A Square Deal

A Square Deal

urban living by Mark Gordon | Managing Editor

The downtown Sarasota condo market has a heartbeat again. Will it keep thumping?

Sarasota-based architect Chris Gallagher has participated in a certain condo conversation so many times over the last two years, he's virtually memorized both sides.

It goes something like this: He tells people, be it relatives, friends or friends of friends, that he's working on a mixed-use condo project in downtown Sarasota and he normally gets a quizzical glance followed by a shrug.

The glance is obvious, as condo construction in just about every Gulf Coast downtown has practically dried up. And the shrug, Gallagher says, usually signifies the other person has little interest in hearing about yet another "box-in-the-sky."

But on a recent Saturday night while out with some friends, Gallagher's condo conversation took a surprising turn. He was chatting with an acquaintance, a man who lives half the year on Siesta Key and the other half in the South of France. Gallagher talked about how this particular downtown Sarasota project, Citrus Square, is "all about the street life," not the view.

Adds Gallagher, of Sarasota-based Jonathan Parks Architect: "This is some real urban living that hasn't really existed in the marketplace before."

And when Gallagher got to the part about how this project is capped at three stories and is being built in the mold of some projects in mid-size European cities, his acquaintance perked up instead of shrugging.

The Sarasota-based developers behind Citrus Square, contractor Mark Pierce and local accountant George Birkhold, are going to need a lot more perk-ups and a lot less shrugs if they are to pull this one off.

While that would be true with any condo project, Citrus Square's challenges and pressures are likely to be heightened, as this is the first downtown Sarasota development in two years to actually begin construction. The project has been able to reach 14 pre-sale agreements, but even that good chunk of news has a caveat: It took about four months to reach that number, a glacial sales pace compared to a few years ago.

"I think this project is hugely significant, given the state of the economy and the real estate market," says Sarasota City Commissioner Ken Shelin. "I think it will be a trigger for further development."

A classic look

Pierce and Birkhold admit they weren't necessarily thinking on such a large scale when putting together Citrus Square. They were really only seeking a commercial investment for themselves and their families, a strategy they had been executing in piecemeal the past decade by slowly buying land parcels around a 10-block area north of Main Street.

"We didn't set out to be in the condo business and we're not in the development business to just be in the development business," says Pierce, who runs a self-named contracting firm that has built waterfront homes, office buildings and restaurants over the past two decades. "This was for ourselves and our families."

Still, Pierce says in late 2005 he and Birkhold realized they had an opportunity to reach an untapped market with their two-plus blocks of property on Orange Avenue, less then a half mile north of Main Street.

After consulting with Gallagher, in addition to city planners and a few area neighborhood groups, they thought building a series of six, three-story buildings with retail on the bottom floor topped by two floors of residences would be the way to go.

Then the downtown condo market collapsed. So the developers tinkered with the pricing points and sizes of the condos, going smaller and less expensive. Pierce says the go-low pricing decision was strictly market-based, not a move to appease city planners by building so-called affordable housing. Says Pierce: "We were trying to serve an undersized part of the downtown market."

The result is condos that are priced from the mid-$200,000s to about $550,000. And, it follows, the lower prices do indeed bring a smaller size: The 20 condos in phase one of the project range in size from 500 square feet at the low end to about 1,300 square feet at the high end.

The size and prices are a fraction of what was mainstream in the downtown Sarasota condo market only three years ago, when prices were hovering around $800,000 per unit and up, while sizes, in some buildings, started at 1,500 square feet.

But the other compelling part of Citrus Square, the developers say, is the ground level retail component, which is planned at about 11,500 square feet of space. Those stores, as many as 10, are planned as a combination of outdoor cafes, restaurants and maybe even a dry cleaners or another service business. The goal, says Pierce, is to have more local and regional names as opposed to national stores.

Other parts of the project add credence to the walking-around European-style of living the developers are marketing. It also follows some of the new urbanism development suggestions made by Andres Duany, a planning and architecture consultant who has worked with several Gulf Coast downtowns, including Fort Myers and Sarasota.

For example, the streets will be lined with trees and antique-looking lampposts, while the building edifices, windows and even awnings will have a classic look. And the entire project is designed to look like six buildings built side-by-side over years, as opposed to one monolithic structure.

What's more, the developers are taking advantage of some new downtown edge zoning codes that allow other Duany-inspired changes, such as a makeover of parking spots. Indeed, Gallagher says the plan is to turn the section of Orange Avenue that fronts the project into street parking, with Main Street-like diagonal spots on one side and parallel spots on the other side.

"The whole thing," says Gallagher, "is designed to be a more unique and enjoyable experience."

Not surprisingly, there are some extra costs and hassles in developing a project with these types of features and experiences. One example: The crews are going to have to reroute dozens of FPL power lines currently lining Orange Avenue that aren't an aesthetic mix with the project. This entails working through the bureaucratic channels of the power company, says Pierce, in addition to spending about $135,000 for the actual rerouting work.

Time to sell

Over the past year, as the plans such as rerouting the power lines began to come together, one challenge has lingered: Finding buyers.

The challenge was even more pronounced for Pierce and Birkhold, as banks and other lending agencies have become tighter then ever when providing financing for a condo project. What was once a requirement to have 50% of presales sold in order to obtain financing has turned into a 70% threshold in most cases. That includes Citrus Square.

For Pierce and Birkhold, that meant selling 14 of 20 units marked for construction in phase one. That was done late last year, opening up about $8 million in financing from Whitney Bank, which could go up at least another $2 million for the second phase of the project.

Pierce hired Sarasota-based real estate titan Michael Saunders & Co., to oversee pre-sales of the project, which began midway through 2007. Pierce and Saunders are longtime friends and business partners, as Pierce's contracting firm has built several homes and commercial properties later owned and sold by Saunders.

Still, even with the power of the Saunders name and the details of the project, Pierce concedes the sales and financing process "wasn't easy." And the commercial side has even been more challenging, as the five or six potential businesses Pierce has spoken with have not yet officially committed to the project.

The 14 residential buyers that have already signed pre-sales agreements and left deposits are a varied mix. The list includes a middle-aged woman who plans to sell her house in nearby Gillespie Park; a few younger professionals who work in the downtown area; and even a man who owns a home on Palm Island that was seeking a landlocked second residence so he doesn't have to rely on the ferry to get home on a weekend evening.

And Pierce didn't have to go far for at least one buyer. Turns out Gallagher, the Jonathan Parks architect, didn't only talk up Citrus Square to friends and acquaintances. He and his wife have bought a unit there, too.

REVIEW SUMMARY

Industry. Development, construction

Development. Citrus Square, Sarasota

Key. The project has set low price points for condos in order to meet stringent financing requirements.