If the real estate market is so hot, why haven’t two prime pieces of land in downtown West Palm Beach traded hands yet?
We’re talking about the vacant land known as the Lakeview Centre, the former Opera Place twin-tower condo site at 419 LakeView Avenue; and 1515 S. Flagler Drive, vacant land that formerly housed the old 1515 Tower condo.
Real estate brokers and developers say the parcels are having trouble overcoming several factors: Price, timing and a concern the market may have become overheated, both in land and construction costs.
Opera Place hasn’t yet found a buyer willing to pay the asking price of $31.9 million. And the 1515 Tower fell out of contract after Boca Raton developer Ken Endelson had second thoughts about paying the $30 million he offered.
When the 1515 Tower property went up for sale in April, it looked like it would be a fast sell. “It’s a large, turn-key development opportunity right there on the water, with direct views of the Intracoastal, Palm Beach and the ocean,” Jaret N. Turkell, managing director with HFF, said at the time.
And, with only 84 units in the 24-story plan, “it should be easy and attractive for a developer,” Turkell said.
The land formerly was home to the 1515 Tower, a hurricane-damaged condo that crumbled to the ground in a planned implosion five years ago. As people in boats and buildings watched the 30-story tower shudder and fall, nearby residents braced for The Modern, a large, bulky condo planned in its place.
The Modern was opposed by some nearby residents because it had three times the mass of the 1515 Tower, but the city eventually approved the plan.
Then the recession came, and the luxury condo market died.
A Texas investment group bought the 1515 property for $5.5 million in 2011, plus some surrounding land. The Texas group wanted to build an apartment with nearly 200 units, but the idea didn’t pass muster with city hall. So the 1515 property went up for sale in April.
The property did go under contract, as Turkell predicted. And the $30 million purchase price was as grand as the waterview location.
But during a due diligence period, Endelson decided against moving forward, an official with Endelson’s Boca Raton company confirmed earlier this month.
So now the property is on the market again.
HFF’s Turkell isn’t concerned. He said he’s fielding 15 offers and the land will sell soon, to someone else. In fact, Turkell said the property could go under contract by the end of the month.
A buyer who keeps to The Modern’s approved plan would be able to build without fear that nearby residents could thwart development. But if a buyer wants to change the building’s design, it could open the door to community opposition, especially if a developer seeks to increase density, as has been contemplated by 1515’s suitors.
Many observers think it’s too risky to pay big money for a property on which only 84 units can be built.
Making a profit would be tricky, not only because of the high land cost, but also rising construction costs, both in supplies and labor.
Therefore a developer paying anywhere near $30 million for the right to build only 84 units would have to sell each unit for millions of dollars.
Is there a market for more multi-million dollar condos in downtown West Palm Beach?
Only one West Palm Beach project is trying to sell very expensive condos, and it’s The Bristol, planned for the Flagler Drive waterfront property formerly known as the Chapel by the Lake.
Although condos sell for millions of dollars in Miami, West Palm Beach “is not Miami. Flagler Drive is not that sexy,” one broker said. West Palm Beach also isn’t a destination for South American flight capital, as Miami-Dade County is.
Meanwhile, questions linger over the fate of Lakeview Centre, formerly known as the Opera Place condos.
That property also fell out of contract, after a rumored deal for $33 million died. Earlier this year, the asking price fell to $31.9 million. It’s unclear whether the price could drop again.
The property originally was set for the twin-tower luxury Opera Place condos, 536 lavish residences priced from $400,000 to $4.5 million.
But the recession dashed plans for construction of the towers. The property’s lender, Cyma Finance, took control of the land last year.
Although the 3.2-property is prime land, the site plan is complicated, the property’s broker said. The land is approved for 1 million square feet, features space for 350 residential units, 250 hotel rooms, 317,179 square feet of office and 57,710 square feet of retail.
“We’ve been on and off again with several groups, but we’re not down the road with anyone yet,” said Brad Capas of Capas Group Realty Advisors.
Not only are some potential buyers balking at the price, but Capas said it’s been hard to find one developer who knows how to build (or is even interested in building) office, hotel and residential.
In addition, Cyma doesn’t want the sale’s closing contingent on any change to the site plan, Capas said.
Some developers who could build the project would rather pay somewhere in the low $20 million-range for the site, which is a non-starter with the owner. Word is Cyma initially wanted $38 million for the site but never was able to attract a buyer at that price.
Capas said interest remains strong, and he’s hopeful a deal can be struck.
Alexandra Clough writes about the economy, real estate and the law.
Watch video of the implosion of the 1515 Flagler tower: www.palmbeachpost.com/1515video