ocean city: revisited

Transcription

OCEAN CITY: REVISITED
Ocean City’s economic expansion of the last several years has ground to a halt. In
2008, of the ten indicators that we follow, all but two were negative. The two positive
indicators were tax base (which will be subject to change after the assessment appeal
process and which lags behind actual trends by up to three years) and construction
permits based on number of dwellings, which also reflects pipeline projects. Of the
negative indicators, the most important was the condominium sales volume, down
14.82%. Average condominium price was also notably lower, down 7.12% (net of
inflation). This reflects the slowing economy and imploding condominium market. The
hotel statistics, after inflation, also trended to the negative. Construction permits for the
town were up by 22.6% in number of dwelling units but down by 9.1% in dollar value.
The analysis below will summarize the most important statistics, provide explanations,
and reflect upon their impact to the resort.
The number of vehicles crossing the Bay Bridge decreased last year, according to the
Maryland Transportation Authority. Average traffic volume in 2008 for the Bay Bridge
was 35,263 vehicles daily, down 5.0% from 2007 at 37,101. Year-to-year decreases
occurred in all months, except for February, which showed an increase of 5.3%. The
largest year-to-year decrease in traffic volume was in September with a drop of -15.2%.
These statistics relate to the average price per gallon of gasoline (see chart).
Liberty Place at Columbia Crossing • 6240 Old Dobbin Lane – Suite 140 • Columbia, Maryland 21045
(410) 423-2300 • Fax (410) 423-2410 • www.lfmvalue.com
Bay Bridge Crossings Compared to Gas Prices in 2008 vs. 2007
% Change 2007-2008
Crossings
Gas Price
2007
Gas Price
2008
Gas Price
Jan
944,391
$2.27
921,492
$3.05
-2.4%
34.0%
Feb
826,916
$2.29
870,712
$3.03
5.3%
32.7%
Mar
1,042,992
$2.59
1,024,389
$3.26
-1.8%
25.7%
Apr
1,078,004
$2.86
1,029,597
$3.44
-4.5%
20.3%
May
1,224,324
$3.13
1,181,564
$3.76
-3.5%
20.3%
Jun
1,287,497
$3.05
1,220,295
$4.07
-5.2%
33.2%
Jul
1,373,152
$2.96
1,311,808
$4.09
-4.5%
38.1%
Aug
1,397,914
$2.78
1,269,042
$3.79
-9.2%
36.1%
Sep
1,186,894
$2.79
1,007,048
$3.70
-15.2%
32.6%
Oct
1,134,179
$2.79
1,070,123
$3.17
-5.6%
13.6%
Nov
1,056,497
$3.07
980,338
$2.15
-7.2%
-29.9%
989,124
$3.02
984,438
-44.1%
Dec
Daily Avg.
$1.69
-0.5%
13,541,884
12,870,846
-5.0%
37,101
35,263
-5.0%
2008 vs. 2007 Monthly Bay Bridge Crossings & Gas Prices)
Ocean City generated $253.2 million in gross hotel, motel and condominium rentals
in 2008, a decrease of 3.44% from 2007 ($262.2 million). This is an indication that
tourist dollars spent on rooms have declined and additionally, there is a siphoning-off of
revenues to unsold condominium units that may not be paying the room tax. Also, the
lower number of hotel rooms, due to demolition or conversion to condominiums may
have had an impact here. Revenues from rentals have remained steady since 2004,
with an average annual increase of 1.21% over four years.
OCEAN CITY ROOM TAX AND REVENUES
Rate is .045. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2008 Tax
January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $128,038
February. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $184,433
March. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $248,475
April. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $347,274
May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $937,221
June. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,213,868
July. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,111,941
August. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,671,155
September. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $954,188
October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $353,442
November . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $149,163
December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $95,549
Totals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,394,746
Total divided by Rate:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $253,216,587
2007 #. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $262,233,197
% Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.44%
Room Tax 2008
Ocean City’s tourists spend more time at the newest hotels rather than at the older
ones. These properties for the most part support suites, large bathrooms and a
generally higher level of finish. The older, well-established properties must continue
to reinvent themselves regularly to compete with the newest additions to supply. Also,
oceanfront properties lead the way in terms of RevPAR (revenue per available room).
Differentiation is also accomplished by pricing, with the highest rates at the newest
properties.
Vacationers not only rent hotel rooms, they also spend money on food, clothing, gifts
and other taxable items. The State tracks these items by county and we use these
statistics in our evaluation of Ocean City’s economic condition. The retail sales figures
reported for Worcester County in 2008 decreased to $1.113 billion from $1.280 billion
in 2007, a decrease of 12.98% (12.88%, net of inflation). This figure indicates that
consumers are buying fewer goods in today’s recessionary market.
The Assessable Tax Base is the total of all assessed property values in a given area
and is affected by physical growth, the economy and market prices. The Town of Ocean
City’s estimated real property assessable tax base (full year) for the tax year beginning
July 1, 2008 increased 21.40% in 2008 with a tax base of $10.309 billion. Worcester
County experienced a 17.50% increase in 2008, with a tax base of $19.914 billion. Both
the Town and the County have enjoyed extraordinary increases over the last several
years. Home sale prices have declined but, the assessable tax base lags for a year or
two, so increases in the tax base are not unexpected.
Billions Ocean City Tax Base 1998 to 2008
TOWN OF OCEAN CITY, MD ASSESSABLE TAX BASE
For Tax Years Ending June 30th:
Fiscal
Tax Base
% Change
Cumulative
Year
(In $Billions)
Change
1998
$3.297
-
-
1999
$3.332
1.04%
1.04%
2000
$3.415
2.51%
3.57%
2001
$3.541
3.68%
7.38%
2002
$3.676
3.82%
11.49%
2003
$3.861
5.04%
17.11%
2004
$4.710
21.98%
42.85%
2005
$5.641
19.75%
71.06%
2006
$6.643
17.76%
101.45%
2007
$8.492
27.84%
157.53%
$10.309
21.40%
212.64%
2008
Average
% Change
1998-2008:
12.07%
2000-2008:
14.81%
Sources: Comprehensive Annual Financial Report for the Town of Ocean City, Maryland, for Fiscal Year ended June 30, 2008. Uniform Financial Report of Town of
Ocean City to Maryland Department of Fiscal Services, 1998-2008.
HOTEL DEVELOPMENT
A Courtyard by Marriott hotel with 91 rooms and nine apartment condominiums is
nearing completion on the former Santa Maria motel site, on the Boardwalk at 15th
Street. Also nearing completion is the American Suites, a property with 16 threebedroom apartments and ten employee housing units, located on 10th Street between
Baltimore and Philadelphia Avenues. This property will be run in conjunction with the
Americana Hotel located on the boardwalk at 10th Street. The 44-room Avelon Hotel
at 1st Street and Baltimore Avenue has been razed and is under construction with
an 84-room Sleep Inn. The Monte Carlo suites has razed an adjacent house and is
constructing seven additional suites on that site. All of these projects are expected to
be completed in 2009.
The existing hotels are still holding their own with the highest rates and occupancies in
the newest projects, on the oceanfront. According to the City government, there were
no hotel units completed in 2008. Currently on hold are a 160-room bayside hotel at
45th Street and an expansion of the oceanfront Clarion at 101st Street. Though not
exactly a hotel, a proposed 94-unit boarding house has been approved for 2nd Street
and St. Louis Avenue.
CONDOMINIUM DEVELOPMENT
Only three projects reached 100% sold out with a total of 55 units.
Recently Completed & Sold Out Building
Building
Location
# Units trailer park
Broad Marsh Condos (3 phases)
Bayfront, 69th Street
15 2007
Ice Land Sea Bright
Bayside, Wicomico Street
20 2006
Bay 1
Bayside, 76th Street
20 2005
Total Units
Year Built
Type
C
55 Three new condominium projects and Phase 2 of a fourth were completed in 2008,
adding to the large inventory of unsold units remaining from 2007. Completed on the
Oceanside is the Gateway Grand, 196 high-end, high-priced oceanfront and oceanside
units at 48th Street. On the bayside at 81st Street, the Rivendell was completed with 88
bayfront and bayside units. Also completed was the Makai at 42nd Street, a conversion
of the Ramada Inn hotel into 96 condominiums.
There are 19 projects still in initial sell-out and comprising a total of 836 units. Of these,
553 units are still available. Of the 553 available units, 387 of them are new additions
in 2008. The remaining 283 are left over from 2005 through 2007. A summary of these
projects is shown on the following page.
Completed Buildings in Initial Sell-Out
Building/Community Name
Street
Comments Type
Hobbitt
Rivendell
Bayfront, 81st Street
# Units Year Built
88 2008
75 units available as of 4/3/09
C, R
Gateway Grand
Oceanfront, 48th Street
196 2008
C
Ramada Makai
Bayside, 42nd Street
95 2008
C
bank site Seaside Escape
Oceanblock, 79th Street
15 2008
C
Nassau
Meridian (Phase 2 - west bldg.) Oceanside, 60th Street
38 2008
C
Nassau
Meridian (Phase 1 - east bldg.) Oceanfront, 60th Street
42 2007
C
Belmont Towers Oceanfront, Dorchester St.
75 2007
C
Sapphire Sea
Oceanblock, 35th Street
10 2007
C
Tamarindo - Phase III & IV
Oceanside, 56th Street
8
2006/07
4 “ units available as of 4/6/09
(1 unit in Phase III and 3 units in Phase IV)”
TH
Bel Mare
Oceanside, Somerset St.
13 2006
C, R
4100 Condominium
Oceanside, 41st Street
16 2006
2 units and 2 retail spaces available as of 4/6/08
South Beach Boardwalk
Oceanfront, Surf Ave.
36 2006
1 unit available as of 4/6/09
C
Bella Vista
40 2006
C
Sunset Beach
35 2006
C
Bahia Vista II
20 2006
C
Emerson Towers
Bayfront, Wicomico Street
13 2006
C
Pier 17
15 2006
C
Bahia Vista I
40 2006
C
Laguna Vista
41 2005
C
Sunset Island
85 85 condos and 6 SFD available as of 8/21/08
Total Units
921 638 units available as of 8/21/08
C-16, R-3
CONDOS UNDER CONSTRUCTION
The largest condominium project currently under construction is a 20-unit building on
Sunset Island. All 20 units are reportedly under contract and are expected to settle
in June or July 2009. There is also an 11-unit townhome development known as
Sunburst, located on 16th Street, between Philadelphia and Baltimore Avenues. Phase
I, consisting of five units, has received final approvals but has not yet received its use
and occupancy permit. Approval has been granted for Phase II but building permits
have not been issued.
Properties Under Construction
Sunburst Phase I
Street
# Units Comments
Type
16th St. betw. Phil.& Balt.
5
final approval, no U & O issued as of 4/20/09
TH
Total Units
5 Liberty Place at Columbia Crossing • 6240 Old Dobbin Lane – Suite 140 • Columbia, Maryland 21045
CONDOS IN THE PIPELINE
There are 203 units are in the preconstruction phase and have received site
development plan approvals. Sunburst
(Phase II) and Bayside Retreat are expected
to begin construction in 2009. Three buildings
are approved for a total of 68 units on Sunset
Island, however, the developer is waiting
for the market to improve before beginning
construction. The Cropper’s Landing
development has been granted approval but
was granted an extension on the approval
through November 16, 2009. It is uncertain
exactly how many additional units might be
in the conceptual phase but shelved until the
condominium market resurrects itself. Below
is a summary of the approved projects that
are in the pre-construction.
Properties in Pre-Construction Phase
Street
Type Status
Sunburst Phase II
16th St. betw. Phil.& Balt.
# Units Comments
6
No building permit issued as of 4/20/09
TH Approved
Bayside Retreat
35 Property is being actively marketed (as of 4/20/09)
C
Approved
Cropper’s Landing
Bayfront, 1st Street
94 Granted extension on site approval plan (expires 11//09)
C-40, TH-54 Approved
Total Units
135 Properties in Review Phase
65th Street Housing
Street
200 64th Street
Total Units
# Units Comments
Type Status
40 40
CONDOMINIUM SALES
According to ARIS , the number of Ocean City condominium sales decreased 14.8%
from 742 units in 2007 to 632 units in 2008. This is a significant drop, although not as
drastic as the 43.5% drop from 2005 to 2006 (1,444 in 2005 to 811 in 2006). Average
selling prices have dropped over 7% while the average asking price has decreased
3%; discounts have decreased from 36% in 2007 to 14% in 2008. This indicates that
sellers are somewhat more realistic in their asking prices. The average number of days
on market has been steadily increasing from 155 days in 2005 to 225 days in 2006 to
305 days in 2007, to 347 (nearly a year) in 2008. The graphs at the end of this section
illustrate trends and recent status of the market.
In 2006 there were 23 condominium units which sold for $1 million or more. In 2007,
there were 39, a substantial percentage increase. Clearly, there were individuals willing
to cross the million-dollar mark in Ocean City. In 2008 the number of sales in this price
range dropped back to 21. The supply of these higher-priced units resides mainly in the
larger buildings which became available in 2008. Buyers are hesitant in this tumultuous
marketplace. Many of the 2008 sales likely emanated from 2006 and 2007 contracts for
2008 delivery condominiums. In order to deplete the supply of high-end condominium
units, significant price reductions will be warranted. The newest larger oceanfront
and bayfront projects for 2008 are: Belmont Towers, Gateway Grand, Meridian, and
Rivendell. All told, these projects delivered more than 400 such units. This flood of
highly priced units will farther drive down the premium for oceanfront and bayfront
views.
As a microcosm of the condominium (re-sale) market, we tracked sales in the Sea
Watch, a 400-unit condominium erected in 1975 with about 360 identical two-bedroom
oceanfront units, as illustrated on the chart below. This particular property was chosen
due to the consistency in unit size, layout and orientation to the ocean. From 2001
through 2005, the average price increased steadily, with a modest decline in 2006
and 2007. During the period of price inflation, the number of sales remained fairly
constant until the peak in 2006. At that point, the number of sales dropped to almost
half. In 2007 the price declined and the number of sales remained flat. In 2008, the
price declined further, from $461,429 to $435,818 and, as a result, the number of sales
increased from 7 to 11, as condominium unit owners became impatient with the market
and more eager to sell their unit.
CONCLUSIONS/OUTLOOK
There has been a steady drop in condominium prices and units sold, coupled with a
significant increase in number of days on market. Relative to the net proceeds of sale,
increased marketing time and reduced price have a similar effect. Therefore, while
average prices showed a modest decrease, the net effect, including the increased days
on market, results in an effective price decrease across the board. Pricing or other
concessions will be the key to selling out the over-supply of condominium units.
Condominium Sales by Price
Condominium Sales Summary
Summary of Economic Indicators
Indicator
2004
2005
2006
2007
Bay Bridge Crossings
5.10%
-0.50%
3.20%
0.80%
Hotel, Motel and Condo Rentals
4.61%
0.30%
6.48%
1.76%
-3.44%
Retail Sales (Worcester Co.) - Gross
8.09%
1.59%
6.77%
4.47%
-12.98%
Net of Inflation
Assessable Tax Base (Tax Base) (Worcester)
2008
-5.00%
4.79%
-1.81%
4.17%
0.37%
-12.88%
20.43%
18.21%
23.53%
20.10%
17.50%
Construction Permits
Total $ Value (all constr.)
9.00%
69.92%
2.89%
-68.05%
-9.10%
No. of Dwelling Units
8.71%
-64.12%
215.96%
-33.00%
22.61%
Condominium Sales Volume ($’s)
32.25%
34.65%
-26.06%
-10.62%
-14.82%
Condo Price Change
21.74%
22.54%
9.40%
-1.08%
-7.22%
Net of Inflation
18.44%
19.14%
6.80%
-5.18%
-7.12%
Number of Indices Up (out of 10)
Ocean City Health Barometer
10
7
9
5
2
100.00%
70.00%
90.00%
50.00%
20.00%
CPI (U.S., All Urban Consumers)
3.30%
3.40%
2.60%
4.10%
-0.10%
NASDAQ
2,011
2,185
2,217
2,430
2,654
to
to
to
to
to
2,175
2,205
2,415
2,652
1,577
10,453
Dow Jones Industrials
10,784
10,718
12,460
13,262
to
to
to
to
to
10,783
10,718
12,463
13,265
8,776
Prime Rate
4.00%
5.25%
7.25%
8.25%
7.25%
to
to
to
to
to
5.00%
7.00%
8.25%
7.50%
4.00%

ocean city: revisited

Transcription

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