“I'm afraid to be optimistic, but I am”: A Q&A with Bos

Last week, Destin developer Peter Bos sat down for an interview with the editorial board of the Northwest Florida Daily News.
Over the past three decades, Bos has been at the center of a number of upscale developments on the Emerald Coast. They include Sandestin, Destin Commons, the Emerald Grande, and Turnberry Harbor. He also owns Legendary Marine.
Such success hasn’t come without challenges, and Bos admits that the current downturn in the area’s real estate economy has financially challenged his company, Legendary Inc.
Outspoken and opinionated, Bos also concedes that he sometimes rubs people the wrong way — until they get to know him.
And above all else, he’s an optimist about the future of the Emerald Coast.
“I’m afraid to be optimistic, but I am,” he said.
Here is his interview with the Daily News, edited for space.

DAILY NEWS: Since we’ve had so much growth and development here in the past 25 years, are we going to be competing for a smaller slice of the pie in the next 25?

BOS: I think we’ve had some horrible growth in the last 25 years.
I think what happened was this spike in demand, where a second home became everybody’s entitlement, and financing was readily available. And we had an explosive mark at rental, too, which helped subsidize the carrying cost of these homes for people. I think we ended up with a lot of people developing who really shouldn’t have been in the development business. If you could pre-sell something, and it’s all sold, the next decision after the sales were done was to sit down and decide what you could take out of the building, because it wasn’t promised, because it would fall right to the bottom line. ‘We didn’t promise the pool furniture — outta here. We didn’t promise them tile in the hallways — outta here.’ We ended up with a whole lot of development that in my opinion was extremely low-quality development.
We’re going to see some major shifts. We’re going to see some real dynamic changes in what we sell. I think we’re going to be competing at a much higher level than we were before. I think we are going to be competing for those markets that are far more sophisticated, or are far more organized, or that have far more services than we have ever done before. I think we have survived as the backyard beach, and that is being challenged in many ways.
The person who owns the house, the condo, has been subsidized in many ways by rentals from people who were happy literally to pick up their own toilet paper from Wal-Mart on their way down. I think that market is being strapped right now with food costs, travel costs, fuel costs, et cetera. So I don’t think they’re going to travel as much, to start with.
I don’t think people like making their own beds and cleaning up their own places. I think the market, as we have this transition of wealth, and we have people, they’re going to take shorter, more and nicer vacations. I think they’re going to be more inclined to variety than routine. I think people are going to be interested in not going to the same place all the time, and I think that’s going to change the profile of what’s sold and what people have.
Now you’ve got all this product that we’ve got that was created because we had this explosive tourism demand. Great beach, but we got thousands, thousands, thousands of units and the value of those units is somewhat dependant on rental income. And I think those projects that lack services are going to have problems in the future market.
How’s that for a short answer?

DAILY NEWS: Real estate sales along the Emerald Coast have plummeted from where they were in 2004 and 2005. How has that affected the higher-end development like Emerald Grande, or Turnberry, or some of the things that you as a developer have been involved in? Has it been as tough for you as it has for everyone else in real estate?

BOS: Actually, (it’s) probably more tough for us and the reason is not why you think.
I think that whenever everyone stopped smoking dope or smelling ether or whatever was going on driving 30 or 40 percent appreciation numbers, all of us knew that would not sustain itself.
However, we did not anticipate the pullback and the speed with which it pulled back. We were all making changes and adjusting, but we never anticipated the speed at which everything would literally stop. It didn’t slow down; it stopped. That stop hurt everybody.
I think, to a lot of degree, it was media driven, meaning it went from being the in thing (that) the second home is a part of your life, and it’s a great investment and here’s people making money and you communicate all that. Then suddenly the collapse of that became bad news, which is a whole lot more fun to write about.
If your refrigerator breaks you buy a new refrigerator. If your TV breaks you wait until the flat screens go on sale, OK? So you don’t need to have a flat screen but you need to have a refrigerator.
The second that the process fell, nobody needed a second home. And people with retirement, they’ll hold up for two years or three years, but they won’t hold up the rest of their life. Nobody wants to buy the flat-screen TV the day before it goes on sale. Nobody wants to buy the condominium the day before it’s marked down.
So what happened is we don’t have a demand that’s driven by people with jobs who have to buy the house by August because their kids need to be in school by Sept. 1. Our market is almost totally people (where) it’s a discretionary purchase.
So when there was bad news about value, and there were some adjustments and collapse, everybody went into a complete freeze, a mental freeze. That freeze is what’s created some of the problems with our fuel prices because people are going to have to figure out what to do with their money so they’re buying commodities, there’s always going to be a shortage of that. So what’s happened is there’s this huge buildup of cash, but (people are) mentally frozen.

DAILY NEWS: What’s going to make it thaw?

BOS: Confidence. The bottom. When’s the bottom? Because there’s a huge pent-up demand.
You know, when you hit the bottom you already missed it. There’s no physical way that you know the bottom has occurred until you’re out of it.
So what makes the difference is the media.
The demand is there. The demand is huge. There’s a tremendous, tremendous demand. But what’s happening is (a lack of) buyer confidence.
Where do you get buyer confidence from? You’re not going to get it from your Realtor community, because the Realtors themselves — I’m one, so I can be critical — are not particularly sophisticated, because we were the ones who were saying ‘buy this stuff” when it was running up at prices that were in the ozone layer. So that’s never going to get it. Where you’re going to get it from is watching CNN, or someone who keeps saying, ‘Housing market, positive starts, going up.’
It’s driven by buyer confidence, and we’re already seeing it.

DAILY NEWS: I’m going to go back to your comment about the media. I would agree with you that the media and how it portrays what goes on matters a lot. But back in 2004 and 3005 we wrote a lot of stories about the housing boom, and I never once had anybody in the real estate development business call and say, ‘Stop writing about how well things are going, because it shouldn’t be going as well as it is.’ So is it fair to say the media caused the stop or is it fair to say the media reported the stop, which occurred because people ran the prices up so high that eventually they were going to hit a ceiling?

BOS: (The) media’s reporting the situation as a general statement. And the general statement is, ‘Our market right now, for reasons of finance, and unavailability of finance, and overly aggressive lenders, and for all intents and purposes infinite supply created by easy financing, and a lot of developers who shouldn’t have been developing, what happened was we basically — they slaughter hogs and they fatten pigs. We were hogs. The development community itself overbuilt, over-supplied the market, in about every single market I can think of.
It’s hurt us (Legendary developments) worse.
In most cases, (many other developers) build the condominium and (they’re) done. (They) go back to Birmingham, hire a maid service to sweep the lobby and a real estate company to sell it.
What we (Legendary) sell are high services levels so when you walk into a Legendary product, not only are you sweeping the lobby and doing that, but you have bellmen, doormen, front desk clerks, maids in uniforms. I provide a level of service you can’t go to zero on.
I can’t hire one-fifth of a front desk person. I’ve got to buy the whole guy. And I can’t supply 24-hour security unless I have at least five people. So when you add service to the real estate component, you’re burdened as the developer with maintaining the service and the real estate. And that’s why (we’re) hurt worse.

DAILY NEWS: What do you have to do to cope with that?

BOS: You cut back everything you can, but there’s a level where you cannot cut back. When you add layers of service, that service is expensive. So in our organization you’ve got to go through the entire organization and everything we didn’t need got cut back. Everything that I didn’t need personally, it went away.
(But) we’ve got to provide a level of service. We sell a lifestyle standard that is better. I can’t take away the trash pickup people or reduce that staff at Destin Commons so the trash is picked up every other day.

DAILY NEWS: Where do you foresee the trough, the point where (real estate) hits bottom or starts going north?

BOS: I need to put this into context.
If you asked me last year, I would have thought we’d already been there. I was absolutely convinced of it.
Now that I’ve destroyed my credibility on predicting, it’s my opinion there’s a lot of signs out there that we’re already there.
I don’t think ‘there’ — meaning at the trough — is a constant, though, across the board.
I think there are products out in the marketplace that are going to be very difficult to sell going forward and I don’t know how low they go, because their only way to compete is price.

DAILY NEWS: Would those be the rentals you were talking about?

BOS: I think there are numerous condominiums that were built that you’ve still got to get in your car to get breakfast, to get lunch, to get everything. The only thing you can do there is sleep and walk to the beach. And there’s a few you can’t get to the beach. They have nothing to offer. They literally are shelter and they are going to be the last ones someone’s going to buy if you have discretionary dollars.
What the difference was between this (last) boom and prior booms in this market was the people who live in Fort Walton saw all these out-of-towners making money, and by 2005 we’re going to do that, too. That’s why a bunch of people, even on a fixed income, jumped in the condo market. And that’s why all these big turnouts at tax meetings with (Okaloosa) County. Before, it was the guy from Atlanta getting his ox gored. Now, they (locals) own the condo that they can’t sell and all of a sudden they’re getting taxed. They were all protected 3 percent a year maximum increase. They were homesteaded. What wasn’t homesteaded is they jumped into this investor market.
So I think that needs to work its way through and because of that, there’s a supply that’s going to stay out there. They’re product, but they’re not exactly high-demand product.
And I think the investor, speculator, flipper, I think is out of the market for awhile. I think we were 75 percent speculators and 25 percent users. And I think now we’re 95 users, 5 percent speculators.

DAILY NEWS: What is the opening of the new Panama City-Bay County International Airport going to mean for the area?

BOS: That airport is huge. I think there’s already been some realization or speculation on land value in this whole area, but the best is yet to come.
I believe the wave we’ve seen in the last 10 years, the wave we’re going into, I can’t tell you if it’s going to be 10 years or 12 years, but I can tell you where we’re going is way bigger than where we’ve been. And I can also say that I believe that a year from now, or two years from now, is we’re going to have the same thing again.
I think the airport is huge, and I don’t think you can overstate that.
And there’s one other benefit that’s every bit as big.
What made Naples was that Westinghouse had huge land holdings. So Westinghouse, along with the airport, moved when there was demand. It’s like the chicken and the egg with demand and aircraft. They’re not going to fly where they’ve got no traffic, but you’ve got to get demand to fly. (Here) you’ve got a developer like St. Joe (Co.) that’s organizing things, and you’ve got the new ‘The Beach’ (marketing plan) which is spectacular in organizing five counties, combining three airports and the power of that to bring people to the region. Pensacola’s now in it, and Okaloosa and Panama City. It’s going to make a major shift in the dynamics of what happens in this area.
And it’s going to exacerbate the issue of haves and have-nots in terms of quality and demand. Because I tell you, you don’t take a taxi from the airport, stop by Wal-Mart, pick up toilet paper and then go to your unit.
As you reach out of that and people recognize this coast as the best beaches in the world, we will see several huge changes.
We will go far more branded hotel, because of the Internet, because of reservations systems and exposure.
If you live in Seattle and you hear about Destin, you don’t call Abbott Realty or Legendary. Legendary, smedg-endary. You call Marriott, Hyatt or whatever and say ‘Whattaya got in Destin?’
Who’s going to win in that? Sandestin’s going to win, because they’re going to be linked as a major resort. Seaside, Rosemary Beach, Emerald Grande. Wherever you’ve got something of critical mass, they will be the biggest winners.

DAILY NEWS: Let’s discuss the potential of development of Okaloosa Island. Looking at that island right now, do you see that will be something that’s going to be developed more than it is?

BOS: The problem that Fort Walton Beach has, or what’s happening in Destin, if you think small all the time, of one restaurant at a time or one building at a time, it won’t happen.
If anyone hasn’t focused on the incredible migration to the east — there’s waterfront everywhere, bays and back bays and remarkable boating. And if there’s anyone in any position that doesn’t believe there’s going to be an unbelievable sucking going on (to the east), he hasn’t been looking and watching.
Fort Walton Beach is our backyard example. When I first came to this town, that’s where everybody did their shopping. Now it’s tattoo parlors, it’s a nightmare, it’s got a CRA (Community Redevelopment Agency) but nobody wanted to condemn anything, nobody wanted to take it to the water. Nobody wanted to build up a big enough mass, so we’ve got this little strip (downtown). And God love the people that are trying — I think it’s fantastic — but it’s a really tough sell because there’s no critical mass.
Destin, Fort Walton, they were never planned. And for whatever reason, they never got planned. Nobody went back and said, ‘We need a new 50-year plan and we’ll gradually work into it.’ It’s just kind of leaving it always the same.
I’m getting around to Emerald Grande. You’ve got to do something that’s significant enough to create critical mass.
And HarborWalk (part of the Emerald Grande development) attracts a lot of negative and positive comment. It’s a lightning rod in that regard, but it has brought people back. Our fishermen are doing better than they have ever done, despite all the stuff. You go five blocks down (from HarborWalk), the fishermen are dying; lack of business. We’re bringing people back to the harbor. And for me, I’m not objective about this. I love the harbor and I love the fishermen and I love the fact that we’re a commercial marina.

DAILY NEWS: Do you think that HarborWalk and Emerald Grande are a little bit like Destin Commons in that once it’s completed, then people see the whole picture? I never hear anyone say anything negative about Destin Commons now.

BOS: They (many people) hated it (Destin Commons) at first. ‘We need another shopping center like we need a hole in the head.’ That was the hue and cry when we cleared that site. I had the same problem with Sandestin.
I haven’t done a whole lot that hasn’t attracted some attention, because I don’t do the one-off project.

QUESTION: One of the things I always hear is there’s no middle of the road about Peter Bos. People either have very strong feelings about the development and the good it’s bringing, or we hear that it’s not doing good.

BOS: Let’s deal with the personal level.
I’ve got a deep voice, large in size, I’m opinionated, outspoken and get involved, so I’m not a wallflower in that regard. That builds people who don’t know me and view me as someone working for my way as opposed to something better.
However, what is also interesting is if you talk to employees who work for me it’s an incredible family-kind of situation and they see me cry at Christmas parties. It’s a very different person.
Most people who have a strong feeling against me don’t know me or haven’t met me, have never talked to me. I get that a lot.
Same thing when we brought HarborWalk. The No. 1 asset for me was the working marina. It has always been. It’s like our Bass Pro (at Destin Commons). It’s a people generator in energy that a bunch of yachts as a parking lot could never be. (But) you couldn’t convince those fishermen, they absolutely thought I was kicking them out and I became Darth Vader. And I was Darth Vader from 1991 until literally fairly recently.
And then the other thing is the projects we build are big. And it’s intimidating.
So those opinions get formed. They used to bother me a lot, but I think most people believe we raised the standard of quality for Destin. Because Destin was heading the same way Fort Walton Beach was, Panama City and everything else. It was just build condos and get by, no planning, no anything.
There are a group of developers — Jay Odom is a good example — who just raised the bar. We just happened to be the first and we’re probably the biggest that really worked at and cared about raising the standard of quality and service. Do I think HarborWalk is going to turn? Yes. And I’ll take it one step further. I think the lighthouse, and the light’s about to turn on in a couple of days, will turn out to be an icon.

QUESTION: What should county government or the Air Force do from your viewpoint to help development?

BOS: I don’t think government should do anything to help development. I think government needs to guide and help with the plan. I think the problem is we never have enough money in government to do enough time with future planning. We always seem to be doing catch up or letting individuals or developers maximize their own opportunity and lead the show. And simply stated, I think that’s inappropriate.

That surprises me, because I would think as a developer you would say, ‘If government just got out of our way, we would be better off.’

No, it shouldn’t surprise you about me. I’m all about planning. I’m different from most developers. I’m all about future planning.
We are a hodgepodge of catch-up and our problem is lack of planning. We have some spectacular opportunities ahead of us right now, and I’ve met with the Air Force. We’re about to build a new parallel roadway. The Air Force has, and rightly so, to protect its mission. When that roadway is built, it will bifurcate large chunks of land from the land mass that’s so critical for the mission. And when it does that it creates these spectacular opportunities for planning.
The issue is if you’ve got 500 acres are you better off to hack it up into a grid and sell it off in 5-acre tracts, or are you better off to master plan it?

DAILY NEWS: One of the things Legendary has done recently is hire Hugh Sawyer as president. It surprised some people that you would hire a president, just because you seem like such a hands-on guy.

BOS: Not as much hands-on, and I’m not particularly a great manager. It’s probably my biggest shortcoming is that the day-to-day administration management accountability of people is not what I do. Or I can do it very intensely for 30 days, or 60 days, or six months. But that’s not the way I have to operate.
I need to be focused on what I do best, and that is the development side, the financing side, the promotion side, and I need somebody else to run the day-to-day accountability of making sure the numbers are in the financial statement. And I am far less hands-on than anybody perceives. I’m involved in macro decisions, and I love watching it work. That’s exciting for me.
I wish I had done it (hired Sawyer) six or eight months ago. But I will tell you when this market stopped, my head went down. I locked myself in my office. I felt like a gerbil eating paper. It’s so much easier to grow and so much more fun.
I’m afraid to be optimistic, but I am. It’s almost like I’m afraid because I’ve been disappointed before.
Marine sales are an example. We’re down 20 percent. The industry is down 38 percent in Florida. And we’ve actually had our best first quarter ever.
How is that possible? Well, we’re paying a whole lot more attention to a lot of things.
As a company, Legendary has been in a growth mode for 10 years.
When you’re always going forward, you never get a chance to look back. What’s happened is, our forward growth stopped, so we looked back, fixed what we could and you live with what you can’t.
The good news is, we’re in the path of progress. And in all sincerity, there is no place in the whole United States I would rather be than right here. And that is an absolute fact.

DAILY NEWS: There was a time after you built Sandestin when things didn’t go so well. Because Legendary is a forward-thinking company that’s been out in front on the high end, do you have concerns like that right now?

BOS: I would be some kind of loony if I told you I didn’t. Of course I do.
(But) what we have here, Southern hospitality, the quality of the sand, the quality of the beaches, the magnitude of the restaurants, the incredible amount of shopping, is really very special.
And when you come here as opposed to all the places we compete with, you’ll come back here.