Catching Up with Carl: December 2014

December, the month of Merry Christmas/Happy Holidays. I'm curious where you come out on these names?

Seahorse Beach Club:

   Last week, we had a full-team Seahorse meeting to assess where we currently are and to make concrete plans for 2015. It was an excellent day and a half. This is the slow time of the year on the Texas Gulf Coast, so many of our decisions will take some months to play out.

   Our main topic was have we over-built our luxury homes on the beach and bay and do we need a second line product? Or, have we just not seen the right prospects yet?

   Because we have not been able to arrange financing for our major amenity, the beach clubhouse and pool, we are really selling with one arm tied behind our backs, as the expression goes.

   Usually, not much gets accomplished during December due to parties and the holidays. No so, as mentioned last month, with us. We are going flat out to improve sales at Seahorse and to get the Florida Keys Resort funded.

Marathon Key:

   The Crystal Cottages project on Marathon is already funded with equity. Now, it's time for the development loan, to start construction and to get into sales. RCI will play a material part in this process.

   The Florida Keys Resort, aka Sombrero Golf Club, with sites for hotel, fractional cottages and new clubhouse, will close next month. We are finalizing the major equity contribution that will allow us to do so. We have transferred our franchise agreement from Crystal to Florida Keys Resort, and still plan to sell the second floor either in a fractional structure or a condo-hotel structure.

   Condo-hotels? The SEC has changed its regulations to allow for a more dynamic presentation of the numbers. With the improving economy and the red hot Keys hotel market, we may have a winner on our hands.

   Where do we go from here? We have a good handful of leads for marketing and/or development. Now comes the tough part—converting the leads into deals.

New Orleans:

   Square #97, about which we've written quite a bit over the past year or so, is in limbo as we have been faced with conflicting information on transient use [hotel, fraction, short-term rentals] and ownership. We may have an 'in person' meeting soon.

Other Deals:

San Antonio, TX – At The Fairmount, we have a proposal before the owner to fractionalize to-be-built condos in and on top of the hotel.

Bear Valley, CA – We have discussed with the new owners the build-out of the village core.

Telluride, CO – We have a proposal for a bulk sale of inventory there in a semi-dormant fractional project.

Wells, ME – Back again after the recession is a wonderful project that will have a golf course, country inn and a fractional component.

The easy part is getting the leads in and organizing them. The tough part is the closing.

Merry Christmas, 

Carl

Catching Up with Carl: November 2014

We are coming upon the Holiday Season. Usually, most work slows down between Thanksgiving and New Year's. Not in our case. If we can get the attention of important participants, here’s what we plan to do:

1. Florida: We are working on two deals. For the Florida Keys Club, we plan to arrange our final financing and move ahead with plans for the fractional cottages and the hotel. At Crystal Cove, we plan to arrange a relationship with RCI for rental, by them and by European travel companies allied with them, to lease a number of condos as the rental market to the Keys is so hot. Then, to begin construction on our first phase, and get into sales.

2. Texas: At our Seahorse Beach Club, during the first week of December we’ll be value engineering our first two homes: one on the Gulf and the other on the Bay with an eye to build and furnish homes that are more competitive with our specific market.

Or, to put it another way, we probably overbuilt and we are adjusting, which should make our selling prices more attractive.

3. New Orleans: We’ve spent a good deal of time fashioning the elements of a venture ‘deal’ there and are finally getting down to what the license can and can’t do in terms of transient use in the Quarter. By year’s end, we’ll either be in one or two projects or none.

4. A lot of projects have come to us for various reasons:

       A] At a Colorado ski area, we are working with the balance of a partially sold-out fractional project. We have submitted a proposal to ‘bulk’ sell the inventory. That proposal has not yet been accepted by the owner.

       B] At a Sierra ski community, recently purchased by a Canadian developer and hotel management company, we are in discussions to find them a development partner to build out the Village core. It's interesting as we managed the pre-sales, back in the mid-2000s, for a condo/fractional project.

      C] A Texas historic hotel with an eye to convert part of the inventory to condos, plus to build condo penthouses all for fractional sales. Our proposal is on their desk.

So, a busy end of the year for us. Our office building in Scottsdale Old Town is still for sale. Any takers?

Catching Up with Carl: October 2014

Just returned from hiking 100 miles on two English trails. Wonderful weather and gorgeous scenery. Also, terrific pubs, food and beer!

At Texas's Seahorse Beach Club,  our grand opening is set for Saturday and Sunday, October 11 and 12. After that weekend, our first Beach Home will be sold out of fractions and we’ll have taken reservations in our first Bay Home, now under construction. We have the local chambers sponsoring the opening and the top real estate agencies bringing their sales teams by before or after the opening based on their sales meeting day.

We are “just” a year behind our original schedule due to a confluence of factors: financing, high-end construction, weather, lack of experience with local contracting for our type of home and the fact that we are building up 19 feet on piers! 

Well, doesn’t everyone build up 19 feet? Sure, but the usual beach house in our area is not the quality of our homes. We have had to blaze new trails at almost every turn of the construction cycle.

So far, the fractional product has been well received. Certainly, a lot of education is needed, but our ace sales manager, Richard Korowicki, has managed that aspect very, very well.

I am very proud of our Star team: Scott Tracy, as project manager, for handling the many, many construction items plus the installation of the FF&E and OS&E; Chris Cannon, our chief marketing officer, has pumped out all sorts of invites, newsletters, website upgrades and—in coordination with our top flight PR agent in Houston, Bernard Kaplan—well-placed articles and releases.

In the Florida Keys, the twists and turns continue in the full financing of the Florida Keys Resort on Marathon Key. We have been successful in extending our closing on the golf club until January 15, 2015. On one hand, the property, bought right and singular by size and uniqueness, should be readily financeable. But we are looking for the ‘just right’ terms and partner. So, that has taken time and some extra expense. The second Marathon Key property, Crystal Bay Resort, is back on track as a mixed-use of either fractions and whole units or a hotel [Marriott franchise] and fractional cottages.

New Orleans is another story. Our team has not been able to bring the right buyer to the table for either of the two projects, and now they are under contract to others. Grand opportunities, but no go. Alas.

Catching Up with Carl: August 2014

The dog days of summer? Not on your life!

At Seahorse Beach Club, www.beachclubatseahorse.com, we are in construction of Bay House #1 with Beach House #1 ready for FF&E and OS&E delivery in early September. We look to close Beach House #1 this fall with its six owners, and Bay #1 soon thereafter. The Beach Club membership program has been slow to launch as we focus on realtor co-op programs.

Soon after closing, the City of Freeport should begin annexation of our area, which will be a boon to our owners. Our Richard Korowicki continues to do a great job as sales director.

September and October will be filled with events for local real estate agents and their clients.

In New York City, all the timeshares, including The Manhattan Club re-sales program, have been ordered to cease selling by the City attorney's office. Some owner complaints about access on their very flexible use plans have caused an election year blow-up. Plus, I am told that the folks in the City attorney's office have not taken the time to understand timeshares in general and use plans in particular. A sign of the times with the new administration?

Yesterday was full of negotiations on some $70 million of project financing for our Florida Keys project. To be candid, this level of equity and debt goes over my head to some extent, but we have a terrific team experienced in that type of transaction, and experienced in development. Marvin Rappaport, Bill Meyer and Peter Rosasco are the champs... wonderful partners all.

New Orleans continues to be elusive. The approval process is embedded in the mayor's office. On one hand, those with the right connections can get approvals. On the other hand, a buyer [or his lender] has a need for certainty, so this process, while it may appeal to insiders, is not what the outsider wants to go through. Our team is moving to solidify the approval process for the shared ownership and/or hotel uses for our listings.

No newsletter in September as I'll be hiking in England.

Catching Up with Carl: June-July 2014

Seahorse Beach Club, located on the Gulf outside of Houston, is really moving now. We're sold four of the six fractions in Beach House #1 and are preparing for construction on Bay House #1, which should trigger the funds to begin the Clubhouse. 

Tiffany Clark, who previously ran operations and marketing at Pronghorn in Bend, Oregon, has joined Seahorse as an operations and club management pro. Pronghorn sold fractions and whole units [up to $3 million each] in addition to having two golf courses and other amenities. A first class deal. As it happens, our Seahorse sales director, Richard Korowicki, came from there, too, after he had sold out the Teton Club in Jackson Hole, Wyoming. 

Down in the Florida Keys, one of the true hot hotel areas in the USA, our Florida Keys Resort is in the final stage of raising the necessary equity and debt to buy the 120-acre property, which includes the golf course. Separately, we have gotten Marathon Key city approvals to sell the 15 fractional cottages and the second floor of the boutique hotel on a lock-off basis. The approvals were never in doubt, but we now have them locked in. Also locked in are the transient zoning units, called ROGOS, necessary for the cottages and the hotel under Florida law. 

Star is getting quite Keys-centric as Marathon Key is also home to the Crystal project, which was to be funded via EB5 but now has other money chasing it. Originally planned were a number of Gulf-front fractional cottages. We hope that the hotel operation will allow them. A number of hospitality companies are closing in on this deal.

Who wants to buy a two-unit office building in Old Town, Scottsdale? Our HQ building is for sale; one half is rented and we occupy the other half. As more of our post-recession business seems to be in the Southeast, we have the building up for sale. It's a really unique structure right in the heart of the dynamic Scottsdale scene. Let me know if there's interest. 

I've written in the past about New Orleans, and the two deals that are part of the brokerage team, and potential JV team. All cities have their 'inside' track to gain approvals, but in NOLA it's a real throwback to the days when if the right team goes into the planning department and the Mayor's office, approvals can be granted in quick time. Too many companies operating through the back door is not what they want to do. This is understood. 

That said, the opportunity is there, especially in the French Quarter, for the developer or other buyer who has nerves of steel and is willing to let the line play out. Real estate in the French Quarter is red hot.

Catching Up with Carl: May 2014

Summer is almost upon us and already schedules are getting amended due to travels.

San Francisco house and condo prices are going off the charts. Condo prices alone were up 19% in the last year. Is SF ready for another fractional project? The Ritz Club sold out some years back, and that has been it. Current prices are more than $1,000 per square foot.

Any thoughts on inventory to convert? Mixed-use is just fine. My estimate is that we would need about 20 units.

At Seahorse Beach Club, Texas, our second home is in the final steps of gaining financing. We knocked down our #1 sale in our beach house so we are off and running. We will establish a fractional market in the greater Houston area soon.

The Beach Club membership campaign is about to launch. That should allow us to get financing for the Club, which is our major amenity.

Down in the Florida Keys, getting some $50 million of financing in place is a tough task. But our good partners, Peter Rosasco, Marvin Rappaport, Bill Meyer, Adam Greenberg and Michael Lapointe, are all up to the task. We are closing in on a couple of fine prospects and should know next week who will win out.

New Orleans continues to be a roller coaster. It is very interesting to me that if one does not know the development nuances of a city like New Orleans, they just don’t get it. All big cities have their quirks and politics. New Orleans has been there so darn long that it has quite a convoluted process to get anything accomplished. Add to that the French Quarter, and one has a very interesting development environment.

Or, to put it another way, when the development window opens, for whatever reason, one better jump through it quickly or lose out big time. Right now, it appears that the NOLA and French Quarter window is opening, and therein is the opportunity.

Had a delightful dinner last week with shared ownership pro and grand lawyer Art Spaulding. He’s moved up from Irvine to San Francisco along with wife Kit and the pooch. It’s good to have a kindred soul in town.

Catching Up with Carl: April 2014

Here we are in the midst of spring. At Seahorse Beach Club on the Texas Gulf Coast, our Beach House #1 is fully framed and the decks are going in. It will be complete in June. Sales are taking off. Good news.

Also at Seahorse, we welcome Tiffany Clark to our management team with a focus on club and PRC management. Tiffany earned her ‘stripes’ at Pronghorn outside of Bend, OR, and before then with HVS out of Colorado. She is a terrific talent.

Down in the Florida Keys on Marathon, our Florida Keys Club continues apace. Equity is being raised, the hotel architect is being selected and the fractional cottages are in final design. We are compiling needs for our site sales and marketing teams. The Keys continue to enjoy unprecedented demand for rentals and our alliance with Brian Schmidt’s Coldwell Banker franchise for the whole Keys gives us not only an excellent lead flow, but a look into the second home demand in the Keys.

New Orleans, the Royal Street property, has continued interest as a timeshare location, and we are closing in on a sale. New Orleans itself is in the midst of a real estate boom.

Check out Tres Santos in Baja California. Our good friend Pat Hanes has joined its management team. We feel that this project, with the master developer in Colorado, is on the forefront of a major trend in resort and residential development—that of sustainability. In Tres’ case, they inked a venture with Colorado State University to have a campus on the project. CSU, as the land grant in Colorado, has a strong history of working in Mexico as well as its own sustainable program on its campus.

With no golf course around as an enticement to sell real estate, the project is making a statement that it is different from all other Baja’s planned developments.

We continue to ask ourselves, is the resort business behind or with the curve of consumer demand?

Catching Up with Carl: March 2014

The ebb and flow of deals: that's a big part of the business we're in.

We began the month with two Marathon Key deals in the Florida Keys and ended the month with one. The Crystal site, which we've tracked for five years, has been sold to an Orlando-based hotel company for debt. Star had a marketing contract on the fractional cottage component of the site. That's gone now. Good for the owners, though, to get off the note and get back their equity.

But, the other Marathon site, Florida Keys Club, continues to move along. Our top-flight team is working very efficiently. The team met with the golf club equity members a month ago to update them on our progress. Our golf course architect, Kipp Schulties, did a terrific job in explaining the course improvements. The front nine is lower than the back nine, so it needs to be raised, which means the front will be closed for a year. The front holes will be realigned to make play more efficient and to accommodate the building of the new clubhouse and the fractional cottages.

When all said and done, the Florida Keys Club will have:

• 18-hole championship course 
• 4 Har-Tru tennis courts 
• Golf and tennis pro shops with golf club storage, snack bar and lounge 
• Deep water marina with direct access to Atlantic Ocean & Gulf of Mexico 
• Clubhouse with spa 
• 114-room boutique hotel, half configured for sale, with meeting space and full-service restaurant. 
• 15 fractional three-bedroom cottages for sale 

New Orleans continues to be a roller-coaster ride. The two properties we have listings on both have interested buyers, who, generally, are not as aware as we'd like to the current appreciation in French Quarter real estate and the uniqueness of actually buying and getting a deed for FQ properties. More next month.

Our Seahorse Beach Club continues apace. The Beach House #1 is framed to the second story. Plans for the fishing and crabbing pier are complete as are the beach walk-overs. We are hopeful of establishing ventures with a Club and HOA manager, and with our architect for the Beach Club building and operations.

Our non-resident membership program for the Club is speeding up thanks to interest from a number of chemical plants in the area, which employ thousands of engineers and supervisory personnel.

More in April….

Catching Up with Carl: January 2014

New Year's resolution? Yes! Expand our project list from one to three projects. Simple, but not so fast. As you know, the business is very convoluted and development financing is still tight, and there are few new starts. So, we are digging deeper with those contacts we have vetted and doing our best to make a small universe work for us. We have a talented core team, including Scott Tracy and Chris Cannon plus myself, so we have some built-in bandwidth assuming we do JVs that have talented members.

At Seahorse Beach Club outside of Houston, Texas, we are now committed to wood pilings versus the composite fiberglass ones. Remember those pilings up 17 feet? We’ll use what we have of the fiberglass pilings for our dune walk-overs and for our crabbing and fishing pier. The goal is to get the framing up and well on the way by March—when the spring breaks occur for Houston schools—and then occupancy in June.

Our law firm, Ballard Spahr, has prepared the non-resident membership deposit forms for our amenity club. That campaign will kick in during February and hopefully get us on the way for funding of the core amenities.

The Florida Keys Resort and Club goes for conditional approval from the City of Marathon, Florida, next week for the hotel, with final approvals in April. We expect few, if any, problems. Following approvals, real estate firm Newmark Grubb Knight Frank can begin to raise the needed equity and debt. How we go about getting the first batch of fractional cottages ready for the winter 2014–15 season is still being worked out. We had an all-partner meeting in Coral Springs last week. It’s a very talented and experienced group, and we are pleased to be a small part of them.

The Crystal Resort, also in Marathon, may go back to a condominium and fractional resort versus a hotel and cottages property. More to sell for Star, or maybe it will go all timeshare. This is the neat part of resort development—multiple options to keep one light on their feet.

Even been to St. Croix? There’s a very nice set of parcels owned by a Pennsylvania family with long ties to the U.S. Virgin Islands, who now want to develop it: Butler Bay by name. We are investigating if development financing is available for the cottage whole and fractional sales program.

Lastly, New Orleans is perking again; both for the Royal/Chartres and Square 97 properties. Good and solid buyers are looking at both of them, so we should know more by early February. That’s grand news!