundreds of $1 million+ properties are being offered, including King's Pointe, Beachside, Casa Marina Residences, Parrot Bay, Harbor House, Steamplant, and Key West Harbor Yacht Clubs (though they do not appear in the local multiple listing service).

Usually, these properties are offered for a cost in excess of $1000 per square foot. Yes, you read that right. And some are offered as high as $1350 per square foot! And these are CONDOS - not spacious houses with land.

But if recent Key West sale prices are any indication, properties are typically selling for below $600 per square foot.

Meanwhile, our nearest big-city neighbor, Miami, is having a real estate meltdown. Predictions are that prices there may drop 20% over the next 12 months. And Florida will likely have a $2 Billion shortfall next year due to declining property tax receipts.

So one has to wonder, what is the future of these EXCLUSIVE McDevelopments? Will they make it? And what will the character of Key West look like?
Like this post? Let us know:


Robert Kelly said...

It's my guess that most of these EXCLUSIVE properties have a large exclusivity premium built in and that even if it's necessary to reduce selling prices by 20% (or throw in incentives), there's still a substantial profit in these units, most of which, after all, include a transient rental license that can help to pay the mortgage. The developers talk about these as $500 a night and more rentals. I'll do the math: $500 per night at 80% occupancy = 292 days X $500 = $1,460,000. Take away another 20% for management fees and condominium charges, that leaves a paltry $1,168,000 to cover mortgage and taxes.

The real crime here is that the conversions to EXCLUSIVE condominiums have created surplus transient licenses which the developers are trying to smuggle into residential neighborhoods, especially in Old Town.

For more on what's going on, read Sloan Bashinsky's posting, at Tom Milone is doing good work in pointing out that a transfer between Pritam Singh and Ed Swift that is currently on the Planning Board's agenda is contrary to the Code of Ordinances.

There may be fireworks.

Anonymous said...

At this moment, there are 409 condos for sale on Key West. Highest $/sf is $1383 (steamplant). Median $/sf is $689. Pricey.

And, as Dave points out, these are just the ones in the MLS that I know about. There are plenty more.

The least expensive (list price) is at 1830 Fogarty, been on the market 430 days during which the price has dropped 30%. Only 411sf = $460/sf.

The least expensive in $/sf is a Solana Village unit at $252/sf. Been on the market 800 days. Started out listing at $500K. Now at $265K. Still active.

Condos are going to have to take a bigger hit than 20% to sell. Miami condos are at 50% of "pre-construction prices" and still falling. And still building... Talk about throwing good money after bad.

Are there enough rich people in the world wanting to travel to Key West to pay $350 (the minimum hotel room fee I've heard on the new condos) to $500/night 292 days/year for all those condos going up? Plus the bed tax on top of that. I can't believe it.

Property taxes for a $1M property are $850/month. Condo fees are minimum $500/month, usually more.

The sale I did for Santa Maria required the owner to use the on-site management company and their service charges 35%. My private management is 20% of the income; all the other private companies that I know of charge that. But all the on-site management companies I know about start at 35%.

Add a slowing economy - Key West is not the only place suffering - to the mix and I'm thinking these condos will be empty more nights than they are full.

Our market is going to go thru plenty more upheaval... I'm interested to see where it ends up. From a perfectly selfish viewpoint, I'm relieved I'm not there to watch. Although Costa Rica is following the path... like deja vu.

Going to check out - thanks, Bob!

Sally O'Boyle

Debora Edholm said...

Hi Bob,
Are you my old friend from Va. Beach? Good math and miss ya. Deb