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Sea Changes in the Caribbean
On a warm December evening on the Bahamian island of Great Exuma, vacationers mingled at a dinner party in a 5,400-square-foot, four-bedroom penthouse suite overlooking the ocean. A chef cooked lamb and sautéed vegetables as Peter Nicholson, the condominium development’s primary investor, gave a tour of the sprawling apartment—which is on the market for $2.99 million.
Though the housing market in much of the U.S. has begun to improve, in parts of the Caribbean recovery is lagging. Shown here is the Grand Isle Resort & Spa in the Bahamas.
More home buyers who want to tear down an existing home and rebuild on the same lot are doing so without wrecking balls and bulldozers. ‘Deconstruction’ is a growing trend in the West Coast housing market. WSJ’s Monika Vosough reports.
As nice as it sounds, life hasn’t been exactly paradise for some developers in the Caribbean. Mr. Nicholson took over the unsold portion of this resort earlier after it went into receivership. ‘I’m selling it at less than it cost to build,’ he said, noting that the same penthouse was priced at just over $6 million in 2008.
Though the housing market in much of the U.S. has begun to improve— median prices in the U.S. rose 11.1% in October from a year earlier, according to the National Association of Realtors—in parts of the Caribbean, recovery is lagging. Among the hardest hit are hotel-condo developments attached to big-name luxury chains, some of which halted construction during the recession and have yet to restart. As a result, ample condo inventory and prices still at depth-of-recession lows are attracting vacation-home buyers looking for deals.
Some islands, like tony St. Barts, have seen strong sales recently at the highest end of the market as international trophy-home buyers snap up prime properties. A handful of very high-end new residential developments are also cropping up elsewhere in the Caribbean, started by optimistic developers amid the downturn, many of whom didn’t require bank financing. Following a $100 million upgrade to the resort, Sugar Beach, a Viceroy Resort in St. Lucia, for example, recently rolled out residences with views of the Piton Mountains that range from $3.2 million to $9 million.
Investors in some struggling projects say they finally see a comeback on the horizon. At Grand Isle, there were no new condos sold between 2008 and January 2012, when Mr. Nicholson purchased 31 unsold units. He has since resold six of them, flying promising customers down to the place to see for themselves, often giving them boat tours of the Exuma Cays, a set of remote islands nearby. Some of these are owned by celebrities like David Copperfield, Tyler Perry and Johnny Depp. ‘They’re not walking across the beach and writing a check today,’ says sales manager Laurinda Jelinek. ‘It’s a little bit of a harder sell.’
In 2009, the Four Seasons Resort adjacent to Grand Isle closed. It reopened in 2010 as an adults-only, all-inclusive Sandals Emerald Bay. Across the street, another development on the property called Roker Point has 91 empty lots arranged along cul-de-sacs and streets overlooking deep man-made canals, a project that was put on hold during the downturn. Marketing recently resumed, and a handful of the lots have recently sold, says John Goldsworthy, director of sales and marketing for the project. Construction has yet to start on any homes.
John Cheadle, a lawyer and pilot from Nashville, Tenn., who has been visiting the island for years, decided to buy a three-bedroom condo at Grand Isle recently, saying he was drawn to the high-quality construction, oceanfront golf course and prices, about a third of what a friend from Nashville paid for a similar-size condo several years ago. ‘In my mind, I thought that this was the perfect time,’ he says.
Colin Lightbourn, a Nassau-based broker with Coldwell Banker, says prices have largely recovered for prime properties in Nassau, Paradise Island and in Harbour Island, which are closer to major population hubs. Despite depressed pricing, Exuma has fared better than other Out Islands with sales picking up recently.
‘Prices came down to rock bottom,’ says Jenny Kettel, a local broker. ‘But people are coming back now to look.’
Here’s a look at what’s happening in some other destinations:
Turks & Caicos
On this small chain of islands not far from the Bahamas, total real-estate sales peaked in 2007 to around $250 million and by 2009 had dropped to under $50 million, according to Rick Newton of Resort Capital Partners. Nina Siegenthaler, a broker with Sotheby’s International Realty Turks & Caicos, says prices have slid further this year, down about 30% from the peak, spurring sales activity. Sales volume as of the second quarter this year already topped $90 million, according to Mr. Newton. ‘The consensus seems to be with buyers I’ve worked with for several years is that we’re now really at bottom,’ Ms. Siegenthaler says.
One listing, a recently renovated home on the beach called Pelican House, was previously listed for $4.95 million and recently came back on the market for $3.95 million. Ian Miller, the seller, lived there with his family for nearly 12 years but has since relocated to Fort Lauderdale, Fla. ‘I don’t think it will ever get back to the giddy heights of 2008 or 2007,’ says Mr. Miller, who owns a chain of fast-food restaurants. Meanwhile, he’s renting the home for as much as $15,500 a week.
Still, at least one developer is optimistic about the high-end of the market. The developers of Grace Bay Club, a major resort on the island, are currently building a small set of high-end beach-front villas not attached to the larger resort.
‘There seems to be less of an attraction to the condo-hotel project,’ says Mark Durliat, the CEO and principal of Grace Bay Resorts. Plans call for about 10 single-family homes on ¾-acre beachfront lots, starting at $3.6 million, with additional homes in the future.
U.S. Virgin Islands
Comprised of the islands of St. Thomas, St. John and St. Croix, the real-estate market in this U.S. territory typically lags about 12-24 months behind the United States, says Lee Steiner, of USVI Sotheby’s International Realty. In terms of dollar volume, 2012 was the slowest year so far, down about 60% from a peak in 2009.
A beachfront house in St. Croix can be had for $400,000, he says, about 40% less than it would have been a few years ago. Grande Bay Resort condos in St. John previously marketed in the $1 million range are now priced at $600,000 to $800,000. A recent sale includes a 7,000-square-foot waterfront home listed for $3.25 million that went for $1.675 million. ‘It’s not uncommon to buy a property for 25% to 30% below asking price,’ says Mr. Steiner.
British Virgin Islands
David Johnson, a luxury-community developer from Michigan, is developing a low-density 400-acre resort on Virgin Gorda with homes and lots that range from $2 million to $30 million. Oil Nut Bay, as the resort is called, has sold $91 million in real estate so far this year, attracting buyers like John Mack, the former CEO of Morgan Stanley who is completing plans to build a home on his lot. ‘We fell in love with it,’ he says. The resort includes a marina, nature center, beach club and an 8,000-square-foot ‘town hall.’
Mr. Johnson says his development has 19 homes and lots remaining of the total 46 offered so far with $100 million in infrastructure already in place. ‘We’re doing no discounts,’ he says. ‘It’s premium pricing.’
Chris Smith, of Coldwell Banker Real Estate BVI, says sales in the territory are strong for homes in both the top-end of the market and the under-$1 million range. The softest market is homes priced from $1 million to $5 million. ‘People are expecting a deal at that level,’ he says. ‘Occasionally someone will come in and drop a price, but that’s unusual.’
Known for its quiet vibe and white-sand beaches, Anguilla saw several high-profile projects stalled during the downturn, including Temenos, which ran into financial trouble and halted construction after buyers put down million-dollar-plus deposits. Viceroy Anguilla Resort and Residences filed for bankruptcy before sales closed. In 2010, Starwood Capital Group took over the project and cut prices on villas, which ranged from $600,000 to $6.5 million.
Developers of a new condo-hotel project, Zemi Beach, say they’ve made efforts to attract buyers who may be concerned about losing their deposits on stalled or shelved projects. Jeffrey Goldstein, one of the developers, says escrow accounts will be held at a U.S. bank with money that cannot be used for construction fees until the roof is about to go on the buildings. Prices range from $2.09 million to $3.12 million for two- or three-bedroom units. One of the eight buildings has been built so far, and the rest are slated for completion by mid-2015.
Naomi Cambridge, who is handling marketing for the Zemi Beach project, says sales have picked up in recent months, including six sales in the past six weeks at Viceroy. ‘The market is buoyant.’
Christian de Meillac, the London-based head of Knight Frank’s Caribbean real-estate desk, says demand has remained relatively strong in Cayman because of the number of banks based there and a large number of expat residents.
Camana Bay, a mixed-use project on 500 acres has been designed in what is called a ‘New Urbanist’ style—it includes retail shops, bank offices and law firms, as well as multifamily homes for rent in a town center that opened in 2007. A 200-home, master-planned for-sale residential component was put on hold during the downturn but has resumed in a scaled-back form, says Jackie Doak, the chief operating officer of Dart Realty, the development company behind it.