Miami Herald: Makeover for Florida Keys hits a wall — for now
Oct 13, 2009
The Miami Herald published this article on October 13, 2009
BY CAMMY CLARK
Developers of Harbor Place in Key West are in foreclosure, leaving a dusty city block in a historic district. Luxury developers with grand plans swarmed the Florida Keys during the real estate boom, paying big bucks to gobble up campgrounds, trailer parks, marinas, mom-and-pop motels — even renowned Holiday Isle and its World Famous Tiki Bar.
Many Keys’ residents became alarmed their “Mayberry-by-the-Sea” was heading toward extinction.
Then came the real estate and credit crash. From Key Largo to Key West, at least 18 pricey projects screeched to a halt in 2007 and 2008. They included The Shore in Islamorada — site of Home & Garden Television’s 2008 Dream Home — and Harbor Place, now a city block of dust in Key West’s Historic Seaport District.
“It doesn’t feel like the rich people are taking over any more,” said Shawn Wilson, a realtor at Prudential Keyside Properties. “Everybody’s broke.”
The economic downturn has become a reprieve — perhaps temporary — for the small amount of inexpensive lodging that remains in the Keys. And it halted other developers’ potential purchases of trailer parks and budget motels.
But it left scars, too.
Properties that housed residents and tourists are now bulldozed and empty, marked by chain link fences and “keep out” signs.
Today, the legacy of the Keys’ land rush is a list of foreclosures, bankruptcies and litigation, some of it so complicated that developments have been left in indefinite limbo. One of the biggest: the $220 million Marlin Bay Yacht Club in the Middle Keys.
“The developers went under. It went to the bank. That bank went under, and it has gone to another bank — I lose track,” said Marathon planning director George Garrett, adding he has “no clue” what will happen to the proposed resort.
Other properties have made their way through the legal process and are back on the market at 2003 and 2004 prices — preboom property values, but still relatively high compared with other parts of Florida.
In Islamorada, for instance, the 25-unit, condo-hotel named Indigo Bay was about 95 percent complete when the money ran out for the now-bankrupt developer DB Key Largo. After two unsuccessful auctions, it remains empty — and for sale. Asking price: $6 million, reduced from more than $8 million and millions less than the developer expected to make if the units had been sold individually.
Most of the other upscale projects never began construction.
In Key Largo, developers of Playa Cristal Resort purchased the popular American Outdoors RV Park, with ambitious plans in 2006 to turn the land with 154 RV hookups into a condo-hotel with 92 upscale units, a restaurant and lounge built in a style “reminiscent of the Hemingway era in Cuba.” Price: $690,000 to $4 million per unit.
The developers, Cortex Living Resort, demolished the park, but all they have to show for the resort is a fading sign off U.S. 1 that says “The Pearl of Key Largo.” The property is now embroiled in a $40 million foreclosure lawsuit.
Other projects never saw a bulldozer, such as Seaglass Resort, formerly a popular KOA Campground on Fiesta Key. Plans called for swanky townhomes with a shipwreck salvagers theme. Despite notices the campground was shutting down, it continues to operate under receivership in the midst of a $74 million foreclosure lawsuit.
“In a way, that’s a good thing,” said Harold Wheeler, executive director of the Florida Keys Tourist Development Council. “We need to keep our nature-based lodging. People love to come down and camp, even if it’s in $250,000 RVs.”
Playa Cristal, Seaglass Resort and Harbor House were all planned to be part of a growing empire of the Cortex Living Resorts, a development company founded in 2002 by a group of Keys natives. The developer’s attorney, Alan Statman, could not be reached for comment.
Other developers who saw dollar signs in the Keys during the boom years of 2002 to early 2007 included Earthmark, Ceebraid-Signal, L.M. Sandler & Sons, the Peebles Corp., and Cay Clubs, the most aggressive in purchasing Keys’ marinas.
David Clark, a former Earthmark executive, founded Cay Clubs in 2004, and over the next couple of years the company bought waterfront property in the Keys for more than 10 resort projects. Cay Clubs employed hundreds of people but also angered others who were concerned about the upscale direction the company was taking the Keys.
But the empire, complete with corporate jets, was short-lived. Financial woes led to the company’s 2007 collapse.
“In my opinion, they almost deserved it,” Marathon City Council member Dick Ramsay said of all the developers who tried to take advantage of the economic boom in the Keys and now are in trouble. “They got greedy. If they took a little piece of the pie at the time, they might still be in business. They went for the gusto, and sometimes got burned.”
$1B IN BORROWING
In the past seven years, developers have collectively borrowed nearly $1 billion for at least 18 upscale Keys’ projects that ran into severe financial problems, according to public records and information provided by the developers.
“The rat bastards bought up our property and took our affordable housing,” said backcountry fishing guide Capt. Dennis Robinson.
In Marathon, Virginia-based developer L.M. Sandler & Son evicted 90 mobile homeowners at Gulfstream Trailer Park and invited high-end buyers to parties to see their planned Marlin Bay Yacht Club with $1.6 to $4 million townhomes, private marina, clubhouse, pool and observation tower. As part of the deal, they agreed to build some affordable housing.
The first 13 of 84 townhomes were built, but only two sold. Construction was halted in May 2008 and nobody knows when — or if — it will resume.
“They were greedy,” said Muffett Barth, who lives with her dog Lucky and refused to sell her quaint bayfront home even though developers included her property in the initial footprint of the project.
“You can’t bust into the Keys, saying `I’m a big shot and everyone has got to move,’ ” she said.
The developers, L.M. Sandler & Son, repeatedly tried to get her to sell in 2007, even after she told them they couldn’t write a check big enough. During construction, she found a use for the $4 million vacation home that was built but never lived in. From her backyard, she projected the movie Over the Hedge on the home’s yellow wall.
Former Marlin Bay project manager Thad Rutherford did not return phone calls.
Also in Marathon, Coral Gables-based Peebles Corp. purchased the aging Key Colony Bay Hotel (formerly a Ramada Inn) on five acres for $28.3 million, borrowing about 50 million to develop it into 72 ultraluxury waterfront homes with roof terraces and elevators. A spokeswoman for the Peebles Corp. said last week the project was indefinitely on hold. Meanwhile, the 80-room hotel has been shuttered with no plans to reopen.
Robert Spottswood, whose family has been involved in Keys real estate for 150 years, predicts it will take two years or more for the market to recover.
For now, he said, he is moving forward on plans to develop two marinas that are part of the Faro Blanco property his company purchased in 2004. But he said he is holding off on building the proposed luxury residential units that had been priced at more than $1 million each.
“Where the market recovers and at what prices, I don’t know,” he said.
Even Holiday Isle, the poster child of gentrifying the Keys, wasn’t immune to the crash.
Purchased at an eye-popping price of $98 million, the developers planned to bulldoze the well-known hodgepodge of buildings — the self-proclaimed birthplace of the rum runner — and turn it into a swanky, Greek-themed resort called Ocanos.
Those plans are history.
“At least in the near future, they are not going to completely destroy the place,” said Edward Koconis, planning director for the Village of Islamorada.
Garrett, the Marathon planning director, said the planned Maranu Luxe Bungalow Resort and Spa on the Knight’s Key RV Campground offers another example of a legal tangle that may take years to sort out. He estimated that 15 banks are involved in the project, which is on hold. But the delay has been good news for the organizers of the popular Seven Mile Bridge Run, which is staged from the campground.
Jackie Harder, president of the Key Largo Chamber of Commerce, said there may be another silver lining for the Keys: “It has given the people a chance to pause and reflect on what the community should look like as a place to live and visit.”