1/4 of Homes On Fisher Island Up For Sale; Few Buyers

Discussion in 'Economics' started by ByLoSellHi, Jan 31, 2009.

  1. http://www.nytimes.com/2009/02/01/business/01fisher.html?pagewanted=1

    Fisher Island: Still a Refuge, but Not From the Downturn

    About a quarter of the 695 condos on Fisher Island, Fla., one of the country’s wealthiest havens, are on the market. Sales are slow.

    Published: January 31, 2009

    Fisher Island, Fla.

    ON Jan. 12, Richard Goodwin, who made a fortune building condominiums, publicly lamented his own real estate woes. In a letter to The Fisher Island Voice, an online forum for residents of this tiny, gilded island less than a mile off Miami, he wrote, “I have $1.2 million invested” in property here, and “I am suffering under a 40 percent meltdown of my net worth.”

    Just a year ago, his revelations would have seemed unthinkable on Fisher Island, one of the country’s wealthiest communities, whose residents relish the privacy of their mini-paradise.

    Chock full of Mediterranean-style condominiums facing the sea, the Miami skyline or a golf course, the isle features yachts moored in private marinas, flamingos that stroll on the sixth hole, and peacocks that occasionally preen atop a parked Rolls-Royce. Oprah Winfrey, Mel Brooks and the financier Martin Zweig are just a few boldface names who have called Fisher Island home.

    But even here, a haven for wealthy families since the late 1980s, the economic storms are bearing down. About a quarter of the island’s 695 condos are up for sale, roughly double the number on the market in recent years, and few are finding buyers. Sellers are cutting prices, brokers say, and one unit is in foreclosure, a surprise to some residents of a place where home prices range from $335,000 to $30 million.

    “Nobody has unlimited net worth,” says Ted Pincus, a retired public relations executive who owns a five-bedroom home here. “Fisher Island has been hit like everybody else.”

    Wealth is no immunization against this downturn. Across the country, the sinking economy is affecting even the most luxurious communities and causing anxiety among residents. On Nantucket, the value of homes sold last year was $445 million, down almost 50 percent from 2005.

    In Southhampton village on Long Island, the real estate market dropped by a third last year, to $346 million. And the Yellowstone Club, a retreat for the superrich in Big Sky, Mont., filed for bankruptcy last year.

    “The wealthiest people are cutting back, too,” says James D. Hardesty, of Hardesty Capital Management. “They are scared. This has been a very tough market for a lot of people, and of course they have lost money.”

    A real estate broker on Fisher Island, Denise LeVine, calculates that 30 homes were sold last year, compared with 100 in 2005. She said one condominium that sold recently for $3.4 million had been bought just two years ago for $4.2 million. (The Realtor Association of Greater Miami and the Beaches does not have definitive data because Fisher Island is not an incorporated city.)

    One British family has put two oceanfront condos on the market for $2.99 million each, said Elena Bluntzer, the broker who is listing them. She promoted one of the units in a flier as a possible short sale, which means the selling price could end up less than the mortgage.

    “Some of the homes have been on the market for a year,” Ms. Bluntzer says.

    In the meantime, Fisher Island Holdings, which owns the island and is the sole builder, has chosen not to start work on a planned condominium building. The company is controlled by Joseph Kay, an entrepreneur from Georgia in the former Soviet Union.

    Mr. Kay declined to comment for this article.

    Until last year, some residents of the island thought it had special features that would help shield it from economic hurricanes. It’s only 20 minutes from Miami International Airport, and it attracts a wide range of buyers. About 70 percent of residents come from outside the United States. Moreover, its appeal extends beyond retirees, or families looking for a second home; many residents live on the island year-round.

    That diversity was in full view at the beach club one morning, where guests were speaking English, Spanish and Russian. The crowd ranged from sedate grandparents surrounded by a clutch of family members to fit young men in $200 Vilebrequin swimsuits.

    When the economy was soaring, few worried about the high cost of living here. But the downturn has created tension, and many residents are trying to rein in spending.

    That’s tough to do when you live in a place where the board of the country club recently approved a plan to spend $60 million in upgrades. That has caused some tenants, like Mr. Goodwin, whose annual expenses run to $80,000 for a 720-square-foot home, to put his property up for sale.

    “It was a grandiose program that went directly into the eye of the storm,” he says. “I used to be rich and by American standards, I still am. But now it is a time for people like me to hunker down.”

    CERTAINLY, this 216-acre island is luxurious. It has 14 pools, 16 tennis courts and a nine-hole golf course, all set against a backdrop of lush gardens that are tended by 49 employees. Residents tool around in golf carts or cars. The island, which also has seven restaurants, a high-end spa, its own school, a playground and two marinas, can be reached only by a fleet of island-owned ferries.

    Counting taxes, insurance, condo fees, club dues and expenses for island upkeep, the annual carrying costs of a condo on Fisher Island can range from $60,000 to nearly $300,000.

    To Joe Zammit-Lucia, who recently created The Fisher Island Voice, such fees did not bother people during the halcyon days of a booming economy. “There was an underlying testosterone-laden arrogance,” says Mr. Zammit-Lucia, a native of England who founded a medical consulting business with his wife, which they later sold. They live on the island for much of the year.

    “The view was: this is a first-class community and we can afford” all the luxurious amenities, Mr. Zammit--Lucia said over breakfast at the beach club. “It is like the way investment bankers act: we can afford the $10,000 bottle of wine at our closing dinner, so why not?”

    OVER the years there have been battles between residents and some previous owners of the island. And in 2005, some residents became upset when Fisher Island Holdings began organizing galas, like one for Spanish Vogue, that drew hundreds of outsiders who clogged the island. Many of the events were held around the opulent stone and marble mansion originally built by William K. Vanderbilt, who spent time there in the early part of the 20th century.

    “They wanted to turn the island into the Monte Carlo of Florida,” says one resident, who declined to be identified because he did not want to discuss island issues publicly.

    Eager to grab back their privacy, residents overwhelmingly voted in 2006 to take over ownership of the club from Fisher Island Holdings. Until that time, annual club dues were subsidized by the company, and ran about $8,000. But over the next two years, without the subsidy, they jumped to $20,000, on top of a one-time $250,000 membership fee.

    Then the economy turned sour.

    Residents and management officials are quick to point out that the island is on solid financial footing. Mark James, chief executive of the Fisher Island Community Association, which maintains the island, said in a statement that the island “is in a far better financial position than many communities.”

    Mr. James added that the “budget is balanced, we ended 2008 with a small surplus, and none of the associations on the island is in financial peril.”

    Still, some of the island’s premier properties are for sale. Bruce McMahan, a hedge fund executive, has put his 7,300-square-foot condominium, which he used exclusively to entertain business associates, on the market, along with all its art, for $30 million.

    Its walls are covered with copies of paintings from the Hermitage Museum in St. Petersburg, Russia. The paintings were done by a team brought over from Russia by Mr. McMahan, who heads the Argent Funds Group. There is also a collection of Fabergé eggs and boxes and original correspondence from the Romanov family, which ruled imperial Russia, all housed in what is called the “Romanov bedroom.” Two Rodin sculptures adorn a terrace that fronts the ocean and is guarded by a German shepherd.

    Mr. McMahan did not return phone calls seeking comment.

    A number of island residents say many expenses have gone up unnecessarily, prompted by other owners who seem immune to worries about spending.

    Barney Rosenzweig, who made his fortune as the producer of “Cagney & Lacey” and retired to Fisher Island in 1995, calls the tension a “battle between the haves and the have-mores.”

    Part of the bulging expense is attributable to the rising insurance costs in Florida, something that is beyond Fisher Island’s control.

    Mr. Pincus owns a 5,900-square-foot home and pays more than $200,000 annually in taxes and fees. He says his property taxes have nearly doubled, to $115,000 from $60,000 five years ago. Other fees include $22,000 toward upkeep (paid to the Fisher Island Community Association), $35,000 for his condominium unit and $21,000 in dues for the country club.

    It’s all but impossible to live on the island and not belong to the country club, which offers access to golf, tennis, a spa and six of the seven restaurants. That helps explain why friction intensified with the decision in early 2008 to charge a $60 million assessment to redo the club, part of which was $16 million for a makeover of the spa, at a time when other costs were rising. Even though Fisher Island’s developer agreed to contribute $25 million toward modernizing the club, that still meant the balance would have to be paid by the members — a bill of about $54,000 a member, payable over 10 years.

    Steve Jones, who quit the construction business in 1987 and bought his home in the early 1990s, has put it on the market. He’s angry that people who want to sell their memberships back to the country club may have to wait for years because of complicated rules. And he says it is unfair that each resident pays the same community association fee, regardless of the size of the home.

    The costs have “just zapped the older residents who are retired,” Mr. Jones said. “The poor are subsidizing the rich.”

    Michael Ashkin, a board member who defends the need for improvements, argues that the costs have gone up only because they were artificially depressed for years because of the developer’s subsidies. He says the fees are similar to those of other clubs in South Florida.

    Tony Fano, president of the country club’s board, called the increases inevitable. “I have respect and empathy for people,” he said. But “if people were in our shoes faced with that decision, they would have made the same one.”

    In a sign of the divide, three new candidates running for the country club board are proposing cost controls. Some changes would be minor, like turning off the night lights on the tennis courts and merging accounting staffs at various operations. The most significant proposal would cut spending on the spa. But they’re hardly enough to placate some protesters. “It will not be enough,” said Alan Trustman, a resident who wrote screenplays decades ago for the original version of “The Thomas Crown Affair” and “Bullitt.” “They don’t know how to manage costs.”

    In the meantime, Larry Brown, the chief executive of Fisher Island’s country club unit, is considering cost-cutting measures in the club’s daily operations. He has already come up with a less expensive dinner menu at one of the restaurants, where entrees now cost $10 to $18. Mr. Brown is also weighing a plan to cut the cost of the spa’s massages and facials by 10 to 15 percent. (For members, an 80-minute massage is now $146.56, with tip. A 50-minute facial is $106.20.)

    TED PINCUS, for his part, believes that if the cost-cutting drive goes too far, it would destroy the island’s quality of life.

    “This is the last bastion of tranquillity in a world overrun by tourists or populated with prosaic retirement villages,” he said. “Some will pay the premium just as some people will cough up whatever it takes to buy a Rolls-Royce.”
  3. no bridges connect the island to the mainland....only boat, ferry or helicopter.......It has it's own fire department and it is on the best Tip miami has to offer....