In August 2004, Legendary Inc. developer Peter Bos of Destin contacted McMullen Development seeking project assistance in bringing a lifelong Harbor front vision to reality. Legendary had been assembling parcels for the plan for more than 25 years to provide the development canvas for a luxury Mixed Use, Festival market place, Themed Retail, Marina, Residential Condominiums and Shared Ownership resort. Today HarborWalk Village is a vision realized and you can see all the excitement at the following address. www.harborwalkdestin.com
The purpose of this project case study is to give an overview of how McMullen Development and its experienced team and top shelf resources can be integrated for success.
Over the 10 years of development (2004 – 2015) Emerald Grande and HarborWalk was conceived, planned, built, marketed, sold, opened and operated creating one of the Gulf Coasts more cherished destinations visited by more than 4 million tourists in 2014. The timing of the project tested the best of the deep experience of the developer owner and project management teams, experiencing headwinds of the economy, a changing real estate market, historical weather and environmental events (Ivan, Katrina, Alberto and Deepwater Horizon) which intensified the value of quality planning, capitalization, and committed and experienced execution. McMullen Development has been an instrumental component to the ongoing success of HarborWalk from inception to completion.
The McMullen Development Team has a rich history of project development, sales, marketing and resort operations for more than 40 branded and independent mixed use resort developments for well known companies like, Marriott Vacations, Hilton Grande Vacations, Shell Vacations, Thousand Trails, Conrad Hotels, Sea Island and others with more than $4 billion in real estate sales to hundreds of thousands of families. McMullen has long practiced a methodical, multi-stepped business process for its own projects and clients who have employed its services. At HarborWalk Village and The Emerald Grande in Destin the team began its assignment with the same time tested disciplines.
Developer Story: Legendary Inc. Destin Florida Legendary Inc., a large multifaceted company in Destin, Florida is a developer of high end real estate, golf communities, festival retailing, restaurants, marine retailing, and has operated several marinas in the panhandle of Florida for more than 30 years. Owned and lead by Peter Bos, President, his projects included the master planning and ownership of Sandestin Beach Resort, Destin Commons, Regatta Bay and Legendary Marina, among others. Legendary had a vision of taking Peter’s 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 economy in the Harbor District influenced by the growth in Walton County at 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. With Legendary’s commitment to quality and strong leadership, the City of Destin realized the value of public private cooperation for the development of a CRA to bring better business to the Harbor with a mixed use development plan known as HarborWalk Village. You can visit the websites of Legendary, Inc. at legendaryinc.com, emeraldgrande.com and harborwalkdestin.com to see more.
From the Beginning: Upon refinement of the planning steps explained in the project summary (above) McMullen Development created a special purpose entity known as Destiny Marketing LLC and reached an agreement with Legendary to become an integral part of the Emerald Grande project execution team with their primary leadership responsibilities being the creation of innovative sales and marketing plans, the resort’s fractional product, and use plan. On February 15th 2005 the planning was final and the project was launched.
In the first quarter of 2005 the sales and marketing team began with a product reservation process achieving $15 million in reservations deposits for more than $165 million of formal purchase contracts of Whole ownership and 1/8th fractional shares to meet the preconstruction financing threshold to begin construction. The sales team was able to accomplish this milestone in less than 5 months from registration approval to the first draw under the construction loan. The introduction of luxury fractional shares and the full service resort condominium concepts required more information to be shared with the local real estate community. We implemented an exclusive broker affiliation and training certification to build this affinity and lay the ground work for a buyer selection and inventory priority program which helped to create and extend buyer demand. Contract reservation agreements was a common practice during the irrational exuberance of the real estate flipping days; however we felt less confident of success with the low commitment thresholds these practices offered. The customary small refundable reservations would be a risk we could not accept given the large financial requirements of a project as big and complex as HarborWalk. We mitigated the market risk by increasing hard money deposit levels to increase buyer equity. Our reservation deposit for a Whole unit was $25,000 and a Fractional share was $5,000, which had a short conversion to a binding purchase agreement with average cash equity of over 28% without finance contingency. The average purchase price of the offerings over $1 million made the sizable deposit and restricted assignment provisions game changers as the market began to feel the impacts of a slowing economy.
The construction period for the residential condominiums was 24 months even with the impacts of 4 major gulf coast hurricanes in the summer of 2005, including America’s deadliest storm, Hurricane Katrina that September, followed by Alberto in 2006. To keep confidence and enthusiasm alive the sales and marketing team shared monthly project updates and held milestone events with the contract holders as well as the local real estate community to demonstrate the commitment, vision and product quality to keep buyer relationships strong through the adversities. One particular activity which was impactful was the project site tours during the construction period. We knew we needed more than a model or simple site plan and needed to get customers to touch and feel materials on the job site. The idea was to get the customer out on the site and create an energy of expectation. We obtained special permitting and insurance for the team to be able to take contract holders and prospects up on the building in the middle of all the cranes, concrete and progress, to stand in specific floor plans and see the views and participate in the transformation. The process of these tours was engaging from the initialed release forms to the construction site clothing, hard hats and footwear to the designated tour route presentation signage; construction elevator experience to the breath taking views. This experience put each buyer firmly in the exciting picture.
The contract closings began in June 2007 where the market bubble was already beginning to bust. Being pro-active in the face of change was the key to the consistency of closings, from our dedicated project sales team and the relationships with buyers to facilitate closing steps, build confidence and administer financing options for both whole units and fractional shares. The contract closing period was originally to be one week per floor for 26 weeks as each residential floor was completed and certificates of occupancy were issued. Even with the strong deposits on purchase contracts there was still buyer reluctance creating a gap between the full payment of the construction loan and net proceeds from closed units and shares. In 2009 with the full effect of the poor economy, the project was placed in a challenging position with a lender (Istar Financial) who was impatient.
The Company took strong measures to cut costs and maximize cash flow including significant layoffs and wage cuts to remaining team members. Refinancing and alternative capital was a challenging effort but we all remained dedicated to find a solution and explored every viable idea. In the spring of 2009 within days of Istar’s formal default notices we introduced Mr. Robert Guidry and his family who were new residential buyers at Emerald Grande to Peter Bos and quickly the Guidry’s became raving fans and ultimately 50% partners replacing the Istar loan and committing to a more stable financial position. The recapitalization with the Guidry family was a major blessing to the project, the partnership and to the community of Destin giving us time and capital at a critical point. However the project was far from out of the woods with only about 60% of the condominiums sold and substantial project operating subsidies required it was imperative that sales and occupancy be increased. Then to add insult to injury the Deepwater Horizon oil spill exploded in April of 2010. The Economy was unstable and the Gulf Coast was ravaged but this did not stop the creativity and commitment of the McMullen Team to try to find a way to move inventory, stabilize the property economics and reassure the stakeholders of the future for HarborWalk.
Vacation Ownership at Emerald Grande The Emerald Grande project was already a successful luxury fractional resort with more than 330 1/8th shares sold and had the basis for a timeshare use plan convertible to a point’s vacation club.
While the project partners were cautious to the idea of creating more flexibility of use at Emerald Grande and had initial reservations about the timeshare customer, it was the experience and industry relationships that McMullen has in timeshare combined with market timing and the high quality product of Emerald Grande that brought together one of the best solutions in a sales and marketing agreement with Wyndham Vacation Ownership (WVO) in what was then a new idea called “FEE FOR SERVICE” and Emerald Grande was the first of its kind. Effectively, it is a sales commission driven inventory brokerage program for dedicated resort units, which are conveyed to the branded Wyndham Club for points access. When completed this strategic partnership will complete the sellout of Emerald Grande with strong results to the stakeholders and bring consistent occupancy for resort operations. This is a winning arrangement for all the parties of Emerald Grande, Wyndham Points Owners and project partners.
Looking ahead: In 2014 HarborWalk village opened its newest addition of Jimmy Buffett’s Margaritaville and has 100% leased its festival village retail. 2015 marks the beginning of the strongest revenues projected to date with a bright outlook for years to come.
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Why McMullen?McMullen has developed strong and lasting relationships with skilled and experienced resources for development services and construction trades all over the world. At HarborWalk, McMullen was able share and influence five key relationships that made a material difference in the net outcomes from day one.
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Each of these team members brought time tested value to the project collaboration.
A special note of importance is Bill Guthrie of Foley and Lardner for Legal and Regulatory Compliance in his creation of integrated legal documents and declarations for the Master Association and subsidiary Condominium Associations. The related budgets and disclosures was a critical foundation that has paid big dividends through the changing market including the “Fee For Service” opportunity with Wyndham.
The effectiveness of the special purpose Moss/Anderson construction team was valuable for their experience, bench strength and speed to market under challenging conditions.
This initial phase of the development and the sizable project scope required significant sales and marketing management, which the McMullen team led. McMullen has long been an innovator in sales reporting, contract management, internal and external sales team’s compensation structures (including the negotiation and documentation of Non-Exclusive Listing Agreements with the external broker community), the development of proprietary CRM Information Systems, policies and procedures for the project leads, tracking, inventory control and pricing, and regulatory compliance all of which were critical to the project’s success. The sales execution requirements and the relationship to Legendary’s Construction Management Team of General Contractors (Moss/Anderson Construction), Architects (HHCP) and Interior Designers (Raleigh Design), a Landscape Design Group and others were also important to ensure successful delivery.
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 professionals, loyal owners and guests.
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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!