The Ohio-based developer behind Pineapple Square is selling its downtown Sarasota property and plans, after concluding it lacks the management team to complete the $200 million, mixed-use project.
Isaac Group Holdings LLC (IGH) has set a deadline of May 11 to submit bids for the project, which promised to transform Sarasota a decade ago with dozens of upscale retail stores and condominiums before stalling during the recession.
“Today, we believe the economy has recovered and Sarasota is in the midst of significant hotel, condominium, retail and apartment growth,” an offering memorandum from brokerage firm Michael Saunders & Co.’s commercial division states. “IGH has decided that it does not have the management team needed to bring a project which is worthy of Sarasota and maximizes the potential of the property to fruition.”
Pineapple Square was among the most high profile — and controversial — developments proposed in Sarasota during the real estate boom of the last decade. Though Isaac Group brought Brooks Brothers, Sur La Table and Eileen Fisher into a largely mom-and-pop retail mix downtown, the proposal drew criticism over city financial contributions.
At one point, the city had pledged to provide Isaac Group with $7.6 million in public funding for parking that would have benefitted Pineapple Square, and it considered selling land appraised at millions of dollars for $1 million.
Under terms of a development agreement approved by the city of Sarasota in late 2010, Isaac Group is entitled to build as many as 157 condominiums and 80,920 square feet of commercial space on a site at State Street and Lemon Avenue downtown, property largely owned by the First United Methodist Church. Future plans would be subject to covenants that entitle the church to parking on its land.
Meanwhile, the city is constructing a 395-space parking garage on a city-owned lot on State Street, a move that fulfills a contractual obligation with the Isaac Group.
“People complain about the city building the parking garage on State Street near Pineapple Square, but what they forget is it was always the city’s plan to build parking there,” says Sarasota City Attorney Robert Fournier. “Ironically, the city has ended up where it started.”
Although a sale now could jumpstart Pineapple Square, it will continue to face hurdles.
Most notably, national retailers’ interest in downtown has waned in recent years, and Pineapple Square now faces heightened competition from other downtown residential developments.
Kolter Group is building 141 upscale condos in its Vue Sarasota Bay, at 1 N. Tamiami Trail; The Jewel residences are under construction; a townhome development known as “Q” is nearing fruition on Ringling Boulevard; and several other rental apartment complexes either are being built or are planned.
“The question is whether the market can absorb that much project right now,” says John Harshman, president of Harshman & Co. Inc., a Sarasota-based commercial real estate brokerage firm. “Retail downtown, in particular, has slowed from its pace of two years ago, when some good tenants moved in. Now, some significant spaces downtown remain vacant, and we’ve not seen the attention from national retailers we once had.”
Even so, Pineapple Square’s developers contend the presence of Hyde Park Steak House and others shows their concept remains viable.
“Phase one of the project was highly successful,” says John Simon, a former Taubman Co. executive who led the Isaac Group effort a decade ago. “There’s just not the appetite to go forward, so other developers can come in now and benefit from a development agreement and site plan in place.”
A selection from proposals submitted to Saunders’ Leon De Lieto will be made on or before June 8, the offering states.