South Point Update

The specter of the city's power of eminent domain in South Pointe did not vanish, however. That fear still looms over Miami Beach's oldest neighborhood, which lies south of the borders of the famous Art Deco District. In the past three years commissioners have invoked their power in order to acquire private property in a three-block tract where Cobb Partners Inc. of Coral Gables intends to build town houses, and city administrators admit they might well use eminent domain again if a project requires it. Some property owners, such as Lowander, say it is this threat of condemnation and confiscation that is holding back redevelopment of their neighborhood. "It's difficult to go ahead and plan a future with condemnations staring at you," says Lowander. "It's hard to deal with."

Despite South Pointe's shaky history, it still attracts people willing to stake money on it. Artist Dana Hotchkiss, for example, purchased a run-down eight-unit apartment building at 222 Ocean Dr. for $525,000 in the spring of 1989. She spent another $50,000 to turn the place into a home for herself and her long-time companion, Fred, a gray mutt of terrier and poodle extraction. She parks her silver Mercedes convertible in a first-floor apartment that she's converted into a garage. Across a hallway is a spacious studio with white walls, a bleached parquet floor, and a view of Ocean Drive. The studio is an empty canvas for the concrete benches, small metal tables, and large abstract paintings Hotchkiss creates. Above the studio is her living quarters, with a spectacular view of Ocean Beach Park and the Atlantic Ocean just beyond. "When I bought this building," Hotchkiss says, "I had no idea what was going on in the neighborhood. I learned just before closing that I could have my property condemned and taken from me. Unlike most, I went ahead with my purchase. People told me I was crazy. But I decided to play the odds."

Developers Louis Gross and Howard Gottlieb are playing the odds, too. Along the 300 block of Meridian Avenue, they want to build eighteen three-bedroom town houses that will sell for more than $120,000 apiece. Private investors will finance the project, for which an architect is drawing up plans. Gross and Gottlieb say they expect ground breaking to take place sometime next year. The duo is not worried about the city condemning their land, Gross says, because they are building what the city wants in that location.

Four blocks away at 140 Ocean Dr., David Colby and Wilhelm Moser recently opened a restaurant next door to their remodeled Century Hotel. Further up the street, just north of Dana Hotchkiss's house, are three vacant 50-foot lots owned by the Mau Mau Corporation, whose directors are Emilio and Gloria Estefan of Miami Sound Machine. The Estefans razed two apartment buildings on the tract. Their attorney, Jorge Hernandez Torano, says his clients have no plans for developing the site at this time.

Other South Pointe gamblers include Kay Statz and his business partner, Norbert Flasch. They plan to build sixteen upscale town houses on three vacant lots at Second Street and Jefferson Avenue. Ground breaking is scheduled for early next year; preconstruction prices range from $139,000 to $169,000. When completed, the town houses will be the first new homes built in the neighborhood since the high-rise South Pointe Tower was finished in early 1988 at the tip of the island.

Statz, president of Camp Development Co., has had the city agree in writing not to condemn his property if he finishes at least one four-unit building within one year of starting construction. "We're not spending $1.8 million on this property to have the city take it away," Statz says. "I wouldn't spend a dime if the city could do that."

State law requires the city to pay "fair market value" for each property it acquires under the law of eminent domain. But unlike regular real estate deals, a person whose property has been condemned has no choice but to sell, and there's only one prospective buyer: the city. Using two appraisers, commissioners determine the "fair market value" and make an offer. If the owner rejects the offer, the city can sue, allowing a jury to decide if the proposed price is truly fair. (In an area such as South Pointe, where the city stalled development for such a long time, a "fair" price might be computed on the basis of neighboring property, whose value was equally, artificially deflated.) Should the jury determine that the property owner is entitled to significantly more than the city has offered, the city can back out of the deal entirely.

Part Two
The threat of condemnation can affect how a banker views a prospective loan, says banking expert John Zdanowicz, a finance professor and director of Florida International University's Center for Banking and Financial Institutions, which conducts research and provides training seminars for the banking industry. A loan on property subject to condemnation is riskier than most, because there is no guarantee that the borrower will receive enough money from a forced sale to pay off a bank note. "The incentive for government is to underprice, obviously," Zdanowicz says. "They're not going to pay true market value because they have the power of the state behind them to underprice."

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