I began writing this a year ago in 2014 when the Magnolia Bay project in south Cocoa Beach finally sold out after a grueling decade of drama and hardship. I decided then to wait until the dust had settled before posting it. Now seems as good a time as ever.----------[ from spring 2014 ]
Something happened last week in Cocoa Beach for the first time in
almost ten years. The number of units offered by the developer at Magnolia Bay
returned to zero. The very last one was contracted. It was a
crazy, ten year roller coaster ride. Much money was lost, homes and
businesses were lost and yours truly got yelled at a few times.
It
was 2004 and flipping real estate was the national pastime. The most
profitable niche in our local market was buying pre-construction
contracts. It was possible at most projects to put down 10% to reserve a
unit and then ride the runaway appreciation for a couple of years
before either closing or selling the contract for a profit. Tripling and
quadrupling the investment in a year or two was the norm. There were
$18,000 reservations at Portside Villas that profited $100,000. There
was so much demand for pre-construction that one major developer held
drawings to pick names of lucky buyers who were "permitted" to reserve a
unit. Timing was everything. An investor stood to make the greatest
gain if he could have the longest time from reservation to close. As we
found out later, he also had the greatest exposure to ruin. A few lucky
contract holders at Sol y Mar and Almar in south Cocoa Beach got a
profitable bonus when the City of Cocoa Beach imposed a construction
permit hold for about a year before those buildings got started.
The
easy money was pretty much finished by 2006 in Cocoa Beach and Cape
Canaveral. Pre-construction contract holders who hadn't flipped by then
were faced with a dilemma; go ahead and close for an immediate paper
loss or walk away from their deposit. In almost every case, walking from
the deposit was the wiser move. The projects that closed after 2006
turned out to be disasters for the buyers who chose to close. A few
developers and banks suffered huge losses as well. The area of south
Cocoa Beach outside the city limits was especially hard hit with
unfortunate timing for multiple projects.
Magnolia Bay was supposed to begin early in the decade on a big parcel of riverfront in south Cocoa Beach between Jack Baker's Lobster Shanty and the River Falls subdivision. It was an overgrown snarl of vegetation and mangroves with a secret homeless camp hidden in the middle. The residents of the River Falls subdivision mounted an organized opposition to the planned project that resulted in several emotional County Commission meetings. I was verbally attacked by angry homeowners because I dared to speak on the developer's behalf to the Commission. For me it was less about the project getting approval than it was about the hypocrisy of the opposition. Most of the vocal homeowners were living in an area that had just been developed a few years earlier on a similar piece of riverfront land. "I've got my house. Now, no more construction."
The
Commission eventually approved the project with a concession on height
of the closest building to the subdivision and a planting of screening
vegetation. (Interestingly, that screen is not in evidence today in
2015) The delay would prove to be disastrous. Construction began and
business at the nearby Express Grocer exploded from the influx of
construction workers. This in addition to their regular business from
the little trailer park next door made life good for Sam, the owner, and Gary,
the long time clerk. I can still remember the sign posted on the door
one day: "Gary is not allowed to give credit anymore. signed, Sam"
Pre-construction units at Magnolia Bay
were first offered in 2005 from $549,900 to $899,900. The lowest prices
were for the five Plantation units on the 1st floor in the middle C
building. The highest prices were the two top floor Signature units at
$899,900. The corner Savannah units in the C building were $689,900,
$729,900 and $769,900, prices climbing with the floor number. Even with
the heady prices being paid for new condos at the time, this was
rarefied air for non-oceanfront units.
The
first group of reserved units began closing in January of 2007 at the
pre-construction prices with eleven units closed that year and three the
following year. By that time, the real estate crash was the headline of
the day and fear predominated. I have no idea how many buyers walked away from their pre-construction deposits rather than close. Although painful at the time, that decision would prove to be prudent for those who did. The last unit to close in 2008 was the
first to close for less than the pre-construction price. At the new
reduced prices, four more units closed in 2009 with two Plantation units
going for $370,000. By the end of 2009 the first short sale was in the
works and it (2nd floor Plantation) closed in December 2010 for $300,000
as did another short sale Plantation that set what was to be the lowest
sold price at the complex, $295,000 for a 1st floor (above the garage) unit. Plantation
units have sold since for as much as $418,000. None have yet approached
the what now seems crazy high pre-construction prices.
As
I finish writing this in April 2015, there are three re-sale units offered, two
Plantation units asking less than $370,000 and a Savannah corner for
$455,000. Market dynamics suggest to me that we'll continue to see
rising prices here though I doubt that I'll live long enough to see them
get to pre-construction levels again. Sam and Gary don't care either
way. Express Grocer is gone for good. I wish them well wherever they
are. The site of the old trailer park next door sits empty, the
residents and trailers moved out for a townhome project that never
materialized, victims of timing and the market crash..
"I feel bad for the homeless guy, but I feel really bad for the homeless guy's dog, because he must be thinking 'Man, this is the longest walk ever.'" ___Norm Macdonald
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