Condo Boom on Texas Coast Defies National Downturn

Luxury towers adding new dimension to coastal skylines

Sunday, March 02, 2008

Condominium developers along the Texas Gulf Coast are doing something strange these days: They're continuing to build.

As a housing slump grips much of the nation, beachfront development in long-hot locales such as Florida and California has ground nearly to a halt. But the real estate market on the Texas coast — and specifically, the condo market — has managed to stay strong.

Jim Gaines, a research economist at the Real Estate Center at Texas A&M University, says that while the national credit crunch has had an impact on the Texas Gulf Coast condo market, most developers "still feel things are pretty good."

"I think for the future (of the condo market), the coast still gets an excellent grade," Gaines says. "The development potential is still very, very high."

Despite national housing concerns, "I feel highly confident in the Texas market, and the Galveston market, for high-rise condos," says Richard G. Anderson, vice president of development for the Falcon Group of Houston, which is developing the $170 million Palisade Palms condo project in Galveston. "Texas, by and large, wasn't able to take advantage of the go-go days of 2004 and 2005, but at the same time, the oversupply didn't hit us like it did in Las Vegas, Florida and San Diego. Texas is fortunate enough that right now we seem to be insulated from a lot of that."

Here is a look at some of the condo developments that are either in the planning stages or are recent additions to the Texas Gulf Coast.

Palisade Palms

At the north end of the Texas coast, a giant condo project has sprung up to dominate the beach-front skyline.

With its twin 27-floor towers, the luxurious Palisade Palms development casts a long shadow over Galveston Beach. The project, developed by the Falcon Group of Houston, began construction in late 2005, and the first residents are scheduled to begin moving in this spring.

Together, the two towers have 288 suites, and about 250 of those have already been sold, says Anderson. The residences will have the amenities of a resort — multiple pools and spa areas, on-site cafes and restaurants and balconies in each unit.

Anderson says the initial two-tower project is just the first step in what could be a four-phase development. "We have enough land to build $750 million worth of project," says Anderson, who has taken the unusual step of being both developer and customer. He has purchased two of the Palisade Palms units himself.

Anderson said the story of a California buyer illustrates what's attractive about the Texas Gulf Coast market for condos. "She lived in San Diego and told us she was planning to make this unit her permanent home. I was wondering, why would you move, as a primary home, from San Diego to go to Galveston?" Anderson said. "So we asked, and she said ... she could sell her house in San Diego and she could buy in Galveston and still have $1 million in her checking account."

Maravilla del Mar

Construction hasn't even started, but the Maravilla del Mar condo project on Mustang Island near Port Aransas is already one of the most talked-about developments along the Texas coast these days, simply because of its size.

The plans call for a huge, 500-unit complex of luxury condominiums in three towers, with the tallest tower about 35 stories, says project engineer David Underbrink, who is president of Naismith Engineering Inc. The Maravilla del Mar, planned to occupy 23 acres near Mustang Island State Park, is being developed by Mustang Island Investment LLC, a group of Wisconsin investors.

"There's nothing as big as this project in this area of the world. You have to go to San Antonio or Houston to find another one like it," says Underbrink, who estimated the project at $325 million. He said the project is about a year from construction.

The Maravilla del Mar plans call for a light, airy beach-town look with the amenities of a five-star resort. Underbrink says he's not sure the Corpus Christi-Port Aransas area will ever see another development of its magnitude.

"I'm not sure that there would be another of this scale allowed in this area, with the regulations that are in place," Underbrink says. "It might be a one-time-only project. There could be others something like it, but not nearly as tall."

The Sapphire

At the south end of the Texas coast, on South Padre Island, yet another high-rise project is drawing attention. The Sapphire South Padre, a 31-story, twin-tower project with about 220 luxury units, is due to complete construction this summer. Dubbed "The Crown Jewel of South Padre" by its developers, Randall Davis Co. of Houston, the project will be the tallest structure on South Padre. The development's two towers are connected for the first 19 floors, then divide into separate spires.

The Sapphire's focus will be on high-end, resort-style living with concierge service, pools and a private, on-site movie theater. The development is expected to be ready no later than December.

The Sapphire is designed by Ziegler Cooper Architects of Houston, which designed the Austonian condo tower currently under construction in downtown Austin. R. Scott Ziegler, one of the founding principals of the architectural firm, says the narrow nature of the island presented an opportunity to build with an unusual feature — waterfront views from both sides. "You get fantastic east views of the Gulf, and the west views are of the back bay," Ziegler says.

Ziegler said that the Sapphire is built to take advantage of the setting on Texas' southern Gulf Coast. "South Padre Island is a lot more precious part of our coast than other areas, such as Galveston might be, as far as raw natural beauty," he said.