County's largest mixed-use project ever killed by funder
The largest mixed-use residential and retail development project ever planned for Indian River County has been killed by its California funder, which has concluded that the Vero and Sebastian market is simply not ready for it.
The California investment fund that that owns the Orchid Quay tract and was planning to finance a $300 million residential community and upscale retail center at the site has given up on the project and put the property up for sale.
Irvine,California-based IHP Capital Partners has concluded on the basis of revised marketing evaluations that the area cannot absorb the 250,000 square feet of retail space and 350 condos and townhomes that were planned.
“They had consultants in here from California and Orlando – nobody local – and they said there are too many vacant storefronts at the mall and in strip centers in Vero and Sebastian for this much new retail space to make sense,” says Vero Beach developer Joe Paladin, who has been IHP’s point man on the project for the past three years.
The 113-acre site, which has $5 million worth of water, sewer and electrical infrastructure put in place eight years ago when the project was called Bristol Bay, is at the southeast corner of the U.S. 1 and CR-510 intersection, the second busiest intersection in the county.
Paladin still hopes to proceed with the project by building it in phases.
He says he is talking with Florida-based and overseas developers with the resources to build 90,000 square feet of retail and office space and 100 town homes to begin with, but has not had time to put a deal together since IHP pulled out in August.
He envisions a shopping center similar to Harbor Point at U.S. 1 and 53rd St. where there is a Publix and a number of small shops and services in a strip mall format.
“I would like to see something like a Fresh Market in there along with a bunch of shops and a couple of restaurants,” Paladin says. “The shops would have office space above. It is a perfect location for a real estate office and an attorney’s office. I have had inquiries from a dentist and an optical shop.”
Paladin says the 3-story luxury townhomes he has in mind would likely be offered in several floor plans at prices between $350,000 and $550,000.
One possible scenario for moving forward would involve a new developer buying the property from IHP, putting 20 percent of the purchase price down in cash and financing the building operation while IHP carried the note for the rest of the land cost.
“They have not committed to financing the purchase, but it is a possibility,” Paladin says.
This is the second time a grand project has faltered at the site while owned by IHP.
It was first developed as Bristol Bay in 2004-5. The 500-unit residential community got as far as infrastructure installation before grinding to a halt during the real estate recession.
In 2011, IHP empowered Paladin to revive the development as Orchid Quay, a $300-million residential and retail project.
Paladin negotiated with the county to increase the amount of retail space through a complex land use swap that took most of year to finalize. He says the additional retail entitlement added considerable value to the property.
His plan, approved by IHP at that time on the basis of its initial demographic research, was to build an upscale destination retail center.
“It will be a luxury development that will cater to the north island and draw customers from Vero Beach and Sebastian,” Paladin told Vero Beach 32963 in 2012. “We will have lots of trees and shrubbery, park benches, pavers and fountains. It is going to be very nice.”
Paladin hoped to break ground in 2012 but the project was delayed by uncertainties about road construction at the U.S. 1/CR-510 intersection, which the county plans to rebuild.
Paladin did not want to build his shopping center and then have the road in front of it torn up and potential tenants had the same concern.
“The road work really hurt me,” Paladin says. “That was big delay.”
With the project in limbo while the county negotiated with landowners for additional right of way needed for intersection improvements, IHP sent in a new batch of consultants and got cold feet when they saw the demographic and marketing reports.
“They want out,” says Paladin, “but we are definitely going ahead with the project. I have been with the property for a number of years and I am staying with it.”
“I am talking with a number of people who are interested in building the first phase.”
IHP Capital Partners listed the property with Margery Johnson, a senior director at Cushman Wakefield, a huge international commercial property brokerage headquartered in Orlando.
Johnson did not return phone calls inquiring about the property and the listing price is unclear at this time.
Paladin says IHP has tens of millions in the property in infrastructure, impact fee ad carrying costs and would like to get as much of its investment back as possible.
He says more than $8 million in impact fees have been paid on the property and that its concurrency was just extended for three years.
Concurrency means the project has been factored into the county’s master plan and would not be rejected for traffic congestion or infrastructure overuse reasons.
As it stands, a large-scale residential and retail development can be built at the site, subject to county approval of site and building plans.
“I have been doing development in the county for 11 years, and I have never lost a project,” says Paladin. “I am not going to lose this one, either.”