What's Next for Newtown?

By Hannah Wallace February 28, 2007

The winds of change are blowing through Newtown, and the breeze smells a lot like money.

During the just-ended real estate boom cycle, property values here appreciated considerably, and buying and selling of property picked up. That's a first in the 80-year history of Newtown, a name that to most Sarasotans is code for "black," "segregation" and "poor."

In Amaryllis Park, Newtown's central neighborhood, bounded to the south by Martin Luther King Jr. Way and to the north by Myrtle Street, 50 homes and empty lots have changed hands since 2000, at prices ranging from a rock-bottom $40,000 to a modest $216,000 for a new home built in 2005, according to the Sarasota Property Appraiser's database.

If this triggers yawns, consider that there were only nine sales in the same neighborhood during all of the 1990s, and seven during the 1980s. Some properties have doubled in value; a historical home on 36th Street actually quadrupled its sales price over just three years.

The recent price spurt coincides with positive demographic trends and the realization of three or four major projects in and around Newtown, both public and private, which had been pending for years.

"The community has made a tremendous turnaround," says Newtown native Jetson Grimes, co-founder of the 10-year-old Newtown Redevelopment Corporation and owner of a hair salon just off Martin Luther King Jr. Way, the area's Main Street. "Now we can bring in the bricks and mortar."

Maybe Grimes is a booster. But outside investors are beginning to respond, overcoming what he diplomatically calls "perceptions."

Banking on long-term appreciation and a pickup in activity, investors continue to snatch up empty lots throughout an area considered off-limits since segregationists forced Sarasota's black residents north from the central Rosemary District in the 1920s and '30s.

It's not just speculators. Several investors and groups have been assembling land, with single-family construction in mind. Already, some bricks-and-mortar projects-most small, in low-profile areas-have begun to change the demographics.

"I believe there's more renovation and construction activity than at any time before," says Newtown Economic Development Coordinator Dru Jones, who started her job in 2002.

According to Jones, Enterprise Zone funding applications by builders for sales tax refund and impact fee waivers doubled in 2005-06 to $475,000 on 75 construction projects, from $187,000 for 49 properties in the previous year. (The state established the Enterprise Zone program 16 years ago with the intent of triggering economic development in areas that rank below the federal poverty level. Under the program, the city of Sarasota provides impact fee waivers and sales tax refunds to businesses and homeowners in four census tracts, all located in the Newtown area.)

"Affordable housing" is the key phrase, and the time for investing is right now, if you believe local real estate players.

"I'm quoting my mom: 'Progress follows the path of least resistance'," says Terry Fine, owner of 41 West Realty Group. "In Newtown, they don't resist development, and developers won't have to fight with City Hall. This is the last community in Sarasota where you can buy for less than $200,000."

Adds Kerry Kleppinger, whose Kleppinger Homes LLC is building dozens of affordable homes for under $150,000, mostly in the Newtown area: "Because of market conditions, [construction] prices are at a standstill. Two years from now, it could be right back to increasing prices. Now is an excellent time."

The rise in real estate activity comes as Newtown is witnessing positive long-term trends. Although Newtown crime statistics still are among the worst in the county, "Crime rates have declined over the past 10 years," says Lt. Steve Breakstone, a veteran Newtown officer. "All major crime is down, especially violent crime. Ten to 12 years ago, you could hardly drive a police car through [the] Janie Poe [public housing complex]; now it's much more quiet. We've made more drug arrests in the last few years, but I attribute that to us doing a better job rather than an increasing drug trade."

What's more, Newtown's rock-solid core of hard-working residents and retirees has apparently seen a slight improvement in household incomes. Amaryllis Park recently lost its Enterprise Zone designation, because the 2005 Census showed that average household incomes had risen above the poverty threshold set by the state.

That apparent rise in incomes may have been behind the accelerated buying, building and renovating by the people who already live in the neighborhood.

National real estate tracking company Trulia rates Amaryllis Park as "warm" (as opposed to "cold or "hot") with "moderate activity and consumer interest compared to other Sarasota neighborhoods." As of late December, five properties were for sale, ranging from $99,000 to $239,000.

To be sure, Newtown is far from the flipper paradise that was most of whiter Sarasota in the recent boom years. In fact, outside homebuyers have been burned (see "A Change of Plans," below). That's good, say some, because it helps prices stay affordable, and it leaves the social fabric intact.

Although Newtown on average ranks low on homestead exemptions, which are often seen as an indicator of social stability, with more than half of properties owned by people who don't live there, some core areas look solid. Using one random example in Amaryllis Park, on the stretch of Palmadelia Avenue that's north of MLK, 24 out of 30 single-family homes are owned by residents.

Affordable housing makes for intense talk throughout Sarasota County, but much of the action will be concentrated in Newtown. (For a rundown of proposed public and private affordable housing projects in the region, see "Making It Affordable," in this issue.)

The largest project involves the Sarasota Housing Authority's four long-neglected housing projects in Newtown. In 2006, the agency, under fire for mismanagement and bungling grant applications, ended up in receivership and under the direction of a turnaround expert sent by the Department of Housing and Urban Development. Michael's Development Co. of New Jersey signed a $143 million contract with the Authority in December to tear down the agency's projects on 52 acres in Newtown, and build 873 new units, more than doubling the number of residents.

Michael's, which has a three-decade track record of similar projects involving federal grants, including one in Tampa, takes a mixed-income approach. The blighted Courts, Orange Avenue, Janie Poe and Bertha Mitchell projects will get a mix of rental flats and townhouses and owner-occupied condos. Rentals will start at $329 a month for a one-bedroom apartment, and top out at $1,100 for a townhouse. Condo prices could start at about $250,000. (The home-ownership portion of the project will be handled by Habitat for Humanity Sarasota.)

Once Michael's has obtained financing and rezoning, and finalized a site plan and design, the project will begin with the relocation of all 388 tenants, who will receive Section 8 vouchers to move elsewhere during construction.

If the track record of similar projects is an indication, only one-quarter will come back. The national average for Hope Six redevelopments is 20 percent to 25 percent of the original residents returning to the new quarters.

Newtown boosters aren't concerned. "That's primarily because they don't want to come back," says John Hawthorne, city redevelopment specialist for the Newtown area. "They usually end up in a very nice area. There's this misconception on the part of the general public that you are depriving folks of the place where they live, when in reality they don't want to live in public housing.

"If you have all low-income people clustered in one area, it becomes very difficult for a community to improve," Hawthorne says. "Taking these 52 acres and making them more diverse is critical to development of Newtown. For Sarasota, this is the single greatest opportunity for affordable housing. It's an opportunity for teachers, firefighters and all the other working people who can't afford to buy a home elsewhere in Sarasota."

Some doubt whether the new homes can actually sell.

"I don't think that a $500,000 unit owner will want to live next to a $100,000 unit," says real estate investor Harvey Vengroff, adding that he doubts the builder can maintain prices. "Every affordable housing program has started low, as something wonderful for workers. But ultimately, when it gets built, prices get up."

But no matter whether a smash hit, modest success or failure, the big public housing plan has already made one difference: Private real estate investors are already buying up lots around the projects.

Harvey Vengroff, the blunt-talking founder of Vengroff Williams & Associates, the nation's second-largest debt collection agency with 1,000-plus employees, is proposing to build 31 affordable single-family homes on lots he has assembled in Bayou Oaks, just outside of Newtown. He ran into a roadblock when neighborhood association members and the city of Sarasota decided they'd rather see his Old Bradenton Road lots converted into a park access.

Vengroff is the 500-pound gorilla among a growing band of developers looking at affordable-home construction in and near Newtown. Partially subsidized with sales tax and impact fee breaks, over the past three years small local developers such as Kleppinger and Joan Engelbach's H&M Homes have cranked out more than 100 homes within the Newtown Redevelopment District (see "Cluster Builders," below).

Another market driver is the nonprofit Habitat for Humanity, which is assembling land for cluster construction on Central Avenue around 20th Street, on Lemon and MLK, and towards the eastern end of MLK, as well as for a larger project of 250-plus units south of DeSoto Road next to the greyhound track.

One developer is trying to take the small-cluster approach to the next level. Instead of hiding his development on Newtown's back streets, Bill Hill's Greater Sarasota Dreambuilders LLC is building seven posh but affordable townhome condos, with two-car garages and a community pool, smack in the middle of Newtown, on in-your-face lots along Martin Luther King Jr. Way.

Hill's "Newtown is beautiful" message seems to be too strong for some Sarasota real estate brokers. A Michael Saunders & Company ad, for instance, describes his Asante Town Villas as "upscale homes close to downtown & Ringling Art School," avoiding any hint they are located in the heart of Newtown.

For a while, Dreambuilders skeptics seemed to be right. In fall 2005, the Washington D.C. native and retired corporate executive ran into trouble with one of his main lenders, BB&T Bank. Hill's contractor pulled out, and construction stopped for 15 months. Most of those driving by the overgrown construction skeleton on MLK concluded that Hill had been too far "ahead of his time," as one fellow developer put it.

But the skeptics underestimated the businessman's perseverance and resources. Late in 2006, Hill's daughter, Traci Hill-Femister, joined Dreambuilders full-time to speed up the process. Hill had sold all seven townhomes of the first Asante phase (including one that will be his own home), and none of the buyers jumped ship during the 15-month delay. The Asante Phase One townhomes sold in the $150,000s to $160,000s.

As of late December 2006, the contractor was back, putting up kitchen cabinets, drywalls and tiles. The first Asante Phase One home should be ready by March, Hill says.

Whether Hill is making any money on Asante is a different question. As every real estate beginner is taught, you don't want to own the most expensive house on the block. He says he absorbed all construction cost increases and didn't pass on anything to his clients.

"The [first] objective was to bring a demographic back to the community that has disposable income," he says. "Secondly, when you've got people with discretionary income, it will encourage others to come. Third, it means for other homeowners that their property values will appreciate."

Hill is proceeding to build another 40 or 50 upscale-yet-affordable homes in Newtown. He says he has sold a planned duplex one block east of Asante, and five of six planned homes of Asante Phase Two across the street on MLK, as well as seven homes on Royal Palm Avenue, on the western edge of the Newtown Redevelopment District. Construction there is slated to begin in the first quarter, with prices ranging from $300,000 to $350,000.

Next is a two-acre property at the corner of MLK and Lemon Avenue for 34 detached homes on larger, 7,000-square-foot lots. Hill says this project will be announced in the first quarter.

Says realtor Terry Fine, who has long worked with tough properties in Atlanta: "They did it in Atlanta 35 years ago. Once development starts, it spreads like wildfire."

The New Landlords

Newtown has seen an unusually high number of multi-unit sales over the past two years.

In 2004, Longboat Key resident Harvey Vengroff bought more than 700 units in various multifamily complexes along Old Bradenton Road on the northwestern edge of Newtown. In February 2006, Reynold Glanz, a California developer and race horse owner, paid $3.9 million for the 66-unit Baltic on Martin Luther King Way, a top target of the city's Nuisance Abatement Board. In October, another California investor, Tyrone Hill, bought the 14-unit The Elms Apartments on MLK for $1.25 million.

Evicting hundreds of tenants they deem undesirable, the new investors have brought an unusual quiet to some sections of Newtown.

"Other owners have had the intention to do exactly what [Glanz] is doing, but if you've got 50 percent of your units vacant, you start relaxing your standards," says Hawthorne. "It appears this guy has the deep pockets it takes to hold out for good-quality tenants."

Vengroff, who likes telling stories of patrolling rental properties in Long Island and Los Angeles with his two pit bulls, is skeptical about the ability of the new landlords to keep up their standards.

"We used to be full, but now we're not," he says about his own rentals. "To pay taxes, we had to raise rents. A $550 apartment is now $650. Plenty of good tenants couldn't afford the $650 rent or the down payment."

As to ridding an apartment complex of drug dealing, this is an expensive proposition if you only own one property, Vengroff says

"We only take properties that their owners couldn't run," he explains. "There were problems, but we could control that because we bought enough properties in that area to put people on the street and keep them from staying around. In the center of Newtown, we couldn't do that. Property ownership is too fragmented. We've got a liberal society now. Every time you throw someone out, you're told you're bigoted. We don't mind dealing with it face to face, but we don't want to end up in court."

The Enterprising Builders

Kerry Kleppinger and Joan Engelbach probably aren't among Sarasota's "Builder of the Year" candidates. Still, as the most active cluster builders in the Newtown area, they are making a big impact on first-time homebuyers.

At the eastern end of MLK Jr. Way, Kleppinger Homes LLC is completing 16 affordable homes priced from $114,000 to $140,000. All except one are now inhabited by owner-residents-a smashing success in terms of neighborhood development. Because Kleppinger's real estate agent focuses on Spanish-speaking clients, most of the owners are Hispanic.

Before this project, he built four new homes at Chester Avenue and 26th Street for the Greater Newtown Redevelopment Corp. And three years ago, he built 12 townhouses at 19th Street and East Avenue.

Does he make money on his affordable-home projects? "It's a little more difficult to be profitable, because of the lower prices," he says. "That's especially the case when you're not within the Enterprise Zone, when you don't get impact fees waived. But I've been fortunate-I was able to complete all my homes in time, and at a reasonable cost."

The price pressure keeps rising because of rising property values. That said, Kleppinger just bought three lots for his next project next to the soon-to-be-reconstructed Janie Poe public housing complex.

Meanwhile, Joan Engelbach's H&M Homes built 17 three-bedroom homes along one block of Central Avenue, south of Myrtle Street. With prices ranging from $120,000 to $150,000, they were quickly snatched up between 2003 and 2005. Today, 16 of the 17 homes are inhabited by owner-residents.

Risky Business

While dozens of speculators have bought vacant lots in Newtown, outsider buying of older homes is less common. Being a single-family landlord in poor neighborhoods such as Newtown is a losing proposition, real estate players say, because rents can't keep up with skyrocketing property taxes and insurance costs.

Builder Joan Engelbach recently finished renovating an older home she bought on 21st Street and Orange. "It was cute as a button, but it was tough to sell," she says. "I ended up doing much more for the buyer than I've ever done before, bringing my price down 10 percent below appraisal. I had a choice of either that or rent."

Jochen Pundt, a hands-on Sarasota investor who doesn't shy away from unclogging sewers, admits it was a mistake to buy six older homes in the area. "Investments in older homes don't pay off," says Pundt, "especially when the tenants don't pay rent."

At the first signs of a real estate bust, he stopped buying $300,000 homes in Sarasota, he says. Instead, he picked up six older homes in Newtown in 2005 and renovated them, thinking that their prices couldn't fall any more.

"I realized I couldn't sell them," Pundt says. "There was nobody to buy them. So I'm forced to rent. Somehow I have to make it through this, but hopefully, with the reconstruction of Newtown, buying will pick up some day."

In line with this optimism, Pundt, 67, actually invested close to an additional $300,000 in Newtown real estate. He and his wife bought options and lots from Greater Sarasota Dreambuilders for two yet-to-be-built homes on Martin Luther King Way and three homes on Royal Palm Avenue, at the western edge of Newtown.

Dumpsite Development

Although their small-business instincts make them uneasy, most Newtown businesspeople support a proposed 206,000-square-foot Wal-Mart super center on the 18.4-acre former dump on the corner of U.S. 301 and Martin Luther King Jr. Way. Wal-Mart would also buy four lots of 5.3 acres fronting 301 and tear down the existing businesses.

Before the city approved a remediation draft agreement for the contaminated lot in February 2006, a local group headed by Rev. Al Davis made a counterproposal to build a retail center on the same site, which could be owned and used by local businesses. But skepticism prevailed.

"The reverend doesn't have the money to do anything," says Hawthorne. "His idea isn't a bad idea, but is he capable of cleaning up the property and building?"

Wal-Mart's winning argument has been jobs, jobs, jobs. The store would create up to 400 of them, half full-time. The company says it would give Newtown residents a first shot at a job fair and would provide in-house training.

What's more controversial is that Wal-Mart could receive up to $8 million in startup subsidies from taxpayers. City of Sarasota officials propose to pay Wal-Mart up to $6.6 million for the clean-up of four feet of solid waste under the site, while only getting $4.9 million for the land. The city also waived $1.9 million in road impact fees, and Wal-Mart is eligible for up to $4 million in brownfield jobs creation bonus, as well as possibly up to $400,000 in state grants for assessing a contaminated site.

Unsurprisingly, the site-plan process is advancing smoothly. City planners are trying to convince Wal-Mart, which proposes 900 parking spaces, to develop a more pedestrian-friendly concept. At a planning board meeting in December with Wal-Mart's local legal team, city requests included "Afrocentric tiles," park-like landscaping and a water fountain at the corner of MLK and 301, and moving the garden department to the back of the store. Wal-Mart told the city it would buy the land within 60 days after the city approves a site plan.

The Wal-Mart project has triggered buying and selling of nearby commercial-zoned properties. Most notably, three Newtown businessmen, Jerome Dupree and Lonnie and Tyshaun Ward, in 2003 bought 32,000 square feet of land along MLK, adjacent to the Wal-Mart site, from the Sarasota African American Chamber of Commerce.

"People are calling us asking whether there are any properties available around Wal-Mart," Hawthorne says. "We're also in the process of gauging the interest of other retailers. That could be a Radio Shack, bank branches, or smaller businesses that feed off the Wal-Mart traffic."

Filed under
Show Comments