This morning we are going to talk about real estate. And I don’t think a day goes by that this is not a topic of conversation across our area and across the US, and probably globally. I’m going to spend probably about twenty to twenty-five minutes talking, and then afterwards I am going to invite your rigorous questions, and we will go from there.
My daughter Ella is a big “Harry Potter” fan. And Harry Potter, for those of you that don’t know, that you haven’t read, or your children, or your grandchildren, haven’t read the books or seen the movies, is about a young wizard. The wizard goes to a school of wizardry. So, if I had a magic wand, and I wanted to solve the single biggest challenge that seems to be facing us today, that would probably be traffic. So if I had the magic wand and I could solve the traffic problem for a day, then we might see something like this: Image of the rabbi skateboarding along Gulf of Mexico Drive.
Or perhaps skateboarding is not your thing; you would be more inclined to go ziplining. So here is a young couple ziplining. And if still that’s not your thing, then I think that what we really need to do is install this along the beach.
So, I’m not sure when the chairlift is going to be built, but I think is certainly plausible and it takes advantage of our wonderful beauty in the area.
Who is Lee Mirman?
Let me start with my story so we have a little context. My parents did not want to raise me and my brother in New York. So in 1978 they drove down the East Coast of Florida, and up the West Coast of Florida, and found Longboat Key and they settled on 6670 Gulf of Mexico Drive. It’s a residential house; it’s still there. Periodically I take my kids and we drive down the driveway. And I grew up here on Longboat Key. Every morning I walked to the end of the driveway, the bus picked me up, and I went to school at Annemarie Elementary School. After a few years, they decided they were a little isolated on the north end of Longboat and so we relocated to Siesta Key. And I finished and I went to Pine View School, and I graduated from school here in Sarasota.
Like many of my peers at the time, we could not wait to get out of Sarasota. So I left the area and I went to college, and I went to work. My first job out of college was working on Wall Street for a bank, JPMorgan Chase, and I spent a couple of years there. I went to graduate school; I worked in Europe; I came back to New York City. I was working on putting together a fund for venture capital, and my office was on the 87th floor of Tower One of the World Trade Center, on 9/11. I looked out on the Colgate Clock on the other side of the Hudson River. And after that day, that precipitated my return, for Lisa and me, to come back to Sarasota, and to return to a business that I’d grown up in as a child. Since I was seven I went to open houses, I sat in my mother’s office, we would tour houses together, and she would point out the fifty dollar toilette in the $2mil dollar house. And so, it wasn’t just my mother, but my grandfather had built schools out of Long Island. So I have a long history of being in real estate.
The Changing Face of Sarasota
When we returned to Sarasota around 2003, there were a couple phenomena that were occurring. First, we were transitioning from ranch houses to mega-mansions. So, when I grew up here, Bird Key was all single-story homes, except for the Pagoda House. And that served the people well in the 50’s and 60’s. But as prices of land began to increase, they started tearing down these ranch houses and building as we know as mega-mansions, to maximize the value of the property. Lakewood Ranch was still in its embryonic stages; it was a new concept. When I grew up here, there was no I75. So the fact that now there is an interstate and people were creating a community on the other side of it was just a different type of experience. I still think that it’s out in the hinterland, but there are people that absolutely love it, and it certainly serves a niche in our community. The Colony obviously was still open, and the Ritz-Carlton, we were beginning to adjust to life in Sarasota with the Ritz-Carlton.
So, then what? So 2003, we weren’t quite sure what the future is going to be. We knew that there was some growth on the horizon. But little did we know about the rollercoaster ride that we were about to take individually; and specifically the Sarasota real estate market. In 2003 prices began to appreciate, and the momentum began in 2004, 2005, and we peaked in 2005-2006. And then we came down. And not only that we came down, but we missed the bottom. And one of the ways that we know that we missed the bottom, or overshot the bottom I should say, is that when you went to insure your property, the amount that you were insuring – the replacement value for your property – was much, much greater than the cost of the house that you were buying.
We came down hard and fast. And this brings us to today, and knowing today’s paper there was a big article about downtown Sarasota, but I don’t think we can focus just on downtown Sarasota. In the last year, 2016, there were over 12,000 approved units to be built in Sarasota County. That’s not including Manatee County, that’s not including single-family homes that are scattered throughout the island or different neighborhoods. These are massive communities; some are going to be huge villages that are part of the 2050 plan. There’s a lot more growth in building and development than we can see. It’s easy to see cranes downtown. But what we don’t see is actually going to be much, much greater than that. In fact, in just in 2016 alone, as I sad, 12,000 units have been approved.
So how are we getting to here? So, back in 2000, this man Andres Duany, who was part of the new urbanism movement, came to Sarasota and he said: “tell me what you want?” And through a series of charrettes they went around asking people. And lots and lots of people came out to these charrettes and had an opportunity to provide input.
And they said that they wanted…, we said, the people that were here that time, they wanted a more user-friendly downtown. And what did that mean? It meant greater pedestrian access, easy to bike, more connectivity between the downtown court and the Bay Front. And we want to see more trees, more parks, more green spaces. And there are also some subtle things and not so subtle things.
Buildings that were on prime roads had to have glass on the ground floor. And not only you had to have glass, but you had to have something going on behind that glass, no longer could that just be the storage room, but you had to see people coming and going, and preferably retail.
I think, for me, one of the most visible signs of change are the hotels in our area. In 1975 the Hyatt was created, and that was the huge deal. For many, many years, that was the center of socialization, and parties, and gala’s for Sarasota. Then in 2001 we had the Ritz, and in 2006 we had Hotel Indigo, and nothing happened again for 10 years. And then last year the Aloft Hotel opened – it’s part of the Sheraton chain. And then in this year, 2017, Curio is going to be Hotel Sarasota, the Weston – which we all know about – is Embassy Suites.
And we’re adding another 740 hotel rooms. But what’s important is that we’re doubling the number of hotel rooms that currently exist in Sarasota. The bigger number is 218,000. That’s the number of individual room nights that are available in our community, that we’re adding to our community just in 2017 alone, just in downtown Sarasota Hotels.
So what does that mean? That means more people are going to have a lot of opportunity to come to visit our area. There are going to be people coming for a myriad of events, whether they’re out in Lakewood Range, they’re on the Barrier Islands. And so when you have more people coming to visit the area, some of those people, like many of us in this room, will decide to stay on, because they’re going to sample a little bit of our community, and then they’re going to stay – as they should.
So, in today’s paper it talks about the development of the downtown, and I think that we don’t quite fully appreciate the magnitude of growth that’s going to occur in our area. We are going to increase capacity, so when I say capacity I mean number of apartments and condominiums, by over 75% in the next few years.
A lot of people get their news from national sources, whether it’s The Chicago Tribune, The New York Times, the Bible, to many the USA Today, even our local paper. And the challenge I have is that a lot of articles, eve those that are printed locally, are about something that’s happening in other places. And real estate, as we know, is hyper-local. And so this development that is going on downtown, it’s not going away, is absolutely happening. There was an article last week in the paper where you had four hotel developers talking. Two of the think that we don’t have enough hotel rooms, two of them think that we have too many hotel rooms. It will play out and it doesn’t really matter at this point because all these hotels are being built. So we’re getting all this information, a lot of it is misinformation or information about other areas and we are trying to extrapolate how that information really applies to our area.
So let’s cross the bridge and look at Longboat Key. In Longboat, what we did is a little graph from 2004 to 2016. Let me digress just for a second. So last year Zillow, which is a private real estate portal, said that all of the value that was lost during the downturn had been regained – that real estate is a 29 trillion dollar market. That’s just not true, that’s the problem. Because if you look at the chart, the peak year in 2005, the medium price was $750,000 for condominiums in Longboat Key; the medium price in 2016 was $475,000. So we’re still 75% of those values that existed in 2005. I think that’s important, because we’re not back to where we were, and the single-family homes, it’s the same thing. While the medium price is a little bit higher – $1,235,000 in 2005 – in 2016 it was $930,000.
These are the four largest communities on Longboat Key: Seaplace, Fairway Bay, Beachplace and Country Club Shores. But this just shows you from 2012 the gradual increase of medium prices over the last five years. So I’m going to talk about two communities to point out this hyper localness and how it’s difficult to extrapolate generalizations.
Emerald Harbor has become a very distinguish community over the last twenty plus years, because the Eisenstats moved into the community there. So in 2006 a family bought a property there for $1,300,000. I helped a buyer purchase a property there in 2011 for 50 cents on the dollar. So they bought their house for $650,000. It was a great deal, but somebody took a major loss. My point in the story is that couple that bought that house in 2011 totally gutted it, renovated it, opened it up, made it spectacular. And still today that property will not sell for what that person paid in 2006.
Our market is very, very specific. Sometimes is street by street. This past week I was in Beachplace and somebody wanted us to list their property, a two-bedroom right on the beach, spectacular setting, wonderful gulf views; they took it down to the studs, absolutely phenomenal. And he said to me: “what do you think we should list it for?” I said: “$1,000,000.” And he said: “that will be the highest price ever in Beachplace.”
How is that? Well, today’s buyer does not want to do any work. They want to walk into some place, have it completely done, and there are lots of people out there that are willing to write a check $1,000,000 to have that spectacular view, that spectacular setting, right on the beach. And so I use these two examples to show the contrast here, specifically on Longboat Key and to demonstrate the hyperlocalness of real estate.
Why Do People Sell?
Why do people sell? So, people sell… It’s very basic. There’s not a lot of – You don’t need a crystal ball – Life happens. There are job gains or there’s job loss, people move to be closer to family, sometimes there’s illness, and even death. There are also people that are retiring, or looking for some sort of different type of lifestyle. And it’s basically it. There are very few people that are trying to time the market. Historically in Sarasota people sell every two to three years, because we’re appreciating and they wanted to experience different parts of Sarasota. They come to Longboat Key, they get tired of the red tide, because the dead fish would back up, and then the canal… And so they would move out east. And they would move out east and they realize they miss the water, and they would come downtown. That’s not happening as much because of the downturn and the unpredictability and the volatility of the real estate market.
How Do People Buy?
How do people buy? That’s even less scientific. That’s emotion. And a lot of that is based on the advice of friends and family. It’s usually very, very well-meaning, but bad advice. And one of the things that we are seeing a lot is that people buy because they’re seduced by model homes. It’s wonderful; I mean, when people say: “well, what do you think of this house, it’s a model.” I say: “what’s not to like? They’ve done everything that we’re looking for on today’s market.” However, it’s more than that.
Today’s buyers need to think about what is their desired lifestyle, especially us here on Longboat Key. Longboat Key provides a very specific lifestyle offering to us, and it may not be right for everyone.
Desired Lifestyle
So what is a desired lifestyle? Some people wake up every morning and want to walk on the beach. Other people want to be able to walk to go to Starbucks to get a cup of coffee. Some people want to have a golf cart in their driveway or in their garage. And I think it’s incumbent that when we are giving advice or for ourselves, to focus first on the lifestyle that you want, and then on the actual unit or house. And I say that because it’s easy to change a house, it’s impossible to change the location. And I think this is very relevant for us here in Longboat Key, because as we talked about greater Sarasota, downtown specifically, and the development going on here on Longboat, it’s clearly going to change the dynamic, the lifestyle of the area that we’re in.
Let’s talk about the Longboat Key Club, Zota and the Colony. As it stands now there are currently 223 hotel rooms open on Longboat Key today. The only hotel rooms that are currently available, that are nightly stays, are The Resort of the Longboat Key Club. So that’s today. Now, in the future, even if there’s no density approval for The Colony Resort, they’re still approved to have 237 tourism units. So, whether the referendum passes or not, they still have the potential to build 237 units.
Zota is going to add 187 units in the location of the former Hilton. And the Longboat Key Club has already been approved to build 300 units. So we are going to triple the hotel capacity on Longboat Key, if nothing else passes. So we’re going to go from about 223 units to about 1,000 units, without any changes. So I think it’s important, because lots of stuff gets written, there’s lots of information, people are certainly hustling and selling their product. But we certainly know that there is a baseline I think it needs to be understood, because there’s a lot of stuff that isn’t open and is yet to be built.
This is our area. I think it would be wrong to say that nothing is happening. There are a lot of people that are working really, really hard to come up with short and long term solutions. For example, there’s a lot of conversation about pedestrian controls on St. Armands Circle. What that means, specifically in the space between Alvin’s T-shirt Shop and the corner where the Starbucks are, people jump out in the street; that’s probably the most active crosswalk. But pedestrian control means prohibiting… the pedestrians can’t walk in the street on demand. They would have traffic lights for pedestrians, so that more traffic can get through.
There’s also talk with the two largest employers out on the Barrier Islands. We have Publix and Ocean Properties. Ocean Properties owns the former Helmsley Sand Castle, The Lido Beach Resort, The Holiday Inn, The Resort at the Longboat Key Club, and Zota. So both of those organizations are looking at having employee buses, to eliminate all those cars that are coming and sit in the parking lot all day. These are small incremental changes, but the people, the business owners and the community, recognize the issues and they’re trying to do things.
There’s now an on-demand bus in the Manatee County side of the Longboat Key. Anybody can call the bus the day before, they will come to your house or your condominium, and they will bring you to any place on the island up until Bay Isles – up until the Publix shopping center. So that is in effect now and people are working with Sarasota County to see what sort of hybrid is available.
So there are different things that are happening to help the traffic situation. There’s been the suggestion with police officers, they’re going to try that, it’s 45 dollars an hour, to try to have police officers stand at the intersection of Gulfstream as well as at Fruitville and 41, and fiddle in with the system. So these are things that people are trying to do immediately to alleviate the traffic issue.
And longer-term, I shouldn’t say longer-term, this month, there’s a water taxi that has started on the north end of the island. It’s going from Whitney Beach, you can park in the Whitney Beach Shopping Center, and it’s going to Points North, up to Anna Maria and Cortez. Private investment is getting involved. There are two feasible locations for water taxis on the southern end of the island. The first is New Bay Front Park, they’re working on those docks, accommodating water taxi’s or water ferries, as well as either the dry dock property or adjacent to dry dock. It’s about a 15 minute ride across the bay and when you get to the other side you’ll have a series of options to either go to the entertainment venue of your choice or to dinner at that entertainment venue.
This month is very significant, because 10 years ago our lives all changed, or most of our lives changed. By a show of hands, how many people still actively use a flip phone? A flip phone. So what happened 10 years ago is that we were introduced to the iPhone, a pocket computer. And some people kicking and screaming. But now we not only are able to receive calls or call people, but we get texts, we can check emails, we can check the weather, and a myriad of other things. we carry this computer in our pocket. And what I want to point out is that change is not easy, as it was mentioned by rabbi Eisenstat on Friday night, it is constant. And so there are changes of afoot that maybe suspend our ability to believe in them, but they are absolutely coming.
The drone. One of the ways that people are going to get off the road is the night before you are going to go to your smartphone, and you might type in that you need some aspirin, you’ve run out of toothpaste, or perhaps it’s milk, and in the next morning, those things are going to be on your doorstep. And I know it sounds like an illusion now, but Walmart, Domino’s, Amazon, they’re actively engaged in commerce today, it’s been tested in the UK; I’ve toured the airport. There are rules and place for drones between 12am and 5am. Things are going to show up on to your doorstep, and this is going to eliminate these random trips to Publix and CVS. We are going to be able to spend our time doing other things other than running errands.
The other thing that I am excited about is the self-driving car. This is a car of luxury. Perhaps some of you have some pets and your dog is going to ride in the front seat. But we’re really moving towards this. So self-driving cars started out, they were testing in the Pittsburgh area, they wanted to do them in California. And in fact California has aggressive regulation in place that makes it very difficult to test self driving cars. Florida does not have the same regulation. So we are going to start seeing, the Florida legislation is working very hard, and having self driving cars being tested in our area. It’s actually more efficient and it will increase capacity on the roads, and we are going to get there much, much quicker than people realize.
So the next generation is Uber. And one of the things that I think it’s important is that communities like Longboat Key have to make themselves consistently relevant, they have to reinvent themselves. Because there are two things that are happening in the world: countries, cities, communities want two things: they want people and they want people’s money. So unless a community like Longboat Key keeps up with the times, the next generation of retirees will go someplace else; it’s just the reality. So clients of mine came in this weekend, they have one of their four houses on St. Armands, and they flew in, they Ubered from the airport to their house, they had a tee time on Friday at 12:30, they didn’t call Uber, they used the Uber app on their phone, Uber came and picked them up, dropped them off at the Key Club for their round of golf. The next generation, and they’re in their sixties, they don’t see the need to rent a car, they don’t want the hassle, they don’t to refill it with gas before return it and go through all those different things. So these things that seem a little bit futuristic, are no longer futuristic, they’re today.
So you’re going to jump on the ferry at one of your two favorite places, either by Bayfront Park or by Dry Dock. On the other end, while you’re on the ferry, you use your Uber app, it will take you to dinner, and then after dinner, you walk over to the opera and then you’ll Uber back to the ferry and come on back to Longboat Key after a wonderful evening. And instead of being in traffic for 45 minute or an hour, you enjoyed a 15 minute boat ride across the bay and it will be a phenomenal experience. Because the nice thing about our busy season here in Sarasota and Longboat Key is when the weather is nicest. And so to have those ferry rides on the bay during the nice time of the year, will be a treat. It’s not for everybody, but these are ways that the traffic is going to be mitigated.
As I talked about hotels or large brands, they need to fill the hotel rooms, and they’re going to be advertising, our community, Longboat Key, Siesta Key, downtown Sarasota, has not gone unnoticed to the rest of the world. And people continue to come here for the beaches, Longboat Key was recognized as one of the top 5 islands in the entire world by Condé Nast, so people will continue to come to our area because the publicity does not stop. Whether they are places to retire, best places to live, whatever that may be, it’s attracting different segments of the population.
What Does it Mean for my Real Estate Values?
So what does this mean for my real estate value? Well, it’s interesting how things that might seem far-field don’t have an effect. So let’s talk about rowing. Sarasota, specifically Lakewood Ranch, is a site of the 2017 World Rowing Championships. And rowers, and specifically people that support rowing, are fairly affluent. So you’re going to have this very affluent population coming for the World Rowing Championships, and they’re going to be exposed to the community, perhaps for the first time. And many of them are going to like what they see.
Harvard University’s crew team has been practicing in Sarasota for the past 5 years. So there’s a lot going on that may not be readily apparent, but the people that are doing the development downtown and other areas of Sarasota, the hotels that are going up, have invested a lot of time and money. And it’s not as if they build it and they will come, there are lots of other nets from publicity to events that are bringing people to the area.
As we know, there is no state income tax in our area. And our quality of life still is inexpensive relative to other areas, especially major cities like Chicago, Boston, New York, San Francisco, etc. In fact, the medium price in Florida is ¼ of what it is in California.
So, as long as the weather is warm, the sun is shining, the weather is clear and our beaches are clean, people are going to come. But we also should know that the Longboat Key is working to stay relevant to the next generation of retirees. Some of the things that they are doing, as you all know because 5 million has already been paid, is it’s creating its own digital infrastructure.
The offshoot of that is that not only are people going to have better connectivity to their children and grandchildren, not only are they going to be able to work more remotely in today’s digital world, but things like telemedicine are going to be more easily adopted. We’ll have to make fewer trips over the bridge to go see our doctors, because our doctors are going to appear in our living rooms and bedrooms through telemedicine. This is being worked on the major cities and it’s only a matter of time before it reaches Longboat Key. And in some cases, for many, it’s already here. It’s been proven that it’s far less expensive, in fact with the quality care may be even better.
We also know that Longboat Key is working on a sophisticated beach renourishment program. It’s been in place since 1996, over 15 million dollars have been spent on the beach, it’s an engineer beach, it’s no longer its original sand. Ringling is working on their Culture and Arts Center. This should not be a mystery. A bulk of the funding of the Arts Organizations in our community comes from people on Longboat Key. And so a side note of this, when talking about traffic and other issues, not only that you need to engage whether it’s the commissioners or the managers, but speak to the Arts Organizations, because they know where their money comes from, and so there’s a lot of leverage in places that are not so obvious to get more progress done at a quicker rate.
There are lots of places around the United States that are beautiful and great to go to, and people put up with traffic during the year. The traffic problem on Longboat Key is 25% of the time. The other 75% it’s virtually non existent. But places like Cape Cod, New Jersey Shore, coastal Carolinas, the Berkshires, Mackinac Island, there’s no lack of places that have traffic issues that don’t have near the quality of life that we have.
With increased demand, prices will continue to go up, we’ll have a definitive appreciation, there’s still value clearly in the market because we’re only 75% of the value that was in 2005, and will continue to go up, at some point will get to those numbers and will surpass it. But we absolutely expect to see appreciation of prices here on Longboat Key.
This is a map that was put together by the Port of Manatee. This is today, the left side, and this is what our area will look like in 2060. The people are coming, and most of the migration is going to be east of where we are, because obviously you can’t develop west. The island will continue to be a desired oasis. As taxpayers and residents and homeowners you get to determine how much more building and density is gong to occur on the island. The National Mortgage Bankers Association expects that the transaction volume in the United States to grow from 900 billion dollars last year to 1.1 trillion dollars in 2017. There is no lack of people coming to Florida, and a proportion of them are going to come to Longboat Key and we’re going to see our prices rise up here.
This is one of my favorite pictures, this is done by the International Space Station, this is a picture of Florida at night, and in the years to come you will see a lot more light at night here.
Thank you for your time! I open up to questions.
