Bluznbeach

This is in Sunday's paper. It's about how St. Joe extended the build-out date for WaterSound.

http://www.nytimes.com/2006/12/17/re...ref=realestate

2bohemians

Thanks for sharing

kurt

IN 2002, when the St. Joe Company, one of Florida’s largest real estate developers, began selling parcels in a new neighborhood here, it was inundated by potential buyers.
With as many as 10 applicants for every lot, the company put numbered balls into a fishbowl, then had an agent draw the balls at random, to decide who would be allowed to buy the home sites.
Four years later, you can hear a pin drop at the gated community of WaterSound Beach. Most of the lots sit empty, and even Thanksgiving weekend brought only a handful of visitors.
After the dire hurricane season of 2005, the real estate market along the Florida Panhandle ground to a virtual halt.
But WaterSound Beach and WaterColor, another St. Joe development eight miles west, are meant to be New Urbanist communities, modeled on Seaside (their neighbor on Route 30A). And New Urbanism requires density. That is why, when it sold the lots, St. Joe had a requirement that buyers break ground on their houses within three years.
Homeowners who did not meet the “build-out deadline” had two options: to begin paying a penalty, as much as $2,500 a month, or to sell the land back to St. Joe at the original price.
As it turns out, many of the landowners were speculators who had no intention of building. “They thought they’d sell after six months, and make a killing,” said Lew Belote, an executive of Move Inc., which provides online services to buyers and sellers, and the owner of a house in WaterColor.
Some did manage to sell. Chris Martin, a local builder, bought a lot in WaterColor in 2003 for $215,000. He sold it in early 2005, he said, for $750,000. In WaterSound, several lots have sold for more than $2 million apiece.
But after Hurricane Dennis hit the Panhandle in July 2005, most of the planned flips turned to flops.
“People got caught day-trading lots,” said Marc Levy, who operates a flooring company in New Orleans and owns a house in Rosemary Beach, a community near WaterColor. Those who did not want to sell their lots at a loss, but had no plans to build, were stuck. After years of double-digit appreciation, the market was so bad that “some of them would have been happy to sell back to St. Joe at the original price,” Mr. Belote observed.
But St. Joe “wasn’t interested in buying back people’s lots,” said Jerry Ray, the company’s vice president for corporate communications. “Our goal is to build towns.”
So last May, St. Joe issued a statement that caught many of the owners by surprise: They would have an extra two years in which to begin building their houses.
For some property owners, the decision, effective June 1, was a welcome reprieve. Debora Usher, who with her husband, John, had bought a lot in WaterColor, said the decision made her “happy, happy, happy.”
The Ushers, who live in Central Florida and own a weekend house in Seaside, now have two more years to decide whether to sell or build in WaterColor. Though other parts of WaterColor are “built out,” their lot is in a section that shows only two signs of development: sewer hookup pipes emerging from the ground, and signs touting the names of the owners and their children (a homey touch meant to create community, but these days seeming spectral).
Some people who have already built houses in the St. Joe communities are unhappy about the extension, claiming that the company changed the rules in the middle of the game.
Pat Spafford, a neonatologist from Atlanta, bought a lot in WaterSound Beach at the end of 2002, began building within the three-year window and moved in with his family late last month.
But the lot alongside his is empty, and now, with the extension, there is no telling when its owners will break ground. So instead of living in a finished community, he said, he could end up living next to a construction site.
Dr. Spafford said he was “not too happy” about the extension. “The speculators,” he said, “put pressure on St. Joe.”
Mr. Belote, who divides his time between homes in Atlanta and WaterColor, said he “kind of took a proactive approach.”

“I got tired of people complaining and nothing happening,” he said. So he helped organize an e-mail group on Yahoo. “I got us communicating more effectively with each other and with St. Joe,” he said. “I think we influenced the company.”
Skip to next paragraph Fred A. Bernstein for The New York Times
Chris Martin bought a lot in WaterColor in 2003 for $215,000 and sold it early last year for $750,000.

Enlarge This Image
Steven Frame for The New York Times
But many other lots remain vacant, prompting the developer to extend a building deadline by two years.



Still, Mr. Belote conceded, some owners “were adamantly opposed to this. I got a lot of people mad at me.”
But without the build-out extension, many lots would have come up for sale, almost certainly sending prices downward. It was “in the best interest of St. Joe and the homeowners to control the inventory in a buyer’s market,” said Nikki Nickerson, an agent with Keller Williams Realty in Seagrove Beach.
Other proponents of the extension say the company’s original deadline never made sense. Both WaterColor and WaterSound Beach have very strict building codes, designed to ensure aesthetic harmony. Simply getting plans approved has taken some homeowners as long as 18 months, according to Ms. Nickerson and others.
Some observers said that if it intended to see communities built quickly, St. Joe should have limited each buyer to one lot. Instead, it allowed the purchase of multiple lots; Mr. Belote said he knows at least three people who own three lots or more.
According to local agents, there was so much demand before 2005 that St. Joe could have had a “one lot per buyer” limit and still sold every home site. But Mr. Ray defended the company’s policy. “You can’t know in advance what a buyer is going to do,” he said. He added that the company “could institute better procedures in the future — we’re always learning.”
Mr. Ray said that in the 1920s, St. Joe, then a paper company, bought nearly 2,000 square miles in Florida for a few dollars an acre. “For all intents and purposes, it’s free land,” he said.
That explains why, with Panhandle real estate booming, St. Joe got out of the paper business, and into the development business, in 1997. A publicly held company based in Jacksonville, St. Joe now has 16 communities at various stages of development statewide. WaterColor and WaterSound Beach, which cater to wealthy vacationers from places like Atlanta and Dallas, are the most expensive of the 16, Mr. Ray said.
But Hurricane Dennis changed everything.
“There was a group panic after the hurricane,” Mr. Usher said.
Nonetheless, Hilary Farnum, a sales agent for St. Joe, said the company had not lowered the prices on the lots that it still owns. Doing so, she said, “could compromise the value of the lots that we’ve already sold.” People buy into St. Joe communities, she said, because they know the company is in a financial position to ride out any storm.
But some people believe St. Joe’s two-year extension has undermined its attempt to create community. Sally Shushan, a federal magistrate who owns a condominium in neighboring Rosemary Beach, said Rosemary had become a real community because the developers “stuck to their guns on the build-out schedule.” Rosemary, whose homeowners include the White House aide Karl Rove, is almost complete, eight years after the first house there was finished.
It is now likely that the St. Joe communities will take much longer to complete.
But not everyone who bought land from St. Joe is concerned about the extension. Barry Richard, a lawyer from Tallahassee, built one house in WaterColor, then moved to a bigger one and put the first one on the market. He said he was not worried about how quickly the community is finished, “because I didn’t buy the houses for investment.”
Eight miles east, at WaterSound Beach, Jim Andros, a lawyer from Atlanta, said he was not affected by the issue either.
Mr. Andros, who spends weekends in a condo in WaterSound Beach, said he bought a lot as an investment. Under the original build-out deadline, he would have been required to break ground on a house this month, he said.
Despite the two-year reprieve, Mr. Andros said, he is likely to start building soon. “I’m ready, and I may just go ahead,” he said, adding, “The market goes up and the market goes down.”

goofer44

I was interviewed by Mr. Bernstein a month ago when he was preparing for this article. I gave a very possitive review of JOE and the Watersound project specifically. Obviously he chose not to quote me. I think the article is slightly unfactual and a bit one sided, but all in all a fair assesment of the situation. I hope Mr. Bernstein will do a follow-up piece when the build-out extension expires, to report on what developments look like.

SHELLY

You mean all those lots were being bought up by people who never really intended to build their vacation homes and eventually retire here???? Gee....what a surprise!!!! Who would've saw this coming???

Interesting how St JOE doesn't even want to "buy-back" the <overpriced> lots at the original price paid...not exactly a vote of confidence on the value of land going forward. <JOE: Hell no...we don't want our fingerprints on this trainwreck.>
.

__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

goofer44

I am sure JOE would have loved to buy back the lots sold in 2002 2003 and early 2004. But since the mkt changed dramatically in 2005 they felt they could not cherry pick the earlier lots at the expense of the lots sold in 2005 and 2006. That would have created a legal catastrophe not to mention a PR nightmare. They chose the least onerous route.

SHELLY

The "build-out" thang rarely--if ever-- applied to lots sold in 02'/03'. The "build-out" clause was added @'04 to keep the frenzy moving along during the hottest period of the bubble to give the "illusion" of exclusivity in order to justify jacking up the prices.

Cherry-picking lots to buy back will seem like a "dream" compared to the upcoming PR nightmare when "Place-Maker JOE" starts cutting corners on "promised" amentities for its "Places."

.

__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

Gypsea

SHELLY, St. Joe has always had build out dates. That was part of their plan from the very beginning.

Beachbummett

Does anyone remember that after 9/11 Rosemary Beach gave an extension on build out dates

__________________
"Save the tata's!!!"

fisher

JOE has the right to buy back ALL the lots at the ORIGINAL price whether they sold once, twice or more. Anyone but the original purchaser is subject to taking a loss if JOE decides to assert its rights. However, I agree with Shelly. Joe wants to have nothing to do with repurchasing the lots. It would be a PR nightmare, a cash flow drain and then they would have to try to resell all the lots in a very bad market. They've got plenty of inventory in Watersound West Beach and Watersound that they need to get rid of, and lots in these subdivisions are not moving at all.

There is no way the market is going to absorb the 120 resales in Watercolor, 80 resales in Watersound PLUS all the unsold lots in Phase IV in Watercolor and the remaining 40 or so JOE owned lots in Watesound before the two year extension runs out. So, don't be surprised to see JOE grant an additional 2 year extension when this one runs out.

flyforfun

Watersound still sits on the most beautiful beach in the world. The extension helped every property owner who was fighting to get through a log jam of over 200 house plans tied up in the design review process that is geared toward constructing homes that will last for generations of lives and storms. Most importantly, it allowed property owners a little leverage in negotiating better construction cost with contractors. There are 51 homes currently under construction in Watersound and 125 in Watercolor. I guess this gentleman showed up on Thanksgiving when he discusses a ghost town. Unlike Rosemary or Watercolor, 100% of Watersound Beach sits on the south side of 30-A with only traffic is from property owners. Even when there is a lot on every single lot, its always going to be a quite community because other than a deli in the gate house it lacks restaurants and retail. Its obvious the author does not appreciate the quietness that many of the owners appreciate now and in the future.

fisher

Watesound does sit on a very beautiful beach and it is a great neighborhood that will get better as more owners build homes. However, for every property owner trying to get a home built, there are just as many investors trying to cut and run and there aren't many buyers out there. The author clearly understood the problems facing JOE, Watersound, Watercolor (and even though not mentioned in the article, Alys, Cypress Dunes, etc). The market is ugly right now due to the greed of JOE and the investors that caught in the frenzy. It will take quite some time for the market to get back to equilibrium.

flyforfun

Let's see, I just checked the county's records for sales of property in Watersound for 2006, and I am counting 36 properties. Other than on Sundays, the sound of hammers and power saws mixes in with the cool ocean breezes. Mark my word, years from now when this community is complete, when every piece of property along 30-A has either a home or condo on it, and all the public beach access is over crowded, the gated community of Watersound will be a tranquil and peaceful place. You will be able to walk along the wooden board walks to the beach without noisy traffic or fear of your kids getting run over. You will meander through 200 yards of beautiful preservation dunes until you reach a magical place on the beach. As you gaze upon the emerald waters, you will begin to wonder if you are at a private beach some where out in the Caribbean. You may come to visit friends and remember a time (like now) when you could have purchased a lot or home in this community. It's a magical place unlike any beach community along 30-A, something I am glad I had the courage to purchase and enjoy for generations.

fisher

By the way, only 20 of those sales were vacant lots. With 85 resale lots currently on the market plus the remaining unsold JOE lots, that means there is over a 5 year supply of inventory in Watersound Beach. Meaning that lots of investors will still be stuck with unsold lots when the JOE extensions end over the next 2 through 3 years. This does not include all of the lots owned by builders that will be putting new homes on the market during that period of time.

Assuming everything gets built our as you say--did you forget about all the people in the 1400 planned homes in Watersound North that will also have access to the beach at Watersound? It won't be as deserted as you think once all those homes are built out. In addition, have you thought about how all those folks from Watersound will get to the beach at Watersound Beach? In the end, Watersound will be just as crowded as any of the other planned developments along 30A. If it was only the 400 or so homes in Watersound that get access to the beach, then it would be pretty quiet. Not with all those other folks from Watersound needing beach access, parking, etc.

No denying that the beach is beautiful in Watersound. But, that won't solve the inventory problem nor will the size of the beach necessarily make it immune to overcrowding once Watersound Beach, Watersound and Watersound Beach West are complete.

flyforfun

The development is not designed around flippers. Were in a post hurricane correction, so get it cheap while you can. When the two year extension runs out, I am certain St. Joe want hesitate to buy back a few lots. It's a community built around people who want to live there full or part time.

Even when watersound east, west, north and south (condo's or barges) it will still be an awsome place. You have to remember that Chicago (5 million plus population) has less than a mile of brown sandy beach along Lake Michigan. It may take some time to find a parking place, but you still can find a place to park your body out in the sun. Having a home at Watersound, just makes finding a parking place a lot easier :-).

gogators

st. joe did not do the build out correctly from the beginning. they cannot arbitrarily enforce it now. that's one of the reasons they extended the "so called build out". they cannot try to fine people when the documents didn't allow for it. there is no build out in watercolor/watersound - rivercamps next. you really think they are going to try and enforce it in two years. not likely. they are not going to buy them back because they cannot sell them.

what has shown to be true is that most of the purchases of lots in watercolor, phase III and watersound were mostly speculation.

watersound and phase III of watercolor will not be built out before 2020 if ever. i heard there were brokeback realtor carcasses in phase III of watercolor that were not found until this ny times writer found them.

flyforfun

Gator, there is 51 homes currently under construction in Watersound Beach. There is currently 84 sets of plans in the Watersound DRB process. Sure is a lot of acitivity in a development in the mist of one of the largest down turns in real estate since the great depression. Things continue to move forward because its the most awsome piece of real estate on the entire gulf coasts! Property owners will continue to build in this development regardless if there are extension's or not.

Bobby J

FFF,
As blind as some of us were about the down turn of this market you will discover the same thing about the continued growth of this market. There are some on these boards that act as if the market has completely stopped. I had my second best year ever! The simple fact about SOWAL is alot of folks, with alot of money like it here!

__________________
www.lifeonshore.com
www.beachpropertiesofflorida.com
www.bobbyjblog.com

flyforfun

Congrats Bobby J! Real estate agents who work, and show up early Sunday mornings when they have a buyer on the hook will always have a great year. The people who realize that this is still the most beautiful beach on the gulf will find the money, cause the last time I checked, God's not making any more white sandy beaches.

fisher

How many of those houses under construction or in design mode are owned by builders or investors? My guess is a large number. Therefore, when many of these homes are complete they will be dumped on the market with the current glut of homes adding to the inventory problem.

If you look closely, a large percentage of recently completed or to be completed homes have been placed on the market. This trend is likely to continue as a large percentage of the lots sold by JOE were sold to investors rather than end users.

Currently, there are 105 homes and lots on the market representing nearly 25% of total available inventory. We need more end users before the market will turn around.

the beaches are beautiful but there is only a small sliver of the population that can afford a $2 million second home.

Paradise Sea

I love Watersound Beach. However, I agree that someday it may end up being a VERY crowded place in the summer months.

I believe that in time Paradise by the Sea will be discovered as one of the few truly low density beaches on 30-A. There's no public beach access, it will be a gated community, no build out restrictions, deep lots with average lot frontage of 60'-70' and only 51 lots for 1700' of beach. Also, at this point, only 47 homes can be built in this development since a couple of the homes utilize multiple lots. At least one other home is planned to do the same. Located within walking distance of Rosemary Beach, Seacrest Beach and Alys Beach you have the best of both worlds. Even so, the two most recent sales of tier 1 lots with incredible wide open gulf views both sold at under $1,000,000 this year. Compare that to south of 30A prices in Rosemary or Alys. I think it's a bargain, especially compared to other places we've evaluated on both coasts and the gulf.

flyforfun

Regardless if they are an investor or end user, Watersound is about privacy, quality and attractive clean beaches. Believe it or not, that is what people with money are looking now days. If you are not in that small sliver of population, you have no idea the tax advantages or the investment strategy of owning a second home of $2 million or more. I much rather own a 2 million dollar home that may go up or down in value, than stock that's values are "dummied up" by people who cook the books and never get's caught unless a whistle blower turns them in.

My father in 1958 purchase a lot a mile from the beach for $300.00. He sold that lot in 1998 for 45K. The same lot sold again in 2004 for $110K. As long as you don't over leverage yourself, real estate is a smart move. I am certain there are some in these high end developments that have done just that. There are plenty of buyers hunting for those folks, just so they can sell the property 12-24 months from now at a 30-50% gain. The secret down at the beach is not to ever over extend yourself.

Beachbummett

Congrats Bobby J

or will show property during a tropical storm!

__________________
"Save the tata's!!!"

goofer44

Congrats Bobby

It is funny that hard work and success seem to go hand in hand !!! You love what you do and so even though it is work, you do it with great enthusiasm.

SHELLY

Let's see....crooked appraisals...liar's loans...cash-kick backs..."perfidious puffery"...mortgage fraud---There's no deceit to see here folks, just keep moving along.

__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

fisher

Please do tell about the tax advantages of owning a second home.

There are none if you don't rent or you use the home more than 2 weeks per year. Even if you rent, you can only deduct expenses up to the amount of your rental income.

Second homes are a cash drain while you own them if you don't rent and many times even if you do rent. They only result in a true gain when you sell IF the gain is enough to cover your carrying costs (insurance, homeowners fees, taxes) and maintenance costs while you owned the property AND the commission you pay upon the sale of the property.

flyforfun

Fish you are absolutely correct if don't place property on a rental program or its not corporated property. I have owned real estate in a lot of places, and no where have I had returns to come close to match beach property. It's certainly not a risk free investment, but what is? Expenses can always be managed. You don't really need a RE agent to sell, and if you do commission's are negotitable. If you design a home that is low maintenance that helps long term expenses. If you build a home using the fortress guidelines you can even get a reduction in insurance premiums ( http://www.ibhs.org ). Second homes are only a cash drain if you are not using or enjoying it. It's basically a matter of value. People will always find value in owning beach property.

flyforfun

Shelly true to some extent especially if you are a rather nieve investor in the RE market. You can be a smart investor in the stock market and get ripped off by a much larger number of people including your own broker or financial planner.

OnMackBayou

flyforfun, I'm sure 99% of us get your drift and are happy for you. Most of us who have been thru Watersound understand why you feel the way you do. Watersound is a special place and always will be. That's all that matters. You've found your paradise and that in itself is priceless.

The other details regarding the level of crowding on the beach, taxes, insurance....at this point you've figured that in to the equation and you are still in paradise.

SHELLY

They haven't even scratched the surface on all the deceit, trickery and fraud that went on during the last couple of years in the real estate game. There are many investors who are holding RE or contracts right now that don't even realize they've been duped yet--this thing will take some time to unwind.

__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

spinDrAtl

Please share some details.

SHELLY

Lawsuits

With once-hot condominium markets across the country in sharp decline and many real estate professionals predicting a further weakening, some developers are facing more than a glut of unsold inventory. Angry condo buyers from Boca Raton, Fla., to San Diego are taking them to court, alleging everything from breach of contract to fraud.

Some of the lawsuits claim that the amenities featured in glossy marketing brochures and models never made it into the final product. Others involve much-hyped projects that went bust, leaving hundreds of buyers with contracts for condos that will never materialize.

In Florida, 2,557 individual complaints against developers were filed in fiscal year 2006, ended June 30, up from 1,825 two years ago, according to the state's Department of Business and Professional Regulation.
---------------------------------------------------------------

Developer Fraud
But now their company, Sky Development Group, is at the center of a huge real estate fraud investigation that started in Citrus County - and could span the globe.

Detectives say they think Natalia and Victor Wolf slipped out of the country in October, leaving behind more than 100 victims and taking more than $20 million from fraudulent transactions.
-------------------------------------------------------------


Mortgage Fraud
Coral Gables lawyer Brian Bieber is intimately acquainted with mortgage fraud, having represented people accused of the crime. But earlier this year, he was stunned when a broker instructed his own mother, a Broward County schoolteacher, to create phony evidence of a second job to get a mortgage for a Hallandale Beach condo.

''That mortgage broker actually suggested to my mother that she obtain a false letter of employment from me and my law firm,'' Bieber said. ``The broker went so far as to give her the explicit amount my mother needed to be earning per week and asked my mother to ask me to generate at least four pay stubs.''

------------------------------------------------------------------

Homebuilders Fraud
Jeffery Alan Teague (also known as Jeffrey Allen Bryant), 49, pleaded guilty late Nov. 27 in federal district court to two counts of wire fraud for a scheme to defraud mortgage lenders by arranging loans to buy incomplete homes in the names of California, New York, and Florida "investors." Teague provided the lenders with false Certificates of Occupancy, stating the houses securing the loans were "completed to code" and "suitable for occupancy."
--------------------------------------------------------------------

All contributed to the crazy run-up in prices over the last couple of years--this type of crap is baked in to the price of properties bought during the frenzy.

__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

flyforfun

Shelly, I don't understand what all of your issues has to do with Watersound? Do you think corruption is only limited to real estate an mortgage companies? Ninty-nine percent of the developers, contractors, real estate agents and mortgage people out their are honest hard working folks, especially the people at our beach. There are scam artist and crooks in every trade and profession! It's good they are getting caught, and I certainly hope they all spend some time in jail or spend every last penny trying to defend themselves from going to jail. Still, none of your listed items have a thing to do with the Watersound development. Are you against people making money in real estate, buying beach property or are you a stock broker?

fisher

A blast from the past.

Almost 3 years later, I bet there are a lot of people WISHING Joe would buy them out now at original purchase price. I don't think Joe will ever be buying back any lots.

totally

They have already been doing that, re: the amenities.

SWGB

Such as?

__________________

fisher

Such as charging fees for tennis, bikes, boats, etc in watercolor.

melscuba

It may seem silly, but they also stopped providing towels at all pools except the beach club in Watercolor. BTW, we still had one hour of kayaking each day while we vacationed there this summer. Are you saying as a homeowner, there are now charges for using these amenities?

SHELLY

...I wrote that comment in Dec 2006

.

__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

SWGB

I guess that could be construed as Joe's decision if they still ran those things. Perhaps Noble House isn't in the business of subsidizing the amenities like Joe was?

Anybody remember what a cocktail cost at the Beach Club prior to Noble House?

__________________

Miss Kitty

No...I have never known what a cocktail cost a the WC BeachClub. Much?

Maybe , jsut maybe Noble House is a tired as I am of all those nice, "FREE" towels not being returned and finding their way up and down 30A!

__________________
The mind is like a parachute, it works best when it is open.

melscuba

True, true. They said they lost upwards of 2,400 towels last season. They now have a checkout system with charges for towels not turned in by 7:00p.m. I just wish they'd implement the same system at their community pools. It felt like a slip in customer service. It made us ask if it was the slippery slope. Like I said, silly, but still worth noting if service and perks will be lost piece by piece.

SWGB

Well the 3 remaining pools X full time staff to account for towels = a price most homeowners aren't willing to pay as an added addition to their HOA dues.

__________________

melscuba

I understood that to be the case. If I'm lucky enough to have that be my problem, I guess I can discuss it with them then. In the mean time, I'll bring my own towels and hope no more "perks" are lost.