Article published Jun 16, 2008

Manatee land market said to be iffy
Real estate agents say the overall sales trend is still declining

PALMETTO Palmetto developer Alan Zirkelbach sold 138 acres of industrial land near Port Manatee to two groups of investors in April for $18 million.

Those two sales represented 46 percent of $39 million in land sales that took place in Manatee County during the 12 months ended May 31.

Because of those sales, the total dollar volume of land that changed hands was down only 4 percent from the $40.8 million in sales that were concluded in the county during the same period a year ago.

Commercial real estate agents, however, say that Zirkelbach’s sales were a blip on the radar screen. The overall trend in the market for vacant land continues to be downward with respect to price and the number of closings.

“There are a lot of buyers and a lot of sellers out there, but they’re miles apart in their philosophy at the moment,” said Stan Rutstein, an agent with Re/Max Gulfstream in Bradenton. “Buyers are evaluating land values with a microscope, while sellers, who either got in too high or are too leveraged, are operating with unrealistic expectations.”

The real estate buying decision is based on confidence, Rutstein continued.

“If you are nervous, which is the prevailing mood right now, you are going to take much longer to work out deals as you try to squeeze out all the risk out.”

Two years to recovery?

All told, there were 50 undeveloped land sales in Manatee County during the 12 months ending May 31, a 17 percent drop from the 60 deals that took place during the same period a year earlier and a 78 percent drop from the 215 sales that took place during the 12 months ending May 31, 2006, Manatee County property appraiser data show.

John Stephens, an undeveloped land specialist with North Manatee Realty in Palmetto, predicted that it will take at least two years before the market revives from its current moribund state.

“How many thousands of vacant residential lots are out there that we don’t have buyers for?” Stephens asked. “Until those lots are absorbed, there won’t be any demand for raw land.”

Stephens said the restrictions on the digging of new wells only exacerbates the problem.

“Because the water management district won’t allow new wells for farming, new farms can’t come in,” Stephens said. “As a result, demand for farm land has been depressed to zero.”

Another factor depressing the market is the price of gas, said Barbara Anson, an agent with Wagner Realty in Myakka City.

“People are holding back on buying land in rural areas because they don’t know what it will cost them to drive back and forth,” Anson said.

Demand hitting prices

Manatee County property appraiser statistics show that falling demand for empty land is having an impact on prices.

Where land was selling for an average of $78,210 per acre in 2006, the average price for the 17 deals that have closed this year is just $25,182 per acre — a level not seen since 2004.

There may not be enough sales in 2008 yet to get a clear picture, said Dale Friedley, a data analyst with the Manatee County Property Appraiser’s Office. “However, there is a definite further price downtrend,” Friedley said.

Paul Klick, a commercial agent with Coldwell Banker in Sarasota, agreed that the market for residential land is catatonic. But he said buyers are still interested in commercial and industrial land. Zirkelbach’s two sales in April are certainly proof of that, Klick said.

Zirkelbach originally paid $6.1 million for the 138-acre tract off Buckeye Road in northern Manatee in July 2005. He then submitted plans to convert the land into an industrial park for distributors and light manufacturers, originally intending to market the park to end users over time. But when the downturn hit, Zirkelbach put the whole property up for sale.

Klick, who helped Zirkelbach sell the land, said the ultimate sale resulted from three factors: intensive marketing, obtaining site plan approval and getting a group of developers to commit to building a 123,367-square-foot regional distribution center for Federal Express Ground.

“Federal Express ended up being the anchor tenant for the industrial park, which was the linchpin to putting the deal together,” said Klick, who was assisted in the sale by Coldwell Banker agents Charles Clifton and Jerry Lamb.

Indianapolis-based Scannell Properties ended up paying $5.5 million for 16.5 acres where the FedEx distribution center is being built. The rest of the property was bought for $12.5 million by a consortium of developers led by Clearwater builder Brad Shirley of Jomar Development.

Klick said that while the Fed-Ex sale was driven by a national company’s need to expand its regional distribution network, the sale of the remaining land was due to developers who believe in the future of the area.

“Port Manatee is expanding tremendously,” Klick said. “It is starting to handle containers. And being the closest U.S. port to the Panama Canal, it will benefit from the expansion of the Canal Zone.”

Besides commercial and industrial users, the only other buyers of undeveloped land in recent months have been investors who are taking advantage of the fact that they are the only ones taking advantage of available opportunities.

Carlos Beruff, a longtime Southwest Florida builder and developer, bought 47 acres for $1.1 million, or $23,787 per acre, in December, according to property appraiser records. That price was 74 percent less than the $4.2 million, or $89,362 per acre, that Kimball Hill Homes paid for the South Manatee property in April 2005.

Similarly, Ronald G. Allen, an Osprey resident who made a fortune investing in real estate, bought 101 acres near Myakka City in May for $3.4 million, or $33,663 per acre.

“I didn’t steal it,” said Allen, who bought the property from Michael Ferro. “But I don’t think I got taken either.”

Allen said that he sold his house on Casey Key to Ferro for $3.2 million and agreed to pitch in an extra $200,000 for Ferro’s land in eastern Manatee.

“The land has already been rezoned,” Allen said. “The former owner spent about $500,000 to develop it. That’s what made it interesting to me.”

Allen believes his money is better off invested in land than it would be if it were sitting in the bank.

“If you don’t panic and you hang on to what you have, the market will come back,” Allen said.