Grand Strand Real Estate News - May 2023

May 2023

Volume 2023 Issue 5

Dear Gene Carter Team,

Summary

Sales activity for oceanfront and resort condos slowed in May but it seems to be picking up again in early June. Also, I want to talk about “bulk upfits” - extensive building-wide interior renovations for almost all of the condos in several of the largest condotels. One of these is almost complete but long standing plans for 5 others which were set for this winter were suddenly postponed a few days ago. 

Oceanfront and Resort Condo Market Update

The number of active oceanfront condo listings increased sharply for the second month in a row – 483 new listings compared to 434 at the end of April and 370 at the end of March. The number of active condo listings off the beach also increased, from 774 at the end of April to 852 at the end of May (See chart in newsletter).

The number of new oceanfront condo listings increased by 10.1% and the number of active listings increased by 11.3%. The number of closed sales was down 15.9% and pending sales were down 11.5%. As was the case last month, the inventory of active listings increased because we had an increase in new listings and a decrease in new contracts and sales (See chart in newsletter).

Sellers: Prices are still holding up but inventory is increasing. No one knows what the future holds but if you plan to sell any time soon, now might be a good time to do it. 

Buyers: More listings means more choices. And for you investors, there’s still time for you to catch most of the peak rental season. Please contact Teressa or Kevin for assistance.

New Home Sales (Resales Too)

For the first month in the past four, there were slightly more resales than new home sales in the residential market. The chart in the newsletter provides further insight.

Bulk Upfits - One Completed and Five Canceled

Massive “bulk upfits” which have been in the works for a couple of years for several big oceanfront resorts totaling approximately 1500 condos (Caribbean Resort, Ocean Reef Resort, Compass Cove Resort, Bay View Resort and Paradise Resort) were suddenly postponed from this winter until next year. Meanwhile, the bulk upfit in The Breakers Resort is almost complete.

“Bulk upfit” is the term coined by local resort operators for a method used to perform major interior upgrades on most of the condos in a building all at once. The HOA borrows the millions of dollars necessary to pay for the upfit and the owners make payments over several years. It’s a major undertaking for the HOA and the onsite rental management company so the sudden postponement of 5 such projects is big news. 

Why Bulk Upfits?

Why go to all this effort to orchestrate these bulk upfits? The furnishings, decor and appliances in many of the oceanfront and resort condos on The Grand Strand are in desperate need of attention. It shows up in selling prices and rental numbers. Incidentally, the condos which owners have made modern and up-to-date are separating from the others in prices and rental incomes.

The newest oceanfront condos on the Grand Strand were built 15 years ago. Most condotel management companies have been requiring updates just about every year but they eventually end up with a patchwork of mismatched items and they are never completely up-to-date with current popular trends. Periodically these condos need a major overhaul - which is what these condotels are attempting to do with the bulk upfits. 

Bulk Upfit History and Results

Grande Cayman Resort, formerly known as Long Bay Resort, was the first resort to do a bulk upfit structured like the ones that other developments are now attempting. That renovation was started in the fall of 2019 and completed in the late spring of 2020. 

One thing for sure with the upfit at Grande Cayman is that the condos ended up looking great! See before and after pictures in the newsletter.

Bulk Upfit Costs

In a bulk upfit, the interior of the condo is gutted and then completely rebuilt. There’s new flooring, new paint, all new furnishings, completely renovated bathrooms, smooth ceilings, new artwork, new appliances, new drapes and typically extensive decorative additions. Keep in mind that these renovations are far more complicated and expensive in an oceanfront high-rise building than they would be in a typical house or even a commercial building.

For instance, in the now postponed upfits, the renovation costs for one bedroom condos ranged from $45K to $55K, two bedrooms from $75K to $80K, three bedrooms from $85K to $100K. Payments for these were to be spread over 7 years at 6.5 % interest. The onsite management will pay 40% of each month’s payment as long as the owner stays on their rental program. Also, please be aware that each individual owner had the choice of opting in or opting out of the bulk upfit. 

Why Were the Bulk Upfits Postponed?

The primary reasons given for the bulk upfit postponements were that not enough buyers opted in for the upfits to be cost-effective and that costs and interest rates were higher than originally anticipated. The resorts plan to move forward with revised plans next year. 

What Return Should Owners Expect?

A condo will certainly look much better but the big question is whether or not the expected higher rental income and the higher market value of a condo will justify the bulk upfit’s expense. This additional payment each month will have an effect on the cost of ownership - as well as the rate of return if the owner rents his condo out. Hopefully, the positive benefits will offset the costs but there are no certainties. 

Another factor which must be considered is the cost of doing nothing. Over time, rental incomes and market values will decrease in relation to other properties which have been upgraded. Whether an owner chooses to opt into a bulk upfit or upgrade on his own, he will have to invest in improvements as long as he owns his condo to keep up with the times.

What Should an Owner do?

My general advice when a bulk upfit has been announced has been for an owner to decide whether he plans to keep the property long term or sell in the next couple of years. If he enjoys owning and he’s going to keep it, it might be a good idea to hang on and hopefully realize the benefits. If the owner is not in it for the long term, there’s a good chance there will not be time for the appreciation and increased rental incomes to be fully realized, especially the rentals, which could take awhile.   

There was a flurry of listings when the plans and prices for the renovations were announced a few months ago. Some sellers opted in and some sellers opted out depending on whether they thought buyers would prefer to move forward with the bulk upfit or avoid it and do their own renovations. Either choice meant that the seller would miss out on a large percentage of potential buyers. For this reason, the postponements are a blessing to anyone considering selling soon. They can still appeal to ALL buyers without having to make an upfit choice (for the time being). Please contact me if you would like to discuss this.

Incidentally, a condo in a building which has had a bulk upfit can be sold with the buyer picking up the payments for the balance. In other words, the seller does not have to pay off the loan to sell. Of course, when a buyer has to assume a large financial obligation along with his purchase, it reduces the price below what the buyer would have been willing to pay without this, somewhat negating the positive effect of the improvements on the value. 

The resorts and the owners are in a tough spot. Whatever happens, I’m definitely a big believer in owners’ continuing to invest in their condos. Please contact me if you want to discuss this.

Please Contact The Beach Pro Team If:

You are thinking of buying or selling an oceanfront or resort condo in our area

                                                                  Or

You are considering moving to our area or know someone else who is

                                                                   Or

You are an agent who has clients thinking of moving here or buying or selling in our area

                                                                   Or

You currently own a condo in our area and want a permanent home here.

That’s all for now. Check out our usual Grand Strand Market Reports, Sales and Listing Updates, my Best Buys, and new Beach Pro Team reviews.

Greetings from The Grand Strand!

Sales activity for oceanfront and resort condos slowed down quite a bit in May but it seems to be picking up again in early June. We will take a look at some market stats below. Also, I want to talk about “bulk upfits” - extensive building-wide interior renovations for almost all of the condos in several of the largest condotels. One of these is almost complete but long standing plans for 5 others which were set for this winter were suddenly postponed a few days ago. 

Oceanfront and Resort Condo Market Update

Below is the updated chart for active oceanfront condo listings. The number of listings increased sharply for the second month in a row – 483 new listings compared to 434 at the end of April and 370 at the end of March.The number of active condo listings off the beach also increased, from 774 at the end of April to 852 the at the end of May.

The chart below shows month to month metrics for oceanfront condos. The average selling price increased slightly again (2.1%) to $324,973. The number of new listings increased by 10.1% and, as previously reported, the number of active listings increased by 11.3%. The number of closed sales was down 15.9% and pending sales were down 11.5%. As was the case last month, the inventory of active listings increased because we had an increase in new listings and a decrease in new contracts and sales.

Sellers: Prices are still holding up but inventory is increasing. No one knows what the future holds but  if you plan to sell any time soon, now might be a good time to do it. 

Buyers: More listings means more choices. And for you investors,  there’s still time for you to catch most of the peak rental season. Please contact Teressa or Kevin for assistance.

Bulk Upfits - One Completed and Five Postponed

There was big news this past week involving some of the largest condotel buildings in the area. Massive “bulk upfits” which have been in the works for a couple of years for several big oceanfront resorts (Caribbean Resort, Ocean Reef Resort, Compass Cove Resort, Bay View Resort and Paradise Resort) were suddenly postponed from this winter until next year. There are approximately 1500 oceanfront condos in these 5 resorts. Meanwhile, the bulk upfit in The Breakers Resort is almost complete.

I’ve mentioned these types of projects in previous newsletters. “Bulk upfit” is the term coined by local resort operators for a method used to perform major interior upgrades on most of the condos in a building all at once. The HOA borrows the millions of dollars necessary to pay for the upfit and the owners make payments on the loan over the next several years. This first requires a vote among the homeowners to change the master deed to allow the HOA to borrow the money. It may take a year or more and multiple votes to get this passed. Next comes an enormous amount of planning - logistics, pricing, timing, structuring the loan, etc. It’s a major undertaking for the HOA and the onsite rental management company so the sudden postponement of 5 such projects is big news. 

Why Bulk Upfits?

Why go to all this effort to orchestrate these bulk upfits? Because something needs to be done! The furnishings, decor and appliances in many of the oceanfront and resort condos on The Grand Strand are in desperate need of attention. It shows up in selling prices and rental numbers. And all the while, bright shiny new hotels keep popping up to siphon away rental guests. Incidentally, the condos which owners have made modern and up-to-date are separating from the others in prices and rental incomes.

The newest oceanfront condos on the Grand Strand were built 15 years ago. That means that, unless they have been renovated or significantly updated, the colors, decor, furnishings and appliances are also 15 years old. Most have had some items replaced but relatively few are completely up-to-date with current popular trends. Most condotel management companies have been requiring updates just about every year but they eventually end up with a patchwork of mismatched items and you’d better believe renters and buyers notice.

Periodically these condos need a major overhaul. This is what hotels do. Every 8 or 10 years they rip everything out and replace it. This may not be practical for most condo resort owners to do individually but this is exactly what these condotels are attempting to do with the bulk upfits.

Bulk Upfit History and Results

There have been renovations in condotels before but Grande Cayman Resort, formerly known as Long Bay Resort, was the first resort to do a bulk upfit structured like the ones that other developments are now attempting. That renovation was started in the fall of 2019 and completed in the late spring of 2020. The whole building was shut down during this time period. By contrast, at The Breakers, the construction was done in stages, a few floors at a time, so the entire building was never closed. This was how the other buildings were going to be handled as well.

One thing for sure with the upfit at Grande Cayman is that the condos ended up looking great! Here are before and after pictures.

Bulk Upfit Costs

As you can tell by the Grande Cayman  pictures, in a bulk upfit, the interior of the condo is gutted and then completely rebuilt. There’s new flooring, new paint, all new furnishings, completely renovated bathrooms, smooth ceilings, new artwork, new appliances, new drapes and typically extensive decorative additions. The cost is substantial. 

For instance, in the now postponed upfits, the renovation costs for one bedroom condos ranged from $45K to $55K, two bedrooms from $75K to $80K, three bedrooms from $85K to $100K. Payments for these were to be spread over 7 years at 6.5 % interest. The onsite management will pay 40% of each month’s payment as long as the owner stays on their rental program. Also, please be aware that each individual owner had the choice of opting in or opting out of the bulk upfit. 

Many owners and potential buyers I’ve spoken with feel that the costs for all these upfits seemed higher than they should be. It’s worth noting that the renovations are far more complicated and expensive in an oceanfront high-rise building than they would be in a typical house or even a commercial building. An agent in our office said a client of hers used a private contractor to perform the exact same upgrades to the same spec levels as the planned upfit in a 3BR condo in the Caribbean Resort and the total cost ended up being very similar to the published upfit estimate because of the added level of difficulty. 

Why Were the Bulk Upfits Postponed?

The primary reasons given for the bulk upfit postponements were that not enough buyers opted in for the upfits to be cost-effective and that costs and interest rates were higher than originally anticipated. I’ve talked to quite a few owners and most were in favor of the upfits but some were not. The resorts plan to move forward with revised plans next year. 

What Return Should Owners Expect?

The big question is whether or not the expected higher rental income and the higher market value of a condo will justify the bulk upfit’s expense. This additional payment each month will have an effect on the cost of ownership - as well as the rate of return if the owner rents his condo out. On the other hand, the condo will look much better and should be able to produce higher rental income and sell for more (and give the owner more personal enjoyment). Hopefully, these positive benefits will offset the costs but there are no certainties. 

As previously mentioned, the only bulk upfit example we have at this time is Grande Cayman. Unfortunately, the upfit was completed just as Covid shut down all short term rentals in our area. Condos in this resort are indeed generating higher rental incomes and higher sales prices but with all the volatility over the past several years, it’s difficult to determine how much has been because of the upfit. It will be interesting to see how The Breakers Resort fares.

Another factor which must be considered is the cost of doing nothing. Over time, rental incomes and market values will decrease in relation to other properties which have been upgraded. As previously mentioned, condos which have been renovated to current popular cover colors and styles are clearly generating more income and selling at higher prices than others. Doing nothing is really not a viable option for the rental management companies or the individual owners. Whether an owner chooses to opt into a bulk upfit or upgrade on his own, he will have to invest in improvement as long as he owns his condo to keep up with the times.

What Should an Owner do?

My general advice when a bulk upfit has been announced has been for an owner to decide whether he plans to keep the property long term or sell in the next couple of years. If he enjoys owning and he’s going to keep it, it might be a good idea to hang on and hopefully realize the benefits. If the owner is not in it for the long term, there’s a good chance there will not be time for the appreciation and increased rental incomes to be fully realized, especially the rentals, which could take awhile.   

There was a flurry of listings when the plans and prices for the renovations were announced a few months ago. Some owners decided to sell rather than incur the increased ownership costs and the temporary building shutdown and they typically opted out of the upfit thinking that buyers would feel the same way. Other owners opted in and listed their condos for sale, thinking that potential buyers would be excited about the upgrades and would be anxious to buy.

As for buyers, we’ve had a few who would only buy if the seller opted out. By the way, these buyers planned to do their own substantial upgrades. We’ve had others who thought the bulk upfit was a good idea. The tough part for a seller was that he had to decide to opt in or out, knowing that either choice would lose him a large percentage of the potential buyers. For this reason, the postponements are a blessing to anyone considering selling soon. They can still appeal to ALL buyers without having to make an upfit choice for the time being.   

Incidentally, a condo in a building which has had a bulk upfit can be sold with the buyer picking up the payments for the balance. In other words, the seller does not have to pay off the loan to sell. Of course, when a buyer has to assume a large financial obligation along with his purchase, it reduces the price below what the buyer would have been willing to pay without this, somewhat negating the positive effect of the improvements on the value. 

The resorts and the owners are in a tough spot. As I mentioned before, something needs to be done to improve the conditions of these condos (as well as many other condos on the Grand Strand) but it’s going to be expensive to do it right. Whatever happens, I’m definitely a big believer in owners’ continuing to invest in their condos.

New Home Sales (Resales Too)

For the first month in the past four, there were slightly more resales than new home sales in the residential market. The chart below provides further insight.

Heather Glen in Little River - D.R. Horton

Please Contact The Beach Pro Team If:

You are thinking of buying or selling an oceanfront or resort condo in our area

                                                                  Or

You are considering moving to our area or know someone else who is

                                                                  Or

You are an agent who has clients thinking of moving here or buying or selling in our area

                                                                  Or

You currently own a condo in our area and want a permanent home

That’s all for now. Check out our usual Grand Strand Market Reports, Sales and Listing Updates, my Best Buys, and new Beach Pro Team reviews.

See you at the beach!

Here is a new review published on Google. 

• Kevin was amazing to work with..With his knowledge about condotels we were able to secure a conventional loan when other mortgage companies couldn't do it. Way to Go Kevin!! Debbie. Ocean Forest Plaza. Myrtle Beach.

We just started collecting Google reviews. At this time we have over 150 Zillow reviews which can be seen on our website Beach Pro Team reviews. 

Grand Strand Market Report - April 2023

OF/OV Homes Brochures:    Link to Listings 

OF/OV Homes Spreadsheet:   Link to Spreadsheet 

OF/OV Condo Brochures:    Link to Listings

OF/OV Condo Spreadsheet:   Link to Spreadsheet

Non-OF Condo Brochures: