Citing rising construction costs, the developer of the proposed The Residences at the St. Regis Longboat Key this week sent letters to sales-contract holders asking for a 13% increase on agreed-upon purchase prices, offering them five days to either agree to new terms or back out for a deposit refund.
Unicorp National Developments Corp. CEO Chuck Whittall sent letters dated Sept. 20 saying the project is $110 million over budget, largely because of disrupted supply chains in the midst of the COVID-19 pandemic.
“We’re eating 60% of it and we’re passing on 40% to the buyers, and generally all of our buyers have been fine with it and understand,” Whittall said.
Whittall said Unicorp has had “one or two fallouts” as of Thursday, but the developer was still hearing back from buyers to make their decisions. Advertised prices for the St. Regis' 69 residential units ranged from $2 million to $20 million.
Whittall mentioned steep price increases from suppliers, subcontractors and vendors. Specifically, he mentioned price increases for steel, concrete, drywall and air conditioners along with PVC shortages for plumbing. For example, Whittall said Unicorp’s concrete contract went from $40 million to $47 million.
“This development began well before COVID, and now we are heavily being impacted from COVID by disruption of the supply chain,” Whittall wrote in his letter. “If there was anything else I could do I would, but there is simply is not.
“I am committed to the quality, as well as delivering the experience you expect. This corpulence is 100% out of my control and I am so deeply apologetic.”
In August, Whittall said Unicorp had sold 84% of its proposed residential units and added a few units would be held back for later sale.
Michael Saunders & Company is the sales broker for Unicorp and opened sales around a year ago. Construction is expected to be completed in early 2024.
“I mean most of them are business people, and understand what’s happening in the world, and deal with similar things in their own businesses right now, and it’s unfortunate that we’ve had to do this,” Whittall said.
Whittall considered three options to make up for the budget deficit:
- Wait for the market to stabilize
- Cancel the project altogether
- Increase condo prices by 13%
“We surveyed some general contractors and talked to Goldman Sachs’ head of construction, and there’s a belief that the market will stabilize over the next several months, but it will not come down,” Whittall said. “So, if we wait, call it eight months to build it, we take the very likely risk that everything will cost more in eight months.”
Whittall said he had hoped to ask for a smaller increase.
“We were hoping we could 10% because it sounded like a more palatable number, and what we did is we met with our bankers, and we backed into our current loan and our cost and the equity that we have in the deal, and it was really important to us (to) set out based on what we could borrow,” Whittall said.
The letters sent to contract holders were dated three days after the town Planning and Zoning Board unanimously advanced a series of revisions to the original plan approved by Town Commissioners in 2018. Unicorp now needs approvals from the Longboat Key Town Commission on those changes to proceed to the building-permit phase. Public hearings are set for Oct. 6 and Oct. 20.
Unicorp has announced an invitation-only, ground-breaking ceremony on Oct. 25.
“There is no chance that the project is falling through,” Whittall said. “If we have to terminate some contracts, we will resell them, but the project is moving forward.
“I’ve got $100 million invested in this, we’ve got our bank loan approved, we’ve got our P&Z approval, we’ll have our Commission approvals during the month of October and then we are starting construction, so there’s not a shadow of a doubt that this isn’t moving forward.”
Once the 17.6-acre land is developed, it could add about $1.5 million to the town’s tax revenue.
Whittall said it’s been an 8.5-year process to begin construction.
“It’s the Colony,” Whittall said. “There’s always something.”