Ocean Pines Horizons
by Mark Venit

The following is the text of a presentation made by OPA Director Mark Venit at the OPA Town Meeting held on 2/26/2005: 

The Ocean Pines Association and the community it manages and governs are at a crossroad: the intersection of a maturing community approaching build-out, with an aging infrastructure, a population that encompasses a core of active seniors to young people raising families and enrolling some 2,000 children in local schools.  Our annual dues have remained modest and we get a solid bargain for what we pay.   And it’s safe to say that just about everyone who lives here loves it here -- as do those who live here seasonally along with those who only visit.

Ocean Pines has evolved into something never envisioned by Boise-Cascade when it started offering lots for sale in the late 1960’s in what was designed as a seasonal community of relatively modest homes with a variety  of summer amenities and small parks.  Unforeseen was that we’d become a year ’round community of more than 13,000 residents that expands in spring and summer to a population that approaches 20,000 people.

The original amenities have served us well during our 36 years -- from five pools and spectacular tennis and golf facilities to boat slips, meeting facilities, foodservice operations, and our own beach, along with parking at that beach.  While tennis and golf still have unfilled capacity, many of the other amenities are stretched to or beyond their limits.  Meeting space is at a premium for the nearly sixty OPA organizations that vie for convenient times.  Places to put our boats in the Pines and to park our cars at the beach are in short supply.   And I’m not telling you anything you don’t already know. 

But allow me to bring to you some other information that many residents might not be aware of.

Our Board has held the line on assessments for two consecutive years and reconfigured the next fiscal year to keep the budget in balance without another increase in dues.  But budget shortfalls for maintaining existing levels of service will likely begin next year and continue to grow larger every year after that, likely forcing ever increasing annual dues.    

The report presented last year by the Comprehensive Plan Committee addressed the brick-and-mortar issues with well-documented facts and figures, resulting in a strong basis for beginning a revitalization of our infrastructure.  Were we to build it all -- and I, for one, favor doing just that -- the capital spending exceeds $10 million.  The report, however, did not address the funding aspect of accomplishing these objectives.

While some of us favor a full implementation of the committee’s recommendations, others may oppose everything.   And many support some projects but not others.  The Board will soon be playing the role of Solomon in determining what we’ll recommend to the community be built in our lifetimes and how we are to pay for it.  

But allow me to introduce a different vision, one that invokes looking at our total assets and how we can best benefit from them in the years and decades ahead.   Let’s look at some specifics.

1. Occasioned through a variety of circumstances, OPA owns 15 “buildable” lots, worth on average more than $100,000 each, valued collectively at $1.5 Million or more.

2. OPA also owns some 100 other parcels that are not “buildable,” but may have value to their adjacent property owners.  These variously-configured non-buildable lots could intrinsically enhance an adjacent property’s value, or be used to expand landscaping, gardening, play area, or for an allowable expansion of a home or deck.   An estimate given me is that the aggregate value of these miscellaneous parcels, might be in the quarter to the half-million dollar range and save us the annual expenses of taxes and maintenance.  

To these ends the Board can authorize the administration to list these lots for sale or auction and convert these non-performing assets into cash and, I’d hope, that any monies we receive for these lots be placed in our capital reserves for infrastructure replacement or improvement.   

3. Excluding the Sports Core land, OPA owns three parcels along Rt. 589 that are estimated by local professionals to be worth a million dollars or more each.   What should we do with these parcels?   First, the administration should ascertain the approximate current market value of these properties.  Second, the Comprehensive Plan Committee should be tasked with
    a) exploring the best uses for these parcels vis-à-vis the best interests of Ocean Pines; and
    b) making recommendations and conclusions to the Board regarding the use, sale,  retention, or other action of our 589 holdings.    

Whether their report will recommend selling one or more parcels, keeping some or all for open space, creating commercial development alone or with a partner, using space for a parking lot for commercial vehicles, allocating space for garden plots, or other uses . . . this is the type of information that will enable the Board to make informed decisions and recommendations to the membership as to what’s best for us today and in the future.  And if the Comp Plan’s recommendation is to do nothing at all, that, too, might be a legitimate conclusion.

4. Due to legal, environmental, and state-related matters, there is a growing likelihood that a YMCA facility will never be built on the land just south of Section 10.   And by the terms of the contractual obligations related to that land, that land will become part of Ocean Pines.   What would be the best, allowable use of the land?  As open space?  A fabulous park?  A location for storing dredge spoils?  For trails and other recreational use?   Perhaps we should look ahead for what that acquisition will mean for the collective best interests of Ocean Pines and to our property owners in the south end of the Pines.  

5. And then there’s the land across the bay, considered by many real estate experts to be among the most valuable undeveloped real estate in Ocean City, perhaps in the County, and by some measures, among the most valuable land in the whole state.   And we own it outright!  

Look elsewhere on the East Coast for another homeowners association that owns such an asset, and  you’d be hard pressed to find another community with our good fortune.   What’s its real value today to Ocean Pines?  

Certainly it’s our favorite beach destination and no one here, on this Board, would suggest that we sell it in whole or in part.  

But consider its role at the inception of Ocean Pines.  

Our beach asset was acquired by Boise Cascade in the 1960s when that area of Ocean City was almost totally devoid of development.   The newly-constructed Beach Club in the early 1970s stood virtually alone and without nearly buildings.   But the primary function of these assets was as a merchandising jewel for Boise Cascade.  Prospective lot buyers, escorted by a real estate salesman, were taken by boat from a launch site at today’s Swim & Racquet Club to the beach just north of where Seacrets is today.  And then taken by lorry a few hundred yards further to the beach.  

Prospects saw the beach, the spanking new beach club with showers and changing facilities, and a parking lot.  If they weren’t yet quite sold on buying a lot here, seeing this beach amenity complex was a major element for many in their ultimate decision to buy a lot here.  

The beach is still there, of course.  So is the adjacent parking lot, which today is full by mid-morning in summer.   Our Beach Club is still there, too, with a beautiful, newly-refurbished pool.   But the building isn’t quite as glamorous as it used to be, and the facilities on the ground floor are, rather, in a word: dated.  

Perhaps, as some have suggested, we should just sell it all off, since only 10-15% of our residents use the beach or beach club and use the money on this side of the bay. 

I can assure you that neither this Board nor any director on it favors selling the beach or the beach club or the land we own in Ocean City.  Repeat: no one wants to sell our holdings on the other side of the bay -- not the oceanside property, nor the bayside property.  Period.

And in case any reporter here didn’t hear it quite right the first two times, OPA is not selling any land or our Beach Club in Ocean City, nor proposing to sell any land or our Beach Club in Ocean City, nor proposing to investigate selling our land holdings and our Beach Club in Ocean City, nor is the Board floating a trial balloon about selling our land or the Beach Club in Ocean City in the future. 

I will, however, suggest here that there are some other options that we might consider.  

Wouldn’t it be nice perhaps to have a new Beach Club?  Winterized for year ’round use.  With modern facilities for showering and changing.   With a full-service restaurant with longer hours. With live entertainment.  And a facility that could provide OPA with a steady stream of sizeable net revenues in perpetuity.   

Wouldn’t it be nice to have more parking for our property owners?   Perhaps a multi-story lot. Well, a new Beach Club would cost  $2-3 million and a multi-story parking lot would cost twice that.  Even if the community supported accomplishing such goals, we just don’t have that kind of money right now. 

But consider, if you will, another scenario: where OPA, itself, becomes the developer of a fabulous, architecturally-splendid venture on our own properties in Ocean City.   What would such a project be worth in terms of total sales and net revenues to the Ocean Pines Association? 

Let’s call it for the sake of discussion Ocean Pines East or Ocean Pines Towers, or Ocean Pines Beach & Bay.   Any of these names or another will eventually find its way into our thinking.

By some estimates from real estate experts, an Ocean Pines East endeavor would generate $150-200 million on the ocean side and perhaps more.  And on the bay side, another $50-100 million in sales.   Whether it be a planned overlay district, which is currently not permitted in Ocean City, or other type development, the potential financial benefits to Ocean Pines are beyond the wildest imagination of anyone 36 years ago. 

It’s like discovering a diamond mine in our own back yard and being able to extract a staggering amount of high-carat stones every year -- for decades, if not longer.   The pre-tax gross profit on a $200 to 300 million Ocean Pines Towers project for OPA?   As much as $40, 50, 80 to $120 million.   But let’s knock those numbers down by considering, hypothetically, a co-venture arrangement with a developer who’s financially able to handle the millions of dollars in upfront costs for architects, real good lawyering, and financial planning and addressing other expensive realities. 

And let’s cut the projected gross profits in half, cover the taxes we’d incur, including staggering millions in capital gains on those properties, and OPA could still be looking at earning a $25-50 million windfall.  

Tens of millions of dollars . . . vs. the current total financial yield from Beach club operations and parking and leasing revenues of between $100,000-150,000 annually. 

In addition to these potential tens of millions of dollars, we’d have gained ourselves a new Beach Club, increased our beach parking, and created an annual revenue stream of a whole lot more than the current annual yield.

Were the development to be condominiums and some commercial establishments at an Ocean Pines Beach & Bay project, all of its units could be Ocean Pines members in one form or another and contribute dues to our association.  Owners of units in Ocean City could become members of our golf club and our tennis club, participate in our organizations, and avail themselves of our parks and other amenities.

It’s even possible that either a bayside beach and/or mooring or docking facilities could be built in conjunction with the bayside parcel if we can comply with environmental regulations -- and I think we can.   Having a bay beach or boat parking or both could dramatically increase the value of the development to its residents -- and to our property owners as well.  

What would be the impact on the association if we were to accomplish some form of the this vision?

Well, assessments could conceivably be reduced significantly over time or at worst not be increased in our lifetimes and quite possibly for another generation.  Our individual properties would become that much more valuable by being part of a community that has extensive self-perpetuating internal funding to offset our increasing expenses.   We’d have ample funds to revitalize our aging  infrastructure, build what we choose to build without burdening our property owners, and ensure our financial stability for decades. 

Could all this become reality?   It’s a challenging task.  “Daunting” might be a more precise word. It would entail extensive planning, considerably more visioning, several phases of hearings and ultimately a series of referenda to ratify whatever dreams we choose to bring about.   We’d have to overcome extensive legal and environmental permitting hurdles along the way, negotiate with Ocean City and county, state, and federal agencies about a myriad of details.   And it will take at least several years to begin to see the first fruits of these possibilities.  

We’d need to consult experts about the impact of such an undertaking on OPA’s legal status, our responsibilities to conserve the potentially huge reserves we’d accumulate, and how to facilitate future Boards and future property owners to determine the evolving needs of this community. And it will take significant resources to do our own planning, to review proposals, to vet the ideas as to what’s realistic and attainable, and to accommodate unforeseen obstacles and surprises. 

Yes, it will take time and money and effort.  But if it’s the community’s will to explore these possibilities, we should not wait forever and should not talk about it forever.   What if Ocean City or the county implements a moratorium on development or restricts us from accessing water and sewer resources?   What would our holdings be worth if we wait too long and our options are eclipsed by unfriendly administrations across the bay or in Snow Hill?

I submit that the time to initiate the planning process is at hand.   Let’s see what’s really practical and do-able for propelling the community into the 21st Century.  I’ll propose here -- and will do so formally in April or May -- organizing a Task Force to develop and define the process of how we should proceed, in what phases and with what target dates for these phases, and for figuring out what further questions we need to ask.   The immediate goal isn’t quite as ambitious as some of the  concepts you’ve just heard about; it’s simply to advance the process one step forward for the Board, move the discourse into the community’s court, and as a topic for candidates to address in the next round of OPA elections.

We can also choose to do nothing, deferring such matters to yet another future Board.   Each of us has talked about the future of Ocean Pines when each us was a candidate for election or re-election to this Board.   We have heard from the Comprehensive Plan Committee and we have talked about their recommendations.   The Board can continue to keep talking about what we should do -- and we’re real good about talking about things -- but I’ll suggest that the time for doing something and exerting leadership into the process is now at hand.    I think I speak for the Board when I say that each of us is committed to revitalizing and re-energizing Ocean Pines.  

And so, to that end, I’ll propose in principle that we entertain receiving proposals for developing our properties in Ocean City with the following provisos:

  1. That a new Beach Club be included in any plan
  2. That beach parking be maintained at least at current levels or expanded for OPA members
  3. That any buildings and land remain titled to/owned by OPA
  4. That the sale of units be offered first to OPA members
  5. That units in the development be required to hold membership or affiliate membership in OPA
  6. That the funding for a co-venture be underwritten by whomever is selected as our partner
  7. That a committee be formed to create a suitable written explanation of our objectives and our guidelines for any parties interested in submitting proposals
  8. That a committee be appointed to provide initial reviews of proposals from prospective partners and make observations about each submission to the Board
  9. That the administration be tasked with a more extensive investigation of those proposals we decide to explore further         
10. That an appropriate fee be paid by parties submitting proposals, sufficient to cover our staff and professional costs for evaluating proposals

My role here this morning has been to put a ball into play.  Now it’s everyone else’s turn to run with it wherever you may.  We welcome your ideas and your reactions, and wholeheartedly encourage your participation in the process of looking out onto the horizons of our community’s future.

Thank You.