Leaning Tower of Padre

One would think that engineers would know better than construct mammoth towers on bed of sand. But one would be wrong. The Island Breeze is reporting on the Halt of Ocean Towers Construction on Padre Island.

The owners of the Ocean Tower condominium building have some serious decisions to make. The 25-story building, still in construction phase, may have structural problems.

Construction has been temporarily halted on the Ocean Towers, north of Andy Bowie Park on South Padre Island, according to Cameron County Building Inspector Noe Benavidez.

“The building has a settling problem. Engineers are trying to figure out what to do about it, how to correct it,” he said.

The building is outside the town’s city limit, and thus does not come under the jurisdiction of South Padre building codes, which conform to the International Code Council’s requirements.

A spokeswoman for Domit Development in McAllen confirmed Thursday that their Ocean Tower building north of the South Padre Island city limit had experienced a “settling” problem, and that construction was temporarily halted.

The building was leaning enough toward the northwest corner to crack the wall of the adjacent garage, which abuts the tower.

Thanks to the Rio Grand Valley Forum for the story.

DeepSouthTexas writes: Maybe it was too much building for our little sand bar. Domit should've read this article by the national park service on the Geology Of Padre Island.

South Padre Island has been in a destructive phase for a long time, probably having retreated landward (along with the lagoon and mainland shoreline). All of Padre Island will probably retreat landward through long-term erosion due to the following causes: (1) interruption and decrease in sediment supply (2) relative sea level rise, and (3) tropical storm activity. Today, hurricane washovers and wind-carried sand deposited in the Laguna Madre build Padre Island’s landward side at the expense of the Laguna Madre.

My friend Scott who lives in Edinburg, Texas sent me this story. Scott had this to say:

That's what happens when you try to construct a highrise on a sand bar where there are no construction codes. The building falls faster than your profits, which at this point are zero. Somebody is going to lose a whole lot of money on this ill-fated project, and it's going to be an eyesore on an otherwise pristine beach for a long, long time.

The Bank Who Financed This Wreck Will Own It

This tower will never be completed, or if it is, it will not be occupied by buyers. Thus, whoever financed this building will end up owning it.

I have no doubt the construction company, and possibly the bank will put tremendous pressure on the engineers to say this is fixable. Regardless of what that engineer's report says, I don't think it is fixable. But let's say I am wrong and it is fixable. Who will believe it? Would you want to buy into this building? Would anyone?

If I had a deposit on this building I would now be asking for it back. Even if I did not get it, I would rather lose my deposit than lose my life. Assuming most others would feel the same, it would be a huge waste of money to finish this tower. It should be demolished.

Who's On The Hook?

Inquiring minds want to know who is on the hook. There is no date on this press release, but this appears to be it.

$75,000,000 Financing for Ocean Front Condominium Tower

South Padre Island will soon have a new skyline view, with the addition of what will be the tallest and most luxurious building on the Island. “Towering” 486 feet in the air, Ocean Tower Condominiums will be the marquis address on South Padre Island, TX.

Metropolitan Capital Advisors, Ltd. has arranged interim construction financing of the 30-Story, 148-Unit ocean front condominium. Ocean Tower Condominiums will have the common amenities of a Five-Star resort, including an outdoor infinity pool, indoor heated pool, fully functioning gym and spa, restaurants, kid’s club, business center and media room.

Interior amenities include Italian marble floors, granite counter tops, stainless steel appliances, custom cabinets, stainless steel fixtures, over-sized Jacuzzi tub and stand-up showers.

MCA arranged a $75,000,000 interim construction loan for Ocean Tower Condominiums on behalf of a Partnership sponsored by Mr. Antun Domit. The financing was a 90% loan to cost.

Hook Harmeling, Senior Director at MCA, was responsible for arranging the 3-year, $75,000,000 interim construction loan with First Bank (First Marshall Bank of Minneapolis, MN).

Metropolitan Capital Advisors specializes in the exclusive representation of investors, developers and property owners in the real estate capital markets. Since 1992, MCA has closed in excess of $3,500,000,000 of debt and equity transactions.

Unless First Marshall offloaded this risk to someone else or has insurance covering this kind of disaster, they will likely end up owning this fine property. I am speculating, but perhaps they will even have to pay to tear it down as a health hazard.

Can First Marshall take a $75,000,000 hit to the bottom line? I don't know but I doubt it. But what did a bank in Minneapolis know about construction in a hurricane zone, on a sand dune, in the gulf, in the first place?

This is a spectacular example of what happens when everyone gets the silly idea that home prices are a one way street. In the grand scheme of things, $75 million is not a lot. But multiply this by every stupid decision made by regional banks across the country and you have a veritable disaster.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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