• Legendary
• Project Execution
• Market Study
• Economic Feasibility Analysis
• Sales and Marketing Plans
• Resort Fractional Use Plan
• Legal an Regulatory Compliance
• Information Systems
• Development and Construction
• Closing Administration

Print Case Study

Emerald Grande at HarborWalk Village
by Legendary, Inc. Destin, Florida 2004 – 2009

In August 2004, developer Peter H. Bos contacted Ed McMullen Sr. and requested assistance with Peter’s Mixed Use, Timeshare and Whole Ownership project that was in development planning in Destin, Florida.

We offer this Mixed Use Project as a Case Study for your review, because this project required a wide spectrum of McMullen Development’s skills and services and demonstrates how we integrated those with our partner’s strengths. Note that our roles have been varied over a period of years and the following narrative has only captured some of those examples.

Please utilize the green links in the Case Study Summary below to read more about any particular role of McMullen Development with Emerald Grande.

Case Study Summary

We began our assistance by conducting an initial Project Evaluation, our traditional first step, which involved entrustment and education by Legendary on their current position and objectives. We quickly pointed out areas that needed further study to confirm Legendary’s initial assumptions. With Legendary’s cooperation, we began our second step, Business Plan Development, which included a new and complete Market Study, designed by McMullen Development, and focused on determining what the consumers wanted in a Product Design Plan, including Unit Mix Programming, Amenity Programs and Resort Services. Based on the research, we quickly came to the conclusion that substantial modifications were required to Legendary’s initial plan, necessitating the preparation of a new Economic Feasibility Analysis.

With a fundamental consensus between McMullen Development and Legendary as to the new Business Plan and its feasibility, McMullen Development reached an agreement to become an integral part of the Emerald Grande Project Execution team.

As key members of the execution team, McMullen Development assumed significant responsibilities for the creation of innovative Sales and Marketing Plans, the Resort’s Fractional Use Plan and Legal and Regulatory Compliance through the creation of integrated legal documents and declarations for the Master Association and subsidiary Condominium Associations, the related budgets and disclosure documents. Then, in order to carry out the Sales and Marketing strategies for the project we took on the need to prepare and monitor detailed financial budgets, created the internal and external sales team’s compensation structures (including the negotiation and documentation of Non-Exclusive Listing Agreements with the external broker community) and created the Information Systems, policies and procedures for the project Leads Tracking, Sales Reporting, Inventory Control and Pricing, Contract Administration and Compliance. For the Development and Construction of the project, we teamed up with Legendary’s Construction Management Team, two Construction Firms, Design Architects at HHCP and Interior Designers at Raleigh Design, Edward H. Modzelewski and his team of Marine Engineers at Applied Technology and Management, a Landscape Design Group and many others, to ensure that the Project Vision was delivered. Ultimately, McMullen Development was instrumental in facilitating the Closing Administration process including working with banks and other lenders to get the project approved through underwriting while taking on the responsibility of meeting with and touring every property appraiser involved in the closing process to help ensure that they understood the unique features of the project which made Emerald Grande different from and more valuable than every other development project in the marketplace. This hands-on, active management style helped us to close more than 95% of our project presales in the very difficult financial and real estate markets beginning in the summer of 2006. See also the Complete Case Study for more information. You may also follow this link for more information about Legendary, Inc.

COMPLETE CASE STUDY

Legendary - Legendary Inc., a large multifaceted company in Destin, Florida, had been developing high end real estate, festival retailing, restaurants, a marine retailer, and operating several marinas in the panhandle of Florida for more than 30 years. Their projects included the master planning and ownership of Sandestin Beach Resort, Destin Commons, Regatta Bay and Legendary Marina, among others. Peter Bos President and majority stakeholder of Legendary had a vision of taking his passion for the Destin Harbor and developing a festival village and luxury resort condominiums on 14 acres located at the Western Gateway of Destin at the foot of the Destin Bridge on Highway 98. His vision was founded on the assimilation of a dozen small parcels from some of Destin’s oldest fishing families to create a canvas large enough to bring his vision to life. The City of Destin was experiencing a loss of interest and economy locally by the growth of Sandestin and famous beach communities to the east of Destin such as Seaside, Rosemary Beach and St. Joe’s Water Color in the 30-A corridor. The City of Destin realized the need and value of a public private cooperation for the development of a CRA to bring back the economy of the Harbor with a mixed use development plan that Legendary envisioned. You can visit the websites of Legendary, Inc. at www.legendaryinc.com, www.emeraldgrande.com and www.harborwalkdestin.com.
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Project Evaluation - In 2004 Legendary Inc. contacted McMullen Development to acquire its services and experience to evaluate Emerald Grande’s base development plan which included a review of Legendary’s; market research, project finance, product mix, pricing and regulatory requirements in order to determine if the project could be brought successfully to market within a tight timeline. The initial Project Evaluation (our first step) included this quick look at the project plan along with project team interviews and an analysis of the development concept and project strategy. McMullen Development provided its preliminary recommendations to Legendary after approximately 2 weeks of intensive involvement.
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Business Plan Development - Upon completion of the initial strategic review and discussion of the recommendations with Legendary, McMullen Development was contracted to develop a detailed project launch plan including a market study, product plan, economic feasibility and sensitivity analysis, regulatory compliance program, master site planning and professional team recommendations. Note each of these items is discussed in more detail below. This step required approximately 12 weeks.
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Project Execution - McMullen Development presented the detail business plan, marketing and sales plan, operating budgets and organizational requirements and with this information Legendary hired our team to execute the business plan and over approximately the last 5 years, McMullen Development has continued to provide Legendary with its professional sales, marketing, operations and other guidance services. (Project Sales, Marketing and Management)
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Market Study - The importance of a comprehensive understanding of the second home market, the customer characteristics and the definable marketing channels proved to be very valuable to Emerald Grande and Legendary particularly in light of the highly seasonal Florida Panhandle marketplace and the introduction of a high end Mixed Use Product such as Emerald Grande at HarborWalk Village. Before we took responsibility, as the Sales and Marketing Team for the project, McMullen Development initiated the Market Research necessary to make a Product Design Plan which included Unit Mix Programming, Amenities Programming, and Resort Services Programming. Additionally, the Market Research helped us define the customer, the marketing programs, sales approach and most importantly the Fractional Use Plan to meet the wants and needs of our target customers. We conducted internet surveys and a battery of focus groups of prototypical customers and local real estate professionals. In this process, it became clear that, to be successful, traditional marketing and sales approaches were not going to deliver the results which would meet the expectations of Legendary or McMullen Development. The decision was made to create a sales and marketing plan to leverage the well established local Retail Brokerage Community to sell both the Fractional product and the traditional Whole Ownership units. This strategy was trend setting both locally and from the resort development industry perspective and required a commitment to develop strong relationships with key brokerage offices along with their sales management and leading sales agents. We identified the firms with the strengths necessary and designed a prospect registration procedure, a compensation structure and sales tools to be successful in the sales effort and comply with the regulatory compliance and disclosure requirements of the Timesharing industry. In addition to this sales channel we committed to an internal sales team as project specialists and a scaled marketing program which built awareness through strong public relations and targeted media and supported these promotional efforts with a comprehensive website and online sales tools.
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The Market Study helped us to identify a risk in the market where many prospective buyers had been engaging in a high level of speculation by flipping contracts and never really planning to live in or use a given product and or project. Closing commitments were a concern given the substantial construction time and nearly $200 million construction loan obligations underwritten by Legendary. Recognizing this early we were able to strengthen the project sales reservation process, arrange for higher earnest money deposit requirements (just over 28% average for all presales) and provide specific restrictions on contract assignments. Note that this required a more involved sales process, but this additional strategic planning of the customer’s financial commitments made closings more successful even as the market began to soften.
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Economic Feasibility Analysis - McMullen Development created an extensive monthly cash flow projection and model specifically for Emerald Grande. This model was utilized by the ultimate construction lenders to underwrite and measure the project’s success. Note that over a period of weeks if not months, this model was used to evaluate several evolving scenarios and provide sensitivity analysis.
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Sales and Marketing Plans - Our sales and marketing plans were driven based on our Market Research. The natural “new sales” market for Destin was composed of local and regional customers with a strong affinity for the Destin community. Ultimately, with nearly 400 binding contracts for Emerald Grande, we fostered strong relationships with each buyer which was important to the closing process and has been hugely valuable in our continued sales effort through our buyer advocacy and referral plans. Since our initial launch, more than 5,000 sales tours have been given and approximately 400 sales contracts have been closed representing more than $200 million in gross sales to date. The execution of this plan and our sales results, including more than 250 fractional sales, was accomplished with total sales and marketing costs of less than 12%. Over the last two years of abysmal real estate market conditions, an average of $20 million in annual sales have been accomplished and Emerald Grande has represented the strongest sales and has maintained its appraised values better than all other resort condominiums in the market. There is approximately $130 million in remaining developer inventory and a healthy resale market for Emerald Grande. Our ongoing sales and marketing program is expected remain a market leader even through this uncertain and unprecedented real estate down turn. In 2009 the project was able to pay off of the construction lender, open the festival village (HarborWalk) and Emerald Grande has brought to life a once economically challenged downtown Destin, FL.
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Resort Fractional Use Plan – The relationship of the Fractional Use Plan and the sales approach was critical. On the one hand, we needed for the product to meet the desires of the customers, but we also needed the plan to be simple and easy to explain. We looked at fractional size as one consideration and considered everything from a 1/4th share to a 1/12th share and landed on a 1/8th share as a logical extension of the Destin customers’ high season (summer) travel patterns. We could go on with descriptions of the multitude of options and considerations that went into the defined use plan but once decided, we needed to formally document that use plan in the formal Legal and Regulatory Disclosure Documents and have them reviewed and accepted by the State of Florida, in addition to the other states in which we intended to market our products. In the end it is the careful planning, customer input and shared ownership experience that helped us fine tune the offering for sales and operations.
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Legal and Regulatory Compliance – When considering a fractional business offering, there is no substitute for knowledge and experience in the legal and regulatory side of the business. McMullen Development took on the responsibility of helping to draft and re-draft the Master Declaration (Declaration of Covenants, Easements, and Restrictions) and the related Condominium Declarations. In addition, we helped to choose the appropriate Legal Counsel for the preparation of the Fractional Use Plan and documents necessary to meet the legal requirements for the establishment of the Fractional Use Plan. Note that this included the preparation of integrated operating budgets, from the Master Association through to the separate Condominium Associations and ultimately the allocations and additional operating costs of the Fractional program. The resort is now in full swing operations and these initial planning choices have proven to be valuable as we work through a challenging market and changing customer characteristics.
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Information Systems – At the time of our engagement with Legendary, there was neither a customer database, nor a system to build or manage any new customer sales data. However, we have had extensive experience in the creation and operation of Information Technology Systems, and so we quickly sorted through our available options and pulled together a solution. The system was an online Application Service Provider. We were able to redesign and re-program custom data fields to capture and report on (among other options) the customers, the sales results, the sales relationships to internal and external sales agents and brokerage firms, and perform extensive leads management and automate workflow for our agents. Automated workflow was critical to effectively build and manage the needed relationships with our leads, prospects, customers and now owners. Remarkably, we were presented with the challenge and had a functional CRM database, customized for our unique circumstances within approximately 30 days time, at a total cost including the first year ASP license fees of less than $40,000. We chose to not integrate Contract Administration (contract preparation) as the cost and time necessary to do so was not cost justified. However, we were able to provide leads tracking, sales reporting, inventory control, and automate our customer communications and agent work flow. Note, that the solution was not without its challenges but it’s described here as a specific example of how McMullen Development has capitalized on its experience and knowhow for the benefit of our clients.
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Development and Construction – Development and Construction for the Emerald Grande at HarborWalk Village required a team of experienced specialists which were to be coordinated by the Developer’s construction management team. McMullen Development recognized these needs and brought forth the introduction of each discipline from Design Architects, Interior Design, Construction, Marine Engineering and Landscape Design. The project business plan proved to be very valuable, not only to the successful execution of sales and marketing, but when the construction lending market began to show signs of weakness it was the integrity of the plan, our validated target customer market, and the experienced team that ultimately gave way to a construction lenders agreement to finance such a large project. At the time the loan was finally closed, the committed construction loan was the largest single construction loan facility ever with a single project by a private developer on the gulf coast. This required more than $165 million in firm pre-sale contracts, and more than $65 million dollars of developer equity. Note that Emerald Grande’s design architects at HHCP Architects and Raleigh Design (see HHCP.com) have been recognized with the 2008 ARDA Gold Award for its superior industry design. Note too, that the project size and scope was such that it justified forming a construction joint venture between Moss Construction and Roy Anderson Construction (see http://www.mosscm.com/partners/roy-anderson.php) for the specific purpose of building Emerald Grande and HarborWalk Village. 286 luxury condominiums, more than 42,000 square feet of festival retailing, a 9,000 sq ft European Spa, a state of the art fitness facilities, ball rooms, conference meeting facilities, a 100 slip marina and ship store along with world class dinning at New Orleans famous Commander’s Palace, Pat Obrien’s, and Harry T’s. HarborWalk Village is now (Summer 2009) at nearly full rental, having added the restaurant “Poppy’s Crazy Lobster”, the New Orleans French Quarter’s most popular daiquiris at “Jesters” and Tropical Smoothie. Great retailing, fine art, food and entertainment, charter fishing and Boogies Water Sports make HarborWalk a must visit destination for the more than 4 million tourists that vacation in the Florida gulf coast.
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Closing Administration – McMullen Development also took on the lead responsibility to plan, organize and orchestrate the real estate closing efforts conducted by Legendary’s selected Title Company, including the solicitation of additional staffing made available from a Title Insurance Carrier knowledgeable and experienced in the timeshare closing process, where the bulk of the transactions would occur. We developed or incorporated the various customer correspondence letters, notices, and other documents into a systematic timetable, process and procedure to help facilitate the significant administrative effort to close our nearly 400 sales contracts in a compressed timetable. A significant percentage of the net closing proceeds were required to be applied to the outstanding construction debt, which ended up being a very valuable service to Legendary. Just as an example, a 30 day average delay caused by inadequate staffing or preparation for the closing onslaught could have cost Legendary up to $1.5 million dollars (one month of $180 million at 10%). In addition, as we have mentioned elsewhere, the concerted effort to work closely with the appraisers and lenders to assist and expedite closings was a critically important service provided by McMullen Development.
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The Results are improving each week as Emerald Grande and HarborWalk Village come alive with special events, destination weddings, weekly fireworks displays and nightly sunset celebrations. The Project will be an icon for Destin and the success has been a team effort by many, most of all a committed visionary Peter Bos, a strong senior management team, dedicated professionals, sales and marketing, loyal owners and guests.

If this is the kind of vision you have for your development then Let’s Talk about how McMullen Development can help you achieve your goals!