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West Palm Beach -- Is it a good time to buy a home?
Developer Jim Engel of Palm Beach believes it is, and he isn't alone. Iconoclastic television stock analyst Jim Cramer said "yes" to the same question Feb. 28 on NBC's Today show.
"It's definitely a challenge, building counter to the market. But we're in this for the marathon, not the sprint. We will build these buildings," said Engel, managing member of American Heritage LLC, a luxury-home builder based in Chicago.
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| Jim Engel looks over the project with West Palm Beach Mayor Lois Frankel. | Central Park Plaza will comprise a renovated six-story building, a new 16-story tower and a public park dedicated to war veterans. |
On Jan. 17 in West Palm Beach, American Heritage started sales for Central Park Plaza, so-named because it will be downtown, two blocks west of the Intracoastal Waterway, and will include a public park.
More unusual is the plan's duality. The six-story 1926 Meridian Building at 326 Fern St. will be converted to 50 lofts, paired with a 16-story, 241-unit condominium tower with first-floor retail.
Pre-construction prices range from the upper $200,000s to $1.5 million, and Engel needs to sell 40 percent to begin building.
"We believe it will take 10 to 12 months to reach that goal," he said. "To be sold out in six weeks ... that's history. But shortly, people will realize that now is the time to be in the driver's seat."
His timing trails that of planned condos that aren't going forward, such as 550Q, Palladio Terrace and Opera Place. But Engel's team is not distracted by undercapitalized projects that didn't come out of the ground. They are intent on offering new luxury units at a time when some developers can't.
"We believe the real estate business is like any other. It's based on supply and demand. And local economists tell us the supply is shrinking. So we want products available for when the buyers are here," Engel said.
As "the only project slated for delivery in 2010, we really won't have any competition when we roll out," said Tim Harris, of Palm Beach-based Martha A. Gottfried Inc., who is marketing the project with Lisa McKeon.
"We took a gamble, but Donald Trump and Jorge Perez, the two geniuses, announced Trump Tower Palm Beach a week after" American Heritage introduced Central Park Plaza, Engel said. "Either we're all dumb, or we have insight."
After tracking the downtown market for 18 months, Palm Beach broker Pamela Hoffpauer, president of Martha Gottfried, concluded, "West Palm Beach is not overbuilt, it's undersold. People are evaluating more carefully," she said. "There are only 700 completed and unsold units in our market."
Palm Beach broker John Pinson, past president of the Realtors Association of the Palm Beaches, disagreed.
The city has a glut of completed units and new units up for resale, and some buyers "are forced to close or lose deposits," Pinson said. At the same time, "owners are willing to rent for extremely low prices just to stop the bleeding."
A few weeks ago, renters could choose from among 220 two-bedroom units in downtown buildings that sold for up to $500,000 per unit, Pinson said. Tenants can get into a full-service, amenity-rich building for $1,100 to $1,450 a month, "so why buy when you can rent cheap and wait for foreclosures?"
Pinson predicted the market will improve, but possibly not until after the 2008 election. "The absorption of excess inventory will take some time to work out, maybe years," he said.
In contrast, the Multiple Listing Service indicates that some sellers in the city recently raised prices, including one listed with Pinson's firm. On Feb. 28, the price of a unit at 1805 N. Flagler Drive went from $189,000 to $194,900. He also raised the commission offered to the selling broker from 3 percent to 5 percent.
Some sellers who are losing money on a rental "still want to tough it out for the market to come back in a year or two," Pinson said.
In its South Florida Executive Summary for the fourth quarter of 2006, American Metro Study Corp. said there is a 1.7-month supply of detached single-family homes in Palm Beach County. And of the 20,000 people a year moving into Florida, many come for the 10,000 new jobs created.
"We believe West Palm will get its fair share of that 20,000 per year," Engel said.
His concept is a second home for buyers who want to be near the Kravis Center, the Meyer Amphitheater, CityPlace and Clematis Street.
"It's important for West Palm to keep this city the entertainment capital of the county," Engel said.
Hoffpauer cited the project's amenities, such as a residents' club for entertainment, exercise and relaxation. Overlooking the lake and Palm Beach, the roof will have a swimming pool, party deck, gazebo, Jacuzzi and his-and-her saunas.
The tower will have a business center, conference room, club room with large screen HDTV, catering kitchen, workout facility and concierge services.
American Heritage paid $10.95 million for the properties, which last sold in 2000 for half that amount.
The Meridian will remain six stories and will be renovated first, followed by the tower, to be finished by 2010.
The firm will landscape a parcel just west of The Meridian and dedicate it as a public park for Florida war veterans, "including a wall with their names," at a cost of about $4 million, Engel said. It will be finished last, because it is the staging area for construction.
Ceiling heights of 11 to 14 feet in The Meridian Building will lend themselves to "very urban, loft-style apartments."
Engel said he isn't worried about taking on the renovation of an older building.
"It has a basement, which is rare, and during the last three hurricanes, it never lost power and got no water in the basement," he said.
He first bought a home in Palm Beach in 1983. He and his wife and business partner, Gaye Engel, bought again in Palm Beach in 2002.
American Heritage has built about 10,000 residential units in the Midwest. The Engels commute to Chicago, where their high-rises include Skytech Lofts, Park 1500, VB1224 Lofts and the Paramount Lofts.
"We wanted two markets. I like West Palm Beach, in my backyard," Engel said.
After scouting properties, he conferred with city officials to create the Fern Street Corridor on the north and south sides of the street.
By Stephanie Murphy
Daily News Business and Real Estate Writer
Sunday, March 11, 2007 - PalmBeachDailyNews.com
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