I wrote the Plaza is untamed Beast, probably, a month ago. Years agoI used to write a lot of blogs. Was #4 on ActiveRain in Florida and #9 in the nation. I am no longer doing it, it is incredibly time consuming, very interesting but nor really a money making tool.
However, in all these years I built some friendships, connections, and with them come the obligations.
So, often I get emails from my former clients and they are asking questions. Some believe that I am an insider, with the information that no no other has, and this is not true. I dragged with responding like I often do, and things change, but I thought I’d rather post it.
This blog is a very lightly edited response to my former client. So, don’t judge too harshly 🙂
Plaza is the Untamed Beast…
Since the sale of the property to its current bosses, we see very aggressive and often weird moves. I do not know whether you read my blog post about The Plaza, but here is the link, and if you have a minute, please read.
The scenario seems not work the way the new bosses wanted. Meaning that they could not force low appraisals even with their appraiser and could not keep buying the units for $30K or comparably low. However, with 100 units they received at closing, plus the units they bought privately, they amassed significant number of units now, and, if this number is 60%, they can terminate the condominium, and become the owner of a premium oceanfront hotel, and this is the best-case scenario for the owners. Imagine if they were got 100 unit at sale, and then got another few dozens for the $30s, and then sell as a hotel for $200K a door, which they should be able to get for this kind of property easily. They are looking at over $50 Mil in room value only, plus commercial, so this is a phenomenal deal.
To the benefit of the owners, they started fighting. My investor bought one unit and the only reason we were successful after the seller spent months with no success, was because Joanne from Johnson & Johnson is not only a feisty lady, but also at that point had great contacts with the association Management company. Of course, the price was very low, with the seller agreeing to split the cost of Special Assessment. If you are interested in legal fight there, I can send you some fascinating stuff, that helped to curb their insatiable appetites, and helped owners sell.
Units for Sale
Right now the lowest priced unit is $73K. No more $40K-$45K units, which looked very weird in the market with regular unit going for $100K and up. It caused the avalanche of calls, where people seriously were trying to figure out if they will make money bout the cheapest units in Daytona. That was such a waste of time…
Lucky us, agents, there will be less of this going forward, if 8 units in Plaza even a number to go forward. A 323-room resort used to have close to 40 units for sale after we were slammed by the crisis in 2008 and later years.
Except for 2 units, the agents are shy regarding who is paying the Special Assessment. Second listing they say that the Seller is willing to split the cost, and the last listing the Seller will pay the Special Assessment in full. It is all left to negotiation. And most probably the sellers would end up splitting the cost of the Special Assessment.
You are right, that on the paper it sounds like a good thing for the property. With these weasels I am not inclined to believe anything they say. Yes, the property needs some upgrading, you can clearly see it if you are in the garage and look at the ceiling and see those terribly rusted pipes. However, it seems their plans go far beyond this fixing. The plans are the improvement of the property with adding restaurants and other amenities, and none of them is necessary for the hotel (they already have a restaurant and 2 bars) but would benefit the commercial side of the property, of which owners are not beneficiaries.
Jonathan told some owners, that this is only one of several assessments, so in June, after collecting the money, they may announce another assessment. They pointed to frustrated owners to give them the units for pennies, but this is no longer happening, and they simply will be generating funds for their endeavors using owners’ money together with their own.
Look at the Big Picture
Now, if we look at the “big” condo-hotel picture, there are only 34 condo-hotel units for sale in oceanfront buildings. Unbelievably low inventory. If my memory still serves me, the explosion in 2004 started when inventory fell to 145 units. Now we have 34 and no explosion.
Seven lowest priced units are in the Plaza Resort and in Oceanside Inn –both troubled properties. The prices for the rest start from $115K with city view at Daytona Beach Resort & Conference Center.
Median price is $160K and as you know, none of the properties is even close to Plaza in terms of quality and decor. Their fair market value should be $250K-$260K as in their close competitor Daytona Beach Resort & Conference Center. In any case over $200K. (these were the values at times of writing it and the values have increased.)
What Defines and Affects Success?
Does the Special Assessment affect the price of the units in the resort? It does. Note how they announced it, 1 year prior to time of collection. I have never see anything like that. Why? Because at that time they were trying to push owners into selling their units to them for $30K or so. And recently they said they will not collect the money in June, but rather drag another 6 months. The least you can say is that this is very weird.
Will the prices go up after they collect the Assessment? They should. It is too big a difference between the best and the cheapest and the worst and expensive. Of course, their policies also create a problem.
The buyers consider those most successful condo-hotels, that allow private rentals, AirBnB, VRBO and other rental platforms. The Plaza and Oceanside Inn are the most stringent, so whoever buys in the Plaza can’t do their own rentals. With the new owners at the helm, I hear from the owners that their check is better than it used to be. Can this fully mitigate the difference has yet to be seen.
Yet, even if in July you could sell your unit for $175K, it may make sense. Prices are still high, the market is strong, that assumption does not look unreachable.
Please, let me know if you have any questions.