Laketown Wharf Busts, Leaves Developer Crying

We’ve all heard the rumors about what is happening with Laketown Wharf.  Jerry Wallace, the developer, once positively referred to the area around Laketown Wharf as a “condo canyon” and himself as the Trump with a drawl.  I bet he doesn’t feel so Trumpish now.

I was VERY critical of this development from the get-go, extremely worried what this “behemoth” would do to the image of our area.  A largely vacant, 750 condo, elephantine monolith, Laketown Wharf actually had great aspirations, with some possibility of success had it come unto creation mid 2004.  With huge swimming pools, a Balagio-style fountain/light show, a 650-seat live performance theatre, 5 restaurants and 1,000’s of square feet of retail space, it was planned to be almost a small town.  And, it is actually kind of awesome, even though it is not on the beach.

On the 12th of September, Jerry Wallace, developer of Laketown Wharf and President of Laketown Wharf, Inc. signed over the remaining unclosed units to Corus Bank, the institution that originally financed the construction of the project.  With only 8% of the 750+ condos built actually closed, the only option was to hand the rest back to the bank.

At this point, a new chapter is created in the life of Laketown Wharf.  The sad part is that the image of a huge traffic crossing point on the beach is now completely up to a financial institution that may or may not have our best interests in mind.

As of two weeks ago, it had looked like the grounds were being neglected, but after going by today, I noticed that some of the pools had been filled back up.  The water-features were not on, nor were any of the fountains and the whole place looked like a ghost town.

We’ll be following this closely.

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79 thoughts on “Laketown Wharf Busts, Leaves Developer Crying

  1. This development is the point I was trying to make with Scott Seidler. To toss out a bunch of MLS numbers does not reflect an accurate assessment of the market. Only all the available units/houses/property for sale or sold will give good numbers. The Laketown Wharf debacle will surely erode condo prices further. Does anyone know what happens to the 65 that closed?


  2. Wait! I’ve got it, the bank sells the “elephantine monolith” (good one, Jason) to the Indian Nation. With all the room they’ve got there, they turn it into a Casino Hotel and bingo the building is saved, the economy returns and the Yellow Brick Road goes on forever and ever. Dorothy! Dorothy! Wake Up!


  3. Usually Resort Interior will give you “credit in the store” but not your money. I have returned many thousands of dollars to Laketown Wharf people who were under contract with me for their LTW decorating. My company, Golden Rule Decor, LLC., legally, by contract, could have kept 20% of the money; however, as a privately-owned company I make my decisions based upon what I think is right and wrong.
    Although I would have liked to keep the money, (I’m also heavily invested in LTW -11 units), I did not think that would be the “right” thing to do to my customers. If you need decorating in the future, give me a call. I’ll treat you better. 🙂 Mona Townsend


    1. Mona…been trying to find your phone# or website and cannot. If you receive this email, please respond with your website and/or if you still have condo rentals…thanks!


  4. Here’s a thought (and quite a stretch), but what about using the units as affordable housing? Yea, yea, I know this won’t happen due to the value of the property and its proximity to the beach, but you have got to wonder about all of those units sitting unoccupied and so many people not able to find suitable housing.


  5. Ron

    In response to #2 above- focusing on auctions, foreclosures, and deed in lieu of, is not the “whole market” either. To put it another way, the worst news is not the only news. I do realize it is the news that is most likely to sell as Don Henley poetically calls to our attention in Dirty Laundry, “ We got the bubble-headed bleach- blonde that comes on at five, she can tell you bout the plane crash with the gleam in her eye. It’s interesting when people die. Give us dirty laundry.” Focusing on MLS on a monthly basis alongside of these other atypical machinations in the market place is not a distraction, it is a very important contribution of mainstream and ordinary real estate activity. Be careful not to slip into the fallacy land of “either /or” when we should be looking at “both/ and”. Be careful not to believe that looking at the homogenized whole is a totally accurate reflection of any of the comprised parts. Ordinary sales marketed the ordinary way may very well consistently outperform the atypical machinations that you desire to give extraordinary influence.


  6. KRisti,
    Could you share some information on the status of your contract. Did the developer refuse to close, but is trying to retain your earnest money? Thank you.


  7. Scott, what part of my post did you not get. I believe I used the word “all” as in “Only all the available units/houses/property for sale or sold will give good numbers.” Anyone with access to the MLS can come up with those numbers you presented, it takes real work to analyze all the transactions out there and make a reasonable report. It may be a great time to buy real estate. I don’t believe it because there’s more to purchasing than just price or want, the economy and its larger picture impacts it. The value of the dollar, taxes, job doubts, and increasing basic living expenses. The now defunct real estate ATM did away with your ordinary market for a long time. And I haven’t even mentioned the Fed bailout. Sorry, I live in the real world, the one that includes all the above, not just your little real estate cheerleader camp. Biff, Boom, Bah!!


  8. Laketown Wharf should never have been approved for construction to begin with. The traffic bottle-neck it would have caused at that intersection, would have been horrific, including all streets around it. It would have been a detriment to firetrucks, ambulances, police and other city services. The lack of adequate parking for a development that large would have kept Wal-Mart’s lot filled 24/7 (and you think it is busy now)! I can just imagine the exhorbitant maintenance fees it would have required to keep it going. How an owner could afford that, is beyond me.


  9. I would assume (there’s that word) the place isn’t going away and will continue to be a condo, but the few owners certainly don’t have much equity or hope (in the short term) for full enjoyment of their purchases. It will be interesting to see just what plans the new owners come up with-hopefully they’ll do more to protect their investment than most banks do with forclosed property. And the idea of making it a prison (because it looks like one) just won’t fly.


  10. Now that Laketown has gone back to Corus Bank, are we still legally obligated to close? For most of us, the contract was signed nearly 4 years ago! They will not return earnest money……most of us have a letter of credit for the additional 10% still out there. Will Corus Bank be able to collect that letter of credit OR is that now out of play? Does a developer simply have an infinite amount of time to get a project finished???? Seems unfair.


  11. Wow, I’m simply astounded that the contract holders are hearing of this on pcbdaily. This is terrible. For those that cannot get earnest money returned, I would seriously consider contacting an attorney. A developer does not have an infinite amount of time to finish a project, under Florida Statute, they must complete and be ready to close within 24 months of the first contract signed. If this doesn’t happen, the contract usually defines what action the purchaser can take. Again, you need to consult with an Attorney.


  12. Though I sympathize with those desparately trying to untangle the rope before the knot’s been tied, can anyone offer a serious response in answer to the earlier question “Does anyone know what happens to the 65 that closed?”


  13. I would also like to know the answer to the previous question. A friend of mine is actually one of the 65 who DID close……our attorney strongly recommended to us NOT to close—–


  14. I am astonished that this property will sit vacant for any time. The indvidual units should be leased at the fair market rate. The tenant should be agreeable to adjusting the monthly lease every six months as the market either comes back or declines further. Several positive things happen when a property is occupied, including maintenance. The bank will be able to determine the writedown in their investment and the new tenants will have decent housing. The value will be determined based on the rents generated at the end of the agreed upon time of the lease. Come on bankers, you are not in the realestate business but in this case how can you ignore it and your depositors need to see what your management style truly is. Get your head out. Fair market needs to be determined by the market place; call your local realtor and get their opinion of what the market is.



  15. Kristi, the earnest money, according to my attorney, is GONE………I am just trying to find out if my letter of credit can still be called. I keep reading over and over about Florida having a statue stipulating that a developer should be able to close his building in 2 years. Any developer with half brain will change that in the contract…Laketown basically said 30 months….but left this open ended clause….so, I guess we are just screwed.


  16. Your earnest money should still be in escrow less the 10% that is allowed to be used for construction. You can request a statement of your balance from the bank holding your escrow funds. Your LOC should be expired by now if you signed it 4-years ago.
    Although they may have violated several statutes (I believe the 2-yr limit applies only to developments not registered with HUD), it doesn’t really matter what the law says. No one is going to make them return your money. You are going to have to hire an attorney and spend tens of thousands of dollars to have a shot at getting your money back. Unless you are willing to spend 50k, kiss it goodbye.


  17. I KNOW the 10% they already have is GONE>….I am trying to see if they can still get ahold of my line of credit……which was irrevocable, now that Corus has taken over.


  18. I also purchased a furniture package through Resort Interiors. They gave me a store credit less the price of window treatments. I’m not sure where I’ll go from here. I don’t think I need any condo furniture now. Let me know if you have any ideas.



  19. The Developer filed Interstate Land Purchase Agreement which allows for longer than 24 months to close. The LOC is available to Corus if the contract holder does not close. Also will show on your credit score. I would bet Corus will try to re-negotiate with current contract holders and then foreclose them out.


  20. Unless the developer went to the Federal Government and filed with HUD, longer time is granted through this venue. Be careful in only believing that Florida Statutes apply. Suggestion, read your purchase agreement and then consult with an attorney


  21. Who would one contact if they are interested in purchasing one of the units owned by Corus … does anyone know? Are they being handled by a specific agency?? Anyone with any info — I would really appreciate any help that can be offered. Thanks!!!


  22. Did anyone see that Laketown Wharf filed for Chapter 11 on Sept. 29 and that they have their bankruptcy hearing tomorrow in Tallahassee? Read THE DEAL-.COm article…is is true that we are now not legally obligated to close and have zero chance of having our lince of credit called?????


  23. More than likely your contract was assigned to the bank as a condition of the construction loan. So the bank could probably call your letter of credit, and they are now the ‘seller’ in your purchase agreement. Either way you need to hire an attorney. I’ve heard they didn’t have a property report, but you only have a few years after you sign the purchase contract to rescind based on that fact.


  24. Ryan, not that this is correct—but a LOC can only be paid to the party named in the letter, which is NOT COrus bank…..according to an attorney I spoke with.


  25. i have an attorney and have been fighting dowd title, escrow company, laketown wharf and jerry wallace since November of 2006. My contract is not even signed by all the buyers. One name was altered and changed to reflect an LLC after the signatures of the buyers. The condo was suppose to be titled to four individuals. The realtor failed to obtain all buyers signatures and his name was changed to an LLC after he got three out of four of the buyers signatures. It took 18 months to get a copy of the contract. Any suggestions?


  26. If I was one who actually closed on a unit, I would move in, then bust through the walls on both sides and expand the unit. After a few years I would claim squatters rights and be happy. 🙂

    This is a mess. The developer had much courage building such a huge building ACROSS THE STREET from the beach. I guess risk analysis went out the window.

    Great concept, just 15-30 years ahead of its time.


  27. If you have furniture you don’t need, we are in need of a new living room suite for our condo. We need tans, browns, greens or even some shades of blue.

    I am really sorry this happened to LTW owners. This is everybody’s fear come true. I don’t want to make anybody mad, but in one way, you may be better off, especially if you were going to finance the condo. I’m not sure how much money you have lost, but it is probably not as much as some of us that actually closed on our condos and they are now worth about 60%, or less, of what we paid. The overbuilding has also decreased the $$$ amount of rent and the days rented.

    I have rented mine very well this year, but it is still going to cost me $17K out of pocket. That has been the case every year. That does include a mortgage payment. Because of the drop in value, I am stuck trying to rent it with no chance of getting out.

    If I could buy now, I would though. I love that beach. If I could buy one at today’s prices, I would be able to break even.


  28. In our contract with LTW, it states that we can get 5% of the purchase price returned to us if we do not close. I applied for and received my 5% refund and dowd co kept the rest. My whole deposit was cash so I don’t have to worry about the LOC hanging over me. It makes me sick that I lost so much money but at least I did get back the 5% and I must say I did not have any trouble gettint it back. I did however let them know by the deadline of my closing date that I could not close. I know there are many lawsuits awaiting a decision about the return of the deposit money. However, in reading the letters about the bankruptcy, it seemed to me that all present and future lawsuits will be put on hold until the chapter 11 filing has had 13 months to figure out what they are going to do. If I understand this right, it is probably going to cost those that have not asked for their 5% refund on time to lose that. If the place has no money, and Jerry Wallac is in hock for everything he ever had, then I don’t see how there could be any money to refund to anyone.


  29. I think the problem with LTW and so many of the other condos that are in trouble in PC and Destin I think all parties involved in the LTW mess are to blame. So many people who did not qualify for the size of loan that was required to make such a purchase as the LTW condo were able to send a 10% cash deposit and follow up with a 10% loc to lock in their unit. Their thinking was that it was a small amount of money to invest when they could flip the condo at a huge profit and never actually have to face closing or raising the rest of the money. It was a huge mistake on the buyers part. A huge mistake on Jerry Wallace and all parties involved to ever let anyone invest that could not prove financial ability to follow through if flipping did not work out. Also, I know from personal experience in this mess that many promises were make by other people such as Richard Massey and Thomas Blackburn that everything was on scheldue and the prices were rising as promised and they were selling units everyday. That was all untrue but it helped suck in a lot of hopeful buyers that were only tryig to make money with the investment. Instead many thousands of dollars were lost that cost people their savings, and left them in debt for LOC that will have to be paid back. It is a devestating situation for hundreds of hopeful investors. I lost money also but did ask for and receive my promised 5% refund. That was small comfort because I lost money I could not afford to lose and it will affect me for the rest of my life. It was my retirement money that I was trying to make grow in order to have a better and easier retirement financially. This is a case of if it looks to good to be true, then it probably is. This was not a game for the guy who could not afford to lose money. It seems to me that there are no winners as of yet in this mess. Even the bank has a mess on its hands. Some rich people from other countries will probably come in and buy up all the depressed proberties and make a fortune. Oh, well, that is the way it goes.


  30. I don’t mean to be crass here but dang y’all!

    I first discovered the beautiful PCB area in ’96, if memory serves. At that time the beach was dotted with these quaint little Mom & Pop motels and condos. Nothing fancy, for sure, but definitely affordable for a family vacation.

    The next time I was able to visit, I think 2004-ish, I could not believe what was happening with all the high-rise luxury condos. I thought to myself, who can afford to buy all these high-priced condos, this is going to be a disaster for PCB!

    Y’all ain’t seen nothing yet, in my opinion.

    I am no Einstein, that’s for sure, but even my little pea-brain could see what was coming down the pike.

    Hopefully it’s not going to be all foreign investors that will buy up the bargains that will be available in the coming years. I hope to buy one too.

    You have a beautiful area but y’all let yourselves get suckered by unscrupulous government officials and carpet-bagging developers.

    Please, can we STOP all this nonsense and get back to some sense of economic reality in this wonderful country we have (had).

    I am sorry that some folks got taken and lost money that they couldn’t afford to lose but dang, is there no common sense left?

    I’m not trying to add insult to injury here but sometimes ya just have to speak your mind.

    I wish PCB the best of luck.


  31. Real Estate Investing should be started slowly and on a small scale. As you build up your assets you can do bigger and bigger deals. Sometimes Risk equals reward and sometimes Risk is just that and it bites. I have both made and lost money in Real estate, But its still a way better investment that the Stock market.

    2 things you should remember:

    Buy Smart
    Be able to afford the worse case.

    You never make anything if the bank takes it back.


  32. As far as I know, the 65 units that were able to be closed are being furnished and rented out or either lived in by their owners. A big problem with closing is that so many of the original terms that were in the contract were changed and none of the changes were to the advantage of the condo owners. All fees went up, fees were added and other things that were decided by Jerry Wallace without as much as a vote by the condo owners. Take it with a smile I suppose. As far as hiring a lawyer to get your deposit back. Good luck with that!! There are several lawsuits, leins, and now a foreclosure on the property which has gone back to Corrus Bank. The deposits are supposed to be held by Dowd Co. but Corus Bank may have them also. You would think that if a property is in foreclosure or Chapter 11 that it could keep any earnest money because nothing can be purchased. LTW did offer a reduction in the purchase price that would make the price much more attractive, but still did not reduce the price enough according to the current market. If the prospective owner could not buy at the reduced price, he did have the option to take his 5% refund [of the purchase price—not 5% of the deposit] and it was easy to apply for and get that. Now, as far as the LOC, you would think those would be cancelled or put on hold until something is decided but I don’t see how those could be called when there is nothing to buy. I took the 5% and ran. I lost more than I could afford to lose, but I learned a very expensive lesson. I listened to a big sales pitch and promise of an easy profit from flipping the property. Those promises fell flat with me and hundreds of other hopefuls. I was leary of it from the start and took the chance anyway and got burned in the process. But when you think about it, everyone involved with LTW has gotten burned. I’m sure some of the people at the top of the list lost everything and may never be able to recover. I cannot imagine why anyone would be able to make an obligation to buy something as expensive as the condos without having to prove they could afford the payments if for some reason they could not flip. I was even told that didn’t matter because there was such a demand for the condos that they would easily sell as soon as they were on the market. Well, that certainly didn’t happen. Four years in the making of this disaster and I think all involved are coming out on the losing end. I know it doesn’t help, but just remember, you are not alone in your situation. I will be financially hurt for the rest of my life because of this adventure, but at least I did get my 5% back. A small amount, but at least it is something. Don’t waste your money on a lawyer. I know people that have lawyers and are not having any luck whatsoever. Just empty promises and no results. The bankruptcy will put everything on hold and if they are truly bankrupt, then there is no money left to refund.


  33. I think the LTW situation is sad for all involved. There are no real winners here except people that may be able to buy at fire sale prices. Perhaps Corus bank will be willing to sell at rock bottom prices and get the place going again. It would be a shame to let that huge buiding go to waste and ruin. LTW is not alone in its desperate situation. There is a huge condo across from LTW on Thomas Drive that is also in foreclosure and all up and down front beach road, high rise buildings full of unsold condos are in trouble. If left too long without occupancy, these condos will deteoriate and be in ruins. I know the residents of PC didn’t want the condos to come in because it would change the whole atmosphere of PC. But after seeing some of the new buildings and going through Pier Park, I am very empressed and if ever completed as planned, I think it will be beautiful. I myself got burned pretty bad in all of this but would still love to see the place finished and flourishing.


  34. I think if you did not close by your deadline, that you will be considered in default. That will probably put a big negative on your credit report. I think you should call someone at LTW and ask if it is too late to ask for the 5% refund of the purchase price that is allowed in the original contract. You may have forfeited that by not getting it by your stated closing date. It’s worth a a try. You sure don’t have anything to lose by asking. It’s for sure they aren’t going to give you anymore than that without a fight and I think that would probably be a losing fight for you. You know that bank has a lot of lawyers they can use to fight this to the end.


  35. Nelson, Boy are you right on the money. Exactly how I feel about the overbuilding. Now the same morans who let this happen want to increase the bed tax 2%. I have no confidence in their decisions or with handling money. I’d like to know what they do with the 3% tax money they get now.

    Back to the subject. If over-building had not been allowed, the condos and mom and pop motels would still be demanding the highest rates and we’d have still have a fun place for tourists and residents to live. Now, it’s turning into places too much like other destinations. Wish we had the family-owned businesses back whose purpose in life was not to see how much money they could make by hook or by crook. PCB has survived hurricanes for millions of years, but the hand of man has destroyed it. God bless America!


  36. Well, I suppose it sounds like I am a big ole whiny baby complaining about my disasterous adventure with LTW. I went against my better judgement and little voice that told me I had no business getting in something like that. But I also was impressed with family members, friends and others that I knew personally who were making a lot of money buying and flipping condos and who assured me that there was nothing to worry about if I got in then. Obviously I just got in too late and paid dearly for the lesson. I also know that some of the people I mentioned who were doing good are also in trouble now with their invetments in PC, Destin and other places. At least I can take some small comfort in knowing I wasn’t the only foolish person involved. The next time my little voice talks to me, I will listen to it rather than people that don’t really have my best interest at heart. The danger signs were all around that there was going to be over building and a glut of condos if it went on too long. I thought I was getting in in time to buy and flip before that happened. so ignored all that and listened to the wrong people. Nobody to blame but myself.


  37. Susan ~ You are an excellent communicator and have a deep understanding of your experience. In addition, you also have an objective eye with respect to what really happened to you and what factors were involved in your decisions. I would suggest that you document your experience on a blog or website. Expand a negative into a positive that will educate others and potentially launch a new source of income for you.

    The economic trends that created Laketown Wharf:

    There were other factors (psychological, economic and demographic) that created the environment that these decisions were made in. For example:

    The real estate craze from 2003 to 2007 was born out of 9/11 and the resulting 2001-2003 stock market decline. Of course that was preceded by a speculative boom in technology and internet stocks. Some of these buyers were boomers approaching retirement that were looking for that vacation/2nd home. Too many wanted to flip.

    These factors combined to create a redirection of speculation to an an asset class that people considered a safe ~ real estate. Real estate is not any different that any other investment. Buy when there is fear of the future and sell when there is no fear.

    We have now witnessed the “mother of all speculative real estate bubbles” pop. (note ~ the specualtion moved to oil and commodities over 2005-2008 which further excacerbated the destruction to the consumer) Unfortunately, Wall Street inadvertently tied the real estate market to all of us through the developement and sale of various mortgage backed securities, credit default swaps and hedge funds that speculated with extraodinary leverage in this space. This created the damage and fear to spread from Bejing to Northern Norway. And very few people in between walked away undamaged. It affects everything from the value of the dollar to the very survival of the American auto industry.

    Moving forward, PCB and other cities have a high inventory of condos and single family residences that need to be absorbed. The good news is that true investors are re-entering the markets. They have cash to put to work and if the economics work they will act. The bad news is the typical American consumer (the prudent ones) that could readily afford to buy a condo with cash or with up to 80% on mortgage is just plain scared to act. It will take time to heal and get these buyers back into the market. As mortgage rates fall, we will see that accelerate.

    Corus has two choices and a worst case scenario:

    A. Keep the property and manage it for rentals as units are sold off. That’s probably a 3-4 year process based on economic forecasts for 2009. This is completely dependent on Corus’ success as a bank and their application for TARP funds. In this scenario, you can be guaranteed that Corus will maintain the property at a high standard to ensure it’s future value. Note ~ Corus has stated they will invest $10 million to compele the project (unknown workscope) and $5 million to furnish 50% of the units. A bank on the edge does not do this so Corus’ plan is for success.

    B. The economic environment and banking environment cause Corus to sell all or part to a real estate investment trust, hedge fund or hotel operator (many of which are real estate investment firms) in the next year to strengthen their balance sheet for survival. Corus will not hold a position if the operator’s track record is suspect.

    Worst Case Scenario: Corus is taken by the FDIC and the Government makes no investments and completely screws up the sale of the property at auction.

    Right now, option A. above in in process. B. will be used within a year if Corus has trouble. Chances of the worst case scenario right now are dropping and stand at less than 30%, in my opinion.

    I am waiting to here what company Corus hires to manage the property, or if they intend to do this with in house employees. Jason has indicated that the current manager has been released this month or next.

    Good luck to all and my sympathy to those who have been hurt that could not afford the risk that they took.


  38. As one of the attorneys representing a number of buyers in Laketown Wharf, I urge all affected buyers to contact their attorney NOW. The bankruptcy court has set a deadline of early January to file any claims or actions for recovery of your earnest money deposits. Corus has already filed a motion to have the escrowed funds paid over to them. There are some good arguments that the buyers are entitled to a return of all of their deposits. However, if you fail to act to protect your interests, the bank will win by default and you will have lost all of your deposit.


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