Return of the High-Rise
After an eight-year hiatus, tower developers are back, betting that a new crop of buildings will succeed in the Southwest Florida market.
STANDING TALL - WCI’s Dwight Thomas, vice president of the tower division (l.), and Paul Erhardt, senior vice president of homebuilding and development, and president, south region (r.), at the company’s Altaira development at the Colony Golf & Bay Club in Bonita Springs.
Photography by Brian Tietz
Luxury high-rise condominiums in Southwest Florida are popping up at last with three expected to open next year after a pause of eight years. Those first across the finish line likely will find themselves in a vibrant market fueled by demand that’s been building for almost a decade, analysts say.
But don’t expect to see the high-rolling speculators and look-the-other-way lenders who charged up the last boom—once-bitten builders and bankers aren’t playing that game anymore.
Now, builders say, their clients are mainly retirement-bound Midwesterners and Canadians who don’t see their purchases as investments.
As the new cycle begins, each developer is touting its project’s unique advantages of price and amenities—all the while keeping an eye on the competition. But with their huge costs and three-year turnaround schedules, it’s still a risky business: Luxury towers are and will remain a roll of some very big dice.
THE HORSE RACE
First up likely will be PACT Real Estate Group’s Aqua at Pelican Isle in North Naples, scheduled to open around May. Today’s market “may not be of the magnitude it was in 2006, but it’s serious buyers who are looking for something new,” says sales director Darline Hillard. A lot of the demand is coming because “so many of the towers are getting older and in need of renovation,” she says, and major renovation in a high-rise is expensive and time consuming. Just trailing Aqua are three other high-rise projects that have already broken ground: Soave Real Estate’s Kalea Bay in North Naples, WCI Communities’ Altaira in The Colony in Bonita Springs (both opening this summer) and the Ronto Group’s Seaglass in Bonita Bay (opening summer 2018).
Two major builders haven’t begun construction but have sales centers for properties they own: Gulf Bay Group of Companies’ Mystique in Pelican Bay in Naples, and Miami-based JAXI CMD’s Allure in downtown Fort Myers. Gulf Bay expects to start construction in October 2017; JAXI in the third quarter of that year.
CALCULATING THE COSTS
The high-rise sector may have re-started with a bang, but will there be enough demand to keep the construction pipeline full of new projects? That depends in large part on what prices do, says Gary Tasman, broker for Fort Myers-based Cushman & Wakefield Commercial Property Southwest Florida. A builder has to pay for land, construction and marketing of a tower, and that number isn’t flexible, he says. “The short answer is $500 to $550 a square foot to make it work.”
That’s why all the towers under construction now are along the coast, where the locations and the views justify that kind of money, Tasman says. Potential sites on the Caloosahatchee River in downtown Fort Myers, North Fort Myers or Cape Coral aren’t quite there yet but likely will come into range eventually, he says. But that isn’t stopping some from trying.
JAXI, for example, bought the 5-acre riverfront site of the failed Cypress Club project in downtown Fort Myers for $4.675 million in April 2015, renamed it Allure and opened a sales office five months later on the Fort Myers Pier in downtown. Allure is permitted for two 32-story towers, each with 140 units.
JAXI managing member Eduardo Caballero says condos are for sale in the first tower ranging from $290 to $320 per square foot depending on how high up in the building they are. The company can offer the units below construction costs, he says, because most of the design, permitting and foundation work had already been done when construction on Cypress Club came to an abrupt halt shortly after getting underway in 2006.
Only a thicket of iron reinforcing rods remains today, but Caballero noted that “with 1,240 piles, 80 feet deep, that’s a couple million dollars right there.” Besides, he says, as Allure gets under way, prices will rise for future sales—and JAXI will have a corner on the market for new downtown high-rise units. The company already has customer reservations for 20 percent of the first tower and expects to resume construction in the third quarter of 2017, Caballero says.
HOW THINGS HAVE CHANGED
In a competitive market, builders are offering the latest amenities to make their projects stand out from the crowd. Kalea Bay, for example, will have a swimming pool on the roof— the first one in Southwest Florida although “it’s being done a lot on the east coast [of Florida] and in Manhattan,” says Inga Wilson, the project’s vice president of sales and marketing.
Splashy, high-profile features such as the pool are more important for today’s high-rises because almost all buyers are looking for a home, not a quick profit, she says. “You have a much more savvy buyer now,” Wilson says. “They’re not just buying for an investment. You saw people flipping 10 years ago—that’s not happening now.”
Gulf Bay founder Aubrey Ferrao is taking the rooftop pool concept a step further in Mystique, which will have a private rooftop swimming pool for each of the building’s four penthouse units. Also, he says, each parking space in Mystique will come equipped with a charger for electric vehicles.
At WCI’s Altaira, customers can check out a temporary furnished condo in the building even though the tower’s still under construction, says Paul Erhardt, senior vice president for homebuilding and development and its south region president. “You have to put your hard hat on to get to it but once you walk through the door you wouldn’t know you’re in a building that’s still under construction,” he says.
The condo addresses the dilemma faced by most customers in a new tower as its two-year construction schedule begins: They have to buy sight unseen or lose out to a bolder buyer. The demo unit also serves to show the more open interior design and higher ceilings that WCI and other builders are deploying in response to modern tastes. Another common theme among the new wave of high-rises is that the units are larger than they would have been for a comparable building 10 or more years ago. For example, the 21-story Sorrento at The Colony Golf & Bay Club in Bonita Springs was built in 2002 with units ranging from 1,930 to 2,932 square feet. By comparison, Seaglass plans range from 2,889 to 3,421 square feet and Aqua’s units go from 3,940 to 6,600 square feet.
Hillard says Aqua was deliberately designed with more spacious units in order to attract buyers who are moving from single-family homes but don’t want to lose the privacy that a house affords. Aqua also makes a point of being more flexible when it comes to customizing a unit—something typical in new houses but less common in multi-family.
EAST COAST, WEST COAST
Southwest Florida high-rise builders take pains to differentiate their market from the bigger, more volatile South Florida one—where a wave of speculative “flight capital” from South America pushed a frenzy of rising prices and new construction over the past three years. Ronto Group Vice President Anthony Solomon says he doesn’t think Southwest Florida’s market is as vulnerable as the east coast to a glut of supply or a crash. “Over there, there are many more opportunities for redevelopment” of existing high-rise sites, he says. But with only a few Gulf-front locations in Southwest Florida able to support a high-rise at today’s prices, “You don’t have to worry about competitors coming along” from Estero south to Marco Island. Deerfield Beach-based housing analyst Jack McCabe says the west coast is better positioned with a more stable pool of buyers, but he warned that a world financial crisis could affect either side of the state. “You can make a case that there is sufficient demand for the projects that have been announced” but that future ones could be vulnerable to price declines.
SOLID FOUNDATION - Ronto Group Executive Vice President Anthony Soloman at its high-rise Seaglass, being built in Bonita Bay
“If buyers from Chicago can’t sell their homes,” McCabe says, “they won’t be able to close on a high-rise unit down here.”
Prices already have flattened out in South Florida, he says—although high-rises still often go for $1,000 a square foot or more. Most of the new condos in Miami or Fort Lauderdale are being purchased by international customers who want a safe haven from their home countries’ unstable economy or currency, he says. The west coast’s primarily American or Canadian buyers aren’t as likely to bail on a condo purchase, McCabe says, but in the event of a financial crisis that’s always a possibility. “The problem with luxury condos is they have roughly a three-year cycle from planning to certificate of occupancy,” he says. “There is demand, but there is probably risk too.”