Driving east on Central Avenue into downtown St. Petersburg, it’s hard to ignore the signs of growth. Cranes, scaffoldings and fenced off lots boasting “coming soon” signs seem to line every block.
Fred Hemmer, 69, can remember a time when this sort of activity would have been unthinkable. The banker turned real estate investor turned developer grew up in the city and is now making his mark on downtown with Reflection, a mid-rise luxury condo overlooking Mirror Lake.
In just the past five years, the city of St. Petersburg has approved at least 32 major multi-family projects like this one, building permit records show. But as the economy slows, could this construction boom come to a screeching halt?
In this interview, Hemmer discusses the evolution of St. Petersburg’s urban core and the challenges that lie ahead for developers.
Instead of specializing in one type of development, you’re working on a wide variety of projects. Can you talk about that?
We have Reflection which is our most well known project in downtown St. Petersburg. It’s a condo we’re building with 18 stories and 88 units.
We’re also in the affordable housing side of the business too. We’re getting ready to break ground on a 264 unit project on 34th St and Fairfield Avenue South in St. Petersburg. Actual construction should start there in the next several months.
We also do lot development work, primarily for DR Horton. They’re the nation’s largest homebuilder and we have five projects underway in the Tampa Bay area where we’re developing lots for single family homes.
What are the challenges that come with each of those different sides of development: luxury, affordable and single family?
Probably the hardest part of developing luxury is selling. You have to go out and find the buyers for luxury units.
For the affordable units, selling or renting is not a problem. They fill up quickly. There the challenge is the cost. Our construction costs are so high. Without grants from the city or the county, it would be impossible to make those deals work.
For single family, in Pinellas County pretty much any single family lot you can develop, you can sell. The challenge is finding the single family lots. We’re the densest county in the state. And when I look around, I think about our projects, they’re just unusual pieces of land that we’ve been able to put together here and there. The days of going out to the farmer and buying 40 acres of clear land and putting in 200 lots, that’s not happening in Pinellas County anymore.
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The other big area of concern in all areas is insurance. On Reflection, in the last two months before we closed on the project and started it, our insurance cost tripled from what the budget was. In Tallahassee, there’s going to be a lot of attention to this situation in the next session.
We’ve seen a ton of projects spring up in St. Petersburg in the past five years. Do you expect that trend to continue?
When you look around at the skyline and you see the cranes, all those projects started probably four or five years ago. It takes that long to bring something to actual construction.
Things have changed since then. It’s more difficult to get the financing. You’ve seen the cancellation of some projects because of that. At that same time, there’s rising construction costs. So how are people going to make those numbers work?
Something has to change, in my opinion, before we see another round of projects like we’ve seen in the past three, four years. It’s just not sustainable with the costs right now.
On the other hand, we have people moving into this state and creating demand for housing and different things. But I don’t know if that can bring the selling prices or rental prices up enough to support the current costs that developers are facing.
As it becomes more challenging to build in the city, what kinds of deals will continue to be successful?
When you look at [Tropicana Field] and the commitment there for long term development, that might be a situation where it’s less risky because of the $6.5 billion investment that’s planned there over the next ten years. So maybe we’ll see more things popping up around there though I’m speculating.
For us, we’re moving more toward the development of single family lots for builders and affordable housing.
With affordable, there will continue to be funds available through public grant programs. These agencies like the Pinellas Housing Authority are sitting on this money and they need to deploy it into good projects.
Some people might be happy to hear you say that you expect some of that growth downtown to slow. What would you say to those people who have concerns about the rapid rate of development?
I’ve lived in St. Petersburg my whole life so I’ve seen the change. I personally like the changes but I can understand why some people don’t like it because the city isn’t the same as it was back then.
People need to understand that as new people move into the city, they need places to live. Whether that’s luxury or middle level or affordable. We have to accommodate that.
I think it’s important that people understand that we’re trying to do development responsibly. I think the city of St. Petersburg is doing a very good job with that as far as their planning goes.
Not everybody’s going to be happy with the change but it’s happening.
Things may be slowing down in the short term, but where do you think the city is headed in the long term? What will St. Petersburg look like 10 years from now?
I think St. Petersburg is a world-class city.
Not many cities have the waterfront like we do. The founders protected that green space along the water. You don’t usually see that, especially so close to downtown.
To me, it’s just too nice of a place to have growth be stagnant for long. It may not be as fast of a pace as we’ve seen in the last five years but I’m confident it will continue to grow.