The Florida Department of Transportation is derailing the development plans and anticipated land sale for nearly 40 acres along Palm Parkway in Orlando's tourism corridor, issuing an eminent domain notice to take the entirety for I-4 Beyond the Ultimate-related expansion.
Colorado-based Excelsior Capital Partners, an investor in distressed debt and real estate, has owned a 38.8-acre strip along Palm Parkway since September 2015, just north of the intersection with Daryl Carter Parkway.
Over the past two years Excelsior has prepared it for infrastructure work that is now underway, and had all of the land under contract to three different developers.
It features 4,000 feet of frontage along I-4, has been cleared in recent months and fully mass graded when Excelsior received FDOT's "Notice to Owner" letter in mid-June that the property would need to be acquired.
The owner had long anticipated an FDOT request to give up roughly 6 acres on the south end, meant to accommodate a new off-ramp for the future Daryl Carter Parkway interchange.
A full taking of the entire property had not been discussed, and preliminary design plans from March 2017 indicated an existing pond to the south would be able to support the drainage needs of this basin.
That changed on June 18, when FDOT informed they want it all for an extensive retention pond system.
"We are still reeling from the news and trying to get our arms around what is next," Nate Cann, principal with Excelsior Capital Partners, told GrowthSpotter on Wednesday.
The Ferber Company has a majority of the site under contract (25 acres), with plans to develop building pads for retail, dining and a hotel, with completed infrastructure delivery targeted for the fourth quarter of 2019.
Ferber wanted to position the project for restaurant owners as "Crossroads 2.0," in reference to the 29-acre Crossroads of Lake Buena Vista shopping center a few miles to the south where tenants are expected to be forced to relocate in the coming year as part of another FDOT land taking for I-4 expansion.
Another 5 acres directly north were under contract to local physician Wade W. Han, and 2.21 acres on the northernmost end were under contract with permit approvals to an affiliate of self-storage investor and developer John McLane III for a three-story, 96,300-square-foot facility.
Next steps for Excelsior and FDOT are independent appraisals of the 38.8 acres. Ideally those two prices would be close, reflect the developed value of the land, and they'll agree to meet in the middle.
If not, once the parcel is appraised the FDOT will make an "Initial Written Offer" to the land owner. If they can't agree on a sale, the FDOT could file a condemnation suit.
What's not clear is if the three buyers under contract will be compensated for their time and investment in designing future projects on the site.
Prineet Sharma, partner at Winter Garden-based Sharma Eminent Domain Lawyers, is serving as co-counsel for Ferber in their eminent domain interest on the Excelsior property.
Who gets paid among the prospective buyers will be largely determined by if language in their contracts contemplated an eminent domain taking.
The law treats a contract holder as having a property interest that is compensable in eminent domain. They're seen as an equitable owner, and the entity selling the property is viewed as holding a lien or mortgage interest up to their contracted price, Sharma said.
If an appraised value is lower than the contract price, then the purchaser wouldn't have rights to the proceeds. But if the market value has appreciated at the time of taking from the original contract price, the buyer would benefit.
The challenge with eminent domain in a hot real estate market like Orlando's tourism corridor is that property values are changing rapidly as buyers move quickly to develop and maximize the use of their land.
"In 10 months Ferber would have had all those pads under contract and been well on their way to a completed project. So are you valuing it in that context, or trying to value in the context of a contract signed before all that effort has been contributed?" Sharma said.
Land owners or prospective buyers can begin suffering market displacement as soon as a taking notice is given by FDOT. New development is typically halted, but the state doesn't guarantee a time frame for when it will buy the land, if at all.
FDOT may be looking for more land along that stretch of Palm Parkway to acquire, as drainage needs for its I-4 Ultimate expansion appear to grow as more study is done. With the Excelsior property, an initial estimate last year of just 6 acres ballooned to the entire 38.8 acres.
About 7.4 acres to the immediate south, bordering the Palm Parkway and Daryl Carter Parkway intersection, are owned by a trust managed by Daryl Carter, president of Maury L. Carter & Associates.
That land and more to the north and west is under contract to Unicorp National Developments, which is moving full-steam ahead on conceptual planning for its mixed-use O-Town West development.
Carter told GrowthSpotter he has not received a taking notice yet from FDOT for that land. An FDOT spokesman declined to comment on ongoing negotiations along the project corridor.
"While it's very unfortunate for my neighbors (Excelsior), they're going to get paid for that land," Carter said. "But if FDOT dropped a (taking) letter on me when I had a pending contract, I'd be a little (upset)."
Unicorp has been planning up to five retail pads for those 7.4 acres, the smallest of its three segments for O-Town West. Orange County's Board of County Commissioners gave approval this week to transmit a Comprehensive Plan amendment to the state, meant to change future land use on another segment of the property from timeshare to multifamily and single-family homes.
The property's zoning already allows for Unicorp to develop its commercial plans, which it claims could reach up to 400,000 square feet of retail and dining.
Alexie Fonseca, director of leasing and development, said Wednesday that Unicorp prefers to wait to break ground once all its land use approvals are in place. She currently anticipates site work to start in Spring 2019.
Design progress for the planned interchange at Daryl Carter Parkway and Interstate 4 was on pace in April to hit a key benchmark by year's end.