‘Atlanta Beach' owners foiled by oil

Atlanta architect Bonnie Henry and her family bought a two-bedroom, three-bathroom waterfront townhouse in Seagrove Beach on the Florida panhandle eight years ago as an investment and second home.

Since then, the only time they’d ever had trouble renting it during the peak summer season was after Hurricane Dennis in July 2005.

Then came the BP oil well blowout. This summer, Henry has doled out thousands of dollars in refunds to guests who canceled and is offering steep discounts to try to fill the house and two other rental properties they own nearby.

Still, empty days pile up on her rental calendar. She pegs her lost rent for June at $6,000, when 21 days of reservations were canceled. She projects the July loss at $11,000, with 42 canceled days. The August calendar for the three properties shows 35 canceled days, 43 days booked and 50 vacant.

“People are scared,” she said. “They don’t want to take a chance going down there. There’s hesitance about spending money to go down there and finding oil and tar balls.”

The fallout of the BP disaster on Gulf locals and vacationers is well chronicled, but Henry and her husband, Len Schneider, are part of a separate set of victims: Second-home or condo owners who’ve watched with horror as the oil spread and renters bailed. Many owners in Walton and Okaloosa counties are from metro Atlanta -- so many that some call the area ‘Atlanta Beach.’

“There’s a real connection between us and Atlanta,” said Barry Stafford, CEO of Florida’s Emerald Coast Association of Realtors. “We see a lot of Georgia license plates.”

“Atlanta owns half of 30A,” observed Henry, referring to the road that links a string of communities including Seagrove, Grayton Beach and Seaside. “We joke that they should build a freeway from Atlanta to Walton County.”

No one has a precise fix on how many metro Atlantans who own property in the area have been affected financially, but Atlanta attorney Foy Devine hopes to gather such information for a lawsuit his firm, Taylor English Duma, has filed against BP. He hopes to gain class action status on behalf of Georgians who own property in Florida.

Even with the recent progress in capping the well, which is about 200 miles southwest of the Walton-Okaloosa beaches, property owners continue to take a hit. Compounding the problem of lost rents is the steep decline in land values across Florida. That makes selling a spill-affected parcel a losing proposition.

The condo Henry bought for $340,000 in 2002 could have sold for $800,000 around 2005, she said. Now? Her original purchase price, if that.

“Luckily,” she said, referring to her three rental properties, “we can hold on to them.” The other two, she said, would now sell for far less than what she paid for them.

Not everyone is as fortunate.

Mike Head, who owns a Forsyth County home improvement company, said he might sell his one-bedroom, one-bathroom condo in Destin, which he bought in 2007 for $197,000. An agent suggested pricing it at $169,000.

Head’s business is being buffeted by the economic downturn, and now the spill has sliced his cash-flow from the condo.

“This summer it was booked solid, then the spill happened,” he said. “Immediately I started getting calls for refunds.”

He said potential renters still call about his place, which normally goes for $1,150 a week plus taxes and a cleaning charge. But they want steep discounts, not “reasonable” ones, he said.

“I’m getting offers for $550 (a week),” he said. “I don’t take those.”

One reason such offers gall him, Head said, is that little if any oil is washing up in his area.

“All the renters say there’s no oil there, and the fishing’s still open,” said Head.

Head is shortening the rental term from a week to four days.

“I’ve got to keep trying to rent it,” he said. “I need the cash flow.”

Property owners say summer is when they have to make their financial nut. The cost to own and maintain a little piece of coastal paradise is substantial. Besides the mortgage, there are taxes, insurance and significant maintenance costs.

Until the oil leak, the vacation rental business had been relatively strong this year, owners and tourism industry observers said, despite the weak economy.

“Florida was at the brink of emerging from a long and deep recession, one that’s hit the real estate sector particularly hard,” said Sean Snaith, an economist at the University of Central Florida. “For the Panhandle this is their high season. Having oil wash up on the beaches is devastating.”

Snaith said the economic damage can’t be quantified because no hard data is yet available.

Property owners, though, need only check their bank accounts.

“This has been a heart break. The timing was horrendous,” said Vicki McCormick of Alpharetta. She and her husband, Mike, own a ranch house they rent in Destin and also manage two other rental properties.

“We’ve had to allow shorter stays and reduce our rates to get people to go,” she said. Bottom-feeders trolling for cut-rate deals abound.

There is, she observed, “blood in the water.”

McCormick said two of her properties are virtually unbooked for August, and the ranch has filled its dates only because it was offered at half-price with no refunds. Fall and winter are wide open.

McCormick said she “will be able to ride this out,” but notes that “This would be a terrible time to sell.”

One rental property owner not bemoaning his situation is former Atlanta credit union executive Rick Scali. He and his wife, Debbie, own four properties and manage a dozen more for other people, all in the Crystal Beach/Destin area.

“We’re about 80 percent of where we should be,” said Scali. “I’m thrilled.”

He had 17 cancellations at one point recently, but generally found replacements.

“We lost some, we got some new ones,” he said.

Scali said he’s weathering the situation because his firm, Easy Street Vacation Rentals, is especially pet-friendly, making for a lot of repeat customers.

He’s also been helped by the BP claims process. He said he’s already received $26,000. Henry, too, expects to recoup some of her lost revenue through the process.

“I’m very, very pleased with my experience with BP,” Scali said, adding, “I know that’s not popular.”

Scali said he is issuing refunds to renters who cancel because of the potential to recover cancellation-caused losses from BP, and because it earns the favor of clients.

“It makes good business sense,” he said. “I have no reason to coerce you to come down.”

Scali hopes the spill damage will pass more quickly than many predict.