Article Courtesy of The Tampa Bay Times

By Susan Taylor Martin

Published September 2, 2015

ST. PETERSBURG -- Holly Hail's first impression of Bay Isle Key was "gorgeous, gorgeous, gorgeous" -- so stunning in fact that she paid $182,900 for a condo there nine years ago.
   
That was the peak of the boom, when Tampa Bay developers were busily converting apartments to condos to take advantage of soaring prices.

But with rents shooting up, condos are again becoming apartments, including the 600 units of Bay Isle Key in north St. Petersburg near the Howard Frankland Bridge. And despite a new state law that better protects owners, thousands are being forced to move out or become renters themselves. "Am I happy about this? No," Hail said Friday, a day after the Chicago investment firm that now owns most of Bay Isle's units won a vote to terminate the condo association and revert them to rentals. Built in 1998, Bay Isle Key is among the hundreds of Florida apartment complexes that were converted to condos during the boom years. But the real estate crash, along with the busy hurricane seasons of 2004 and 2005, left many condo developments in dire shape.

In converting St. Petersburg’s Bay Isle Key to apartments, condo owners are forced to sell.

    
In 2007, state lawmakers amended Florida's condo laws so that the approval of just 80 percent of unit owners — not 100 percent, as before — was needed to make repairs or terminate a condo association. The change had an unintended result: It made it easier for investors who acquired 80 percent of the units in a complex to convert to apartments and force the remaining owners to sell and leave.

"You get a letter saying we're terminating (the association) and now we get to take your property," state Rep. Chris Sprowls, R-Palm Harbor, explained earlier this year. "You're going to get pennies on the dollar."

During the recent legislative session, Sprowls introduced a bill — now law — aimed at better compensating owners who oppose conversion to apartments.

Instead of being paid the assessed value of their unit, as was the case, owners now must be paid 100 percent of the fair market value. Owners who bought from the original condo developer must get what they originally paid even if it is greater than market value.

Additionally, those with homestead exemptions must be paid a relocation fee.

Hail met the criteria for full monetary compensation. Yet she still feels a loss.

"I wanted to purchase a home and live in a condo community, and now I live with renters. This is all very sad for me because it melted down."

At the north end of Dr. Martin Luther King Jr. Street, the lushly landscaped Bay Isle Key is just 20 minutes from downtown St. Petersburg and downtown Tampa. It has been home to employees of Jabil, Raymond James and other companies in nearby office parks.

When the apartments became condos in 2006, buyers like Hail paid top dollar for upgrades including granite countertops and wood flooring. But within a few years, prices plunged and many units went into foreclosure.

In 2009, a Georgia company bought hundreds of units and turned them back into apartments.

"After 2009, things really were very bleak," Hail said. Unsavory tenants moved in, including a drug-dealing prostitute who rented the apartment beneath hers.

In 2011, the bulk of the apartments again changed hands, this time sold to Heitman Capital Management for $51.4 million. Among the few individual owners left is Robert Mackey of suburban Chicago.

In 2010, he and his wife paid $55,000 for a unit to use as a seasonal home. He said he recently got a letter offering him $85,000 and telling him he needs to have his things out by December.

"People might think you're doing great, getting $85,000, but you can find nothing like that for less than $130,000 or $140,000," Mackey said of his condo. "It's a beautiful place, full of furniture. What do I do with all of that?"

Heitman Capital's attorney did not return a call for comment. Hail, who owns a 3-D printing business, said she plans to leave; some of the other owners have decided to stay and rent.

Bay Isle is unlikely to be the last bay area condo complex to go rental again. At Tampa's Grand Oasis at Carrollwood, a Texas investment group now owns more than 75 percent of the 1,000 units.

Says Doreen Rosselli, who could lose the condo she has called home for seven years: "We're just waiting."