Craig's Top Investment and Distressed Property Pick for June 19, 2009: Development Opportunity in Destin

Destin Top Investment Pick 1900 Ninety Eight Gulf Front Commercial Property

Every week I am going to pick a top investment and distressed property pick for the South Walton Area. This week I went to look at one the best and last Gulf Front properties in Destin. This property is located at the corner of restaurant row and scenic 98. Just a few doors east of the Back Porch and Signature Beach Condo. It is just south of Grazie’s restaurant and The June White Decker Beach Access is to the East of the property.

What I like best about this property is the long term potential. This is a true rare gem and the last of its kind in Destin for mixed use Commercial. This is for someone that can buy the property for a steal and hold on while the market recovers. The Signature Beach condo next to this development is amazing. It is a welcomed break from the usual high rise condo designs. This is a modern condo that you would see in Miami or Dubai. Every unit has seamless windows for inspiring views of the gulf and the white sand beaches. The pool on the top floor of the condo is very chic. These condos were selling in the $1.5mil to $1.8mil to the mid $2mil range.

This property is right next to Signature Beach and has 156 of gulf frontage. The site is approved by the City of Destin and permit pending for a proposed development consisting of a 12 story building with 2 levels of parking, 2 amenity levels and 8 levels or residential condo units…that is 16 total condos. The current site has a Triplex and 5 townhomes. These sit “RIGHT” on the beach. You could almost fish of the back porch they are that close to the gulf! The site was originally purchased for $11.5 million and the asking price is $6.995mil.  The beauty of the project is that you can refurbish the existing triplex and town homes and generate significant rental income while the market recovers. Then after the market recovers you can build the condo. The triplex was generating $160K a year in rental income when it was on an active rental program. With the Triplex and the 5 town homes you could generate $400K to $500K in rental income a year.

Download the RENDERINGS of 1900 Ninety Eight

If you are interested in this property or would like more information please contact:

Craig Baranowski
Royce Smith

Fannie Mae tightens up on Condo Lending Requirements

We have all felt the credit squeeze. Especially as a Realtor trying to get our buyers financing for distressed condos as a short sale, pre-foreclosure or REO. In NW Florida, from Panama City Beach to Destin there are only a few lenders that will write mortgages for condos and even fewer for condotels. The difficulty in finding financing is due to lenders being very cautious with condo developments that are not financially sound and HOAs that are in financial trouble. Due to the large surge in condo developments, many new condos are vacant and the units that have sold are mostly in foreclosure. This puts the HOA in a death spiral. As Realtors we find ourselves and buyers in a difficult position. We need to sell the distressed inventory to financially sound buyers to revive the condo developement and infuse much needed HOA dues. Financially solid buyers will get the condos out of their death spiral. However, if lenders will not write mortages for these developments and Fannie Mae will not back them, then there is no way to get out of the financial death spiral.

During the condo boom Fannie Mae loosened up their condo pre-sale requirements from 70% down to 51%. In a letter to Cynthia Shelton, President of the Florida Association of Realtors, the old requirements have been re-instated and now all new condo pre-sale requirements are 70% of units must be under contract. I believe this to be a good move. Fannie Mae is also requiring that at least 85% of condo units in established projects must be current on their condo fees. This requirement has been expanded to new construction.

The tightening of the HOA guidelines makes it very difficult for a condo development to get out of financial difficulties and back on track. Buyers are jumping in to the market taking advantage of the incredible prices and low mortgage rates, hopefully we will work through this condo dilemma and get everything back on track.

You can read the letter that Deborah Tretler of Fannie Mae gave to Cynthia Shelton of FAR here.