For some time now, I have written about the dwindling inventory available on Cayman’s most prized real estate corridor, that of Seven Mile Beach. I can now report with some excitement that the owners of the Lacovia condominiums – an existing development located about a third of the way up Seven Mile Beach – have unanimously agreed to redevelop their property.
While there is still a long road ahead for the redevelopment of this property, I believe this is a really interesting development for Cayman’s real estate industry. The property will remain as is for just over a year. At that point, the existing structure will be brought down and a completely new development will take shape. Currently, there are 55 units at Lacovia and the owners have decided to increase this count by 33, taking the overall number of units up to 88. There will be the maximum 10 stories built, but they chose not to maximize the density of the building as they could have gone for more units. A number of the new units have already been reserved, even at this early stage.
This is a particularly pertinent move for the industry because it will be the first time that the existing owners of a strata property have come together as a whole to facilitate a redevelopment without the pressure of a disaster such as a hurricane necessitating such a decision. Instead, this is a commercial decision that has been taken, paving the way for other similar developments to take place down the road.
This is not the only major development that will be taking place along the Seven Mile Beach corridor over the next couple of years; with three others in the pipeline, so I would caution that absorption rates will need to be followed closely in relation to price points of new developments.
That said, each new development offers something different for investors. Seacrest is a 20-unit development (sold-out) by Brian Butler that will be breaking ground in the near future and will permit owners to rent out their property on a daily basis. The Grand Hyatt will be offering primarily studio (guest suites), with additional one- and two-bed units available, with an option to tie into the hotel’s rental program. The WaterMark development, which is already around 60 percent sold, of the 54 units available, will allow owners to rent out their property for a minimum of six months a year in one go. Lacovia will offer owners the chance to rent out their properties on a daily basis, as it had before.
These properties run from around $600,000 for a studio at the Grand Hyatt all the way to the $24 million penthouse at The WaterMark, so my greatest concern is the challenge we face as to where these properties are going to fit, market-wise.
As the bulk of the properties are in the $4 million range and up, it is clearly only high-net-worth individuals who will be interested in purchasing such properties. And the higher the price, the narrower the market becomes.
For future properties considering to follow Lacovia owners’ lead and redevelop, I would suggest that they think about selling their properties with price differentials per unit. This is because not all properties along Seven Mile Beach are as fortunate as Lacovia insofar as the beachfront that they possess, at 400 feet of prime frontage. Instead, properties may have to be redeveloped to offer beach-facing apartments at the top end of the price point, and also North Sound-facing apartments at a lower price point. It may be necessary to place amenities and services on lower floors at the back of the property and start the lower-priced apartments at the fourth floor, depending on the location of the site and potential configuration.
Along with the above-mentioned properties in the pipeline, it is worth mentioning that Dart still plans to develop the Four Seasons hotel and apartments, and there is also speculation that there may be a second phase of the Kimpton Residences in the running.
James Bovell is broker/owner at RE/MAX Cayman Islands.