Development over Wabasso bridge ready to proceed
STORY BY STEVEN M. THOMAS, (Week of October 27, 2011)
A $300-million mixed-use development on the left as you come off the island on the Wabasso causeway seems almost certain to proceed after the Indian River County Commission approved a land-use swap that will increase the retail component from 90,000 square feet to 300,000 square feet, according to project point man Joseph Paladin.
The project, known as Orchid Quay, is a new version of the former Bristol Bay development, which was started in 2005-2006 before grinding to a halt with the real estate downturn. As now proposed, Orchid Quay will include approximately 350 townhomes and a high-end retail development on a 113-acre site in the southeast corner of the intersection.
The townhomes will sell for $350,000 to $500,000, according to Paladin, and the shopping area will be a destination location with a large retail anchor, a grocery store and numerous restaurants and shops.
“It will be a high-end, luxury development that will cater to the north island and draw customers from Vero Beach and Sebastian. We will have lots of trees and shrubbery, park benches, pavers and fountains. It is going to be nice,” Paladan said.
The land-use swap, which exchanges residential building rights assigned to the project at the intersection of U.S. 1 and Highway 510 for commercial building rights assigned to a piece of land several miles south, was approved unanimously by the Indian River County zoning board and by a 4-0 county commission vote.
The land-use change has to be reviewed by several state agencies and approved by the Treasure Coast Regional Planning Council, which is the kind of next step that usually gives developers nightmares, but Paladin and county officials say there is little chance the plan will be rejected.
“That is not going to happen,” says Bob Keating, Indian River County community development director.
“There is no chance of this thing being turned down,” says Paladin.
“We needed the land swap,” Paladin adds. “Without the extra square footage, we wouldn’t be able to make it a destination. It would just be some stores along the road. My vision of it is as a place where people will want to go spend an afternoon or evening, shopping and dining.”
Developers always dream big and it would be reasonable to wonder if Paladin’s vision will actually come to pass in an economy still struggling to recover from the worst recession since the Depression, but the solid backing of county commissioners and staffs along with Paladin’s own reputation as a straight-shooting, successful developer make the prospect more likely.
Known as the “sixth commissioner" during the latter part of the real estate boom because of his wide-ranging real estate activities and supposed influence over county politicians, Paladin is well regarded by key county staff and commissioners.
“I am not aware of any problems with him,” says Commissioner Wesley Davis.
“He has always been very comprehensive as far as looking at traffic studies and doing whatever is needed for roadway and intersection improvements and he has always come through with those,” says County Public Works Director Chris Mora. “We have never had any problems with Joe.”
“He has been around a number of years and done a number of developments that have come out fine,” says Keating.
Paladin’s expertise and involvement in county development go beyond his own 16 new home communities and include a multiyear stint as chairman of the Growth Awareness Committee of Indian River, an organization he founded to improve development standards in the county.
Many of the group’s recommendations for better landscaping, more green space and other subdivision improvements made during the boom are now part of county code.
“There are many things I do not know about," says Paladin. “But I know development in Indian River County inside out.”
Besides local expertise on the development team and strong county government support, Orchid Quay seems to have rock solid financing in place, and that may be the most important factor to ensure the project will actually break ground as planned next summer and be available to shoppers and diners sometime in the near future.
Irvine, California-based IHP Capital Partners owns the Orchid Quay tract and is financing the development, which eliminates the uncertainties of bank financing and the possibility of foreclosure.
The investment/hedge fund is as professional as they come, with nearly $20 billion in development completed. Its funding partners include CalPERS, the California Public Employees Retirement System, which is the largest pension fund in the country with $235 billion in the piggy bank.
IHP does not invest its own or its partners’ money lightly.
“They brought consultants in from California and spent a huge amount of money doing their due diligence before they decided to proceed,” says Paladin. “They studied traffic, demographics, everything. They are confident this is the perfect time and place for the project.”
Leases cannot be signed until the project is plated, but Paladin says major retailers and restaurateurs have committed.
“The area is underserved by retail and the location on U.S. 1 at the bridge to the barrier island funnels significant traffic past the site,” says Jeff David, president of David Development Advisors LLC who is managing the project for IHP.
“People who build these types of projects do their own projections and analysis and if they are ready to proceed on something this size, they must be confident,” says Sasan Rohani, the county’s chief of long-range planning. “Lots of people live on the barrier island and there is no grocery story or much other retail out there, so it is probably a good location to attract them.”
Another measure of the financial strength and commitment of project backers is the $10 million IHP has already invested prior to final approval and plating.
That figure includes $6.5 million in impact fees, $1.5 million for intersection improvements, $1.4 million paid to acquire the extra commercial building capability in the land use swap and approximately $450,000 paid over the past two years to reserve the right to hook up condominiums originally approved for Bristol Bay to the county water service.
“It is $28 for each hookup each month,” Paladin says.
In a market saturated with unsold housing, the 350 condos seem like the weak link in of the plan, but Paladin says he has an edge there too.
“The hardest thing to sell is going to be the townhouses,” he admits. “The last thing you should build right now is more residential. I can’t build a house for what they are selling them for out there. But I have a group of pre-qualified buyers that changes the equation.
“I am involved in a development near Disneyworld that is 890 units we bought out of foreclosure. Every one of these units is presold to buyers out of England who love Mickey Mouse.
“We have $30 million in an escrow account on the Disney project. Each buyer has a 20 percent deposit that averages $78,000. The English credit rating is based on 1,000 and the average buyer I have qualified has a 990.The average ratio to income is 17 to 1. And I have approximately 400-500 more prequalified buyers than I have units up there.
“I plan to tie some of the Orchid Quay townhome sales into that group, using the connection of the nearby Disney Resort. I am confident we can presell most of those before we build them.”
“It is spectacular location close to the intercostal waterway, public beaches, golf courses and Disney Resort,” says Davis. “It makes all the sense in the world to have those commercial uses there so the residents of the barrier island can get the services they need.”
Another development group that owns an adjacent 7-acre parcel is considering building a hotel on its property, which would hugely enhance the overall project, according to Paladin.
“This is not something that is going to start and stop,” Paladin says.
“This something that is going to start and finish. The money is fully committed. The county is one hundred percent behind us and we have a great location and plan.
“I haven’t lost a project in 11 years and I can see this one in my mind right now. It is going to be something really special.”
Paladin says he expects to break ground in June.