Developers doubling down on beach towns in an age of monster storms

Developer Jeff Lamkin knew the risks when he paid $250 million for 63 acres of an island off the Texas coast. But he saw only upside in the quaint little beach town of Port Aransas.

Over the next 10 years he built Cinnamon Shore, a village of luxury vacation homes fortified by the latest hurricane-proof construction methods. Then Hurricane Harvey blasted ashore, leaving behind $125 billion of devastation along the Texas coast. It was the test every coastal investor dreads. But Cinnamon Shore passed with flying colors.

“To the left of us and to the right of us was total destruction,’’ Lamkin said. “But we had better construction, and so we just held up really well.’’

Developers say it’s worth the potential costs

At a time when climate change is being linked to the rise of monster storms, Cinnamon Shore helps explain why real estate developers are still willing to thumb their nose at Mother Nature, with residential sales along the Gulf Coast increasing 60% over the last five years — almost twice the rate of the nation overall, according to Attom Data Solutions.

Panama City, Florida, ravaged by Hurricane Michael last month, is the latest example of the potential costs, yet developers like Lamkin still say it’s worth it.

Vacation beach towns like Port Aransas and Panama City are increasingly dependent on new building methods to protect against catastrophic storms. As older structures get wiped out, they’re replaced by stronger construction that cushions against the next disaster, emboldening developers to keep investing.

Buyers are on track to sink about $2 billion into Gulf Coast homes this year, based on the mean selling price, according to Attom Data. That would be up from $1.8 billion last year, and a 12-year high.

Rising insurance rates passed along to buyers/renters

Developers aren’t deterred by rising insurance rates, which are largely passed along to buyers and renters, or by more expensive building requirements. Higher costs have simply “forced more expensive development” on the coast, said Charles Watson, a disaster modeler with Enki Research in Savannah, Georgia. Increasingly, coastal beach towns cater to the vacationers who can afford it.

A year into Port Aransas’ recovery from Harvey, Cinnamon Shore remains Lamkin’s most successful beachfront venture, with “solid returns on every level,’’ he said. This year will go down as the project’s best yet, with $40 million in sales for homes ranging from $750,000 to $3 million.

Second $1.3B beachfront vacation community under construction

On Oct. 5, Lamkin’s Sea Oats Group broke ground on a second resort in Port Aransas — a $1.3 billion vacation community on 300 acres of sandy beachfront.

After last month’s Hurricane Michael, Florida’s storm-wrecked panhandle beach towns can look to Port Aransas for a glimpse of what their future might hold a year from now.

Related: People — and cities — are making hurricanes worse, research shows

Chamber of Tourism president Jeff Hentz, 57, had only been in his job for eight months when Harvey blipped onto the radar screen and started heading for Texas. After a career bouncing between New York and Florida promoting destinations from Walt Disney World to Yosemite National Park, Port Aransas had seemed like the perfect place to settle down.

“Port A,’’ as he calls it, was an under-developed beach town within driving distance of 28 million Texans in the middle of a booming economy. Even Florida’s coast and New York’s Hamptons didn’t have that kind of consumer base.

Hurricane Harvey comeback story

With South Texas’ warm winters, Hentz envisioned a year-around destination where vacationers could escape to a more authentic, laid-back beach vibe. Sports tournaments, business conferences and festivals could fill the gaps. Once he saturated the Texas market, he could reach out internationally to Australia and Asia.

When Hurricane Harvey zeroed in, demolishing homes, restaurants, businesses and even Hentz’s own office, it washed away all those plans — at least temporarily. Hentz shifted his attention to raising $2.5 million in public and private funds to speed the rebuilding of Port A. He quickly formed a new plan:

“This is going to be the greatest comeback story of all time,” he resolved.

Related: The untold story of Hurricane Harvey wind damage: 12 key findings

It seemed unlikely at the time. Town residents who fled before the storm returned to eerily quiet streets. The air was heavy with the stink of seaweed and saltwater. Boats from the harbor had been tossed around like toys. Palm trees were bent in half and cemetery gravestones broken. Even structures that remained standing had to be gutted, with debris piling up into a four-story high heap locals called Mount Harvey.

Rebuilt stronger

Mayor Charles Bujan, 74, had been through several hurricanes during his lifetime. He remembered Carla in 1961 and Camille in 1969. But it’s Harvey that brings tears to his eyes. He estimates the storm wrought as much as $1 billion in damages to the small island.

“This one was a monster,” he said, leaning back in the office chair where he slept during the weeks after the storm hit.

Related: Devastating storms seen spurring action on disaster preparation

Bujan surrounds himself now with storm memorabilia. A hand-drawn map of Harvey’s path hangs on the wall. A scrap of paper is taped to his clock recording Harvey’s landfall: “8/26/17, time 0307.”

And on his desk sits a wooden carving of the word “strong” — the way Port A sees itself now. Amid the devastation, residents found an opportunity. Many buildings were destroyed, but they’ve been rebuilt stronger to help withstand future storms.

Making improvements

The RV campground Bujan operates was trashed, which he says gave him the chance to make improvements he’d long been wanting.

After the storm, local business owner Bron Doyle rebuilt his karaoke stage and concession stands and refurbished his fleet of rental golf carts. The whole town is getting an upgrade, he said. “A lot of things that got destroyed are better.”

The idea of recovery was daunting at first. Tracy Ellwood, a 53-year-old manager at Moby Dick’s restaurant, said her friends and family rely on local businesses for their livelihood. “The sooner you fix things and get going, the sooner everybody can get back to work and start to live again,” she said.

Related: Latest climate threat for coastal cities: more rich people

Hentz is still working out of a 60-by-24-foot trailer, but his ideas are back on track. Even with just half of the town’s 4,000 hotel rooms and vacation rentals re-opened, Port Aransas recorded 3.5 million visitors so far this year, down from 4.5 million the year before. Next year, he’s targeting a new convention center followed by a sports complex, launching the town past 10 million visitors by 2025.

Right building techniques = profitable coastal real estate investment

The Palmilla Beach Resort, started by San Antonio billionaire Red McCombs in 2014, is again filled with vacationers. Its newly established neighbor Sunflower Beach Resort, remains on track for development with no visible scars from the storm.

Two miles away at Cinnamon Shore, sales started picking back up just six weeks after the storm, Lamkin said. For the 140 structures that weathered the storm, only 20 suffered enough damage for homeowners to even file insurance claims.

For Lamkin, Hurricane Harvey was a proof of concept: that with the right building techniques — like doors and windows that can sustain 130 miles-per-hour winds, steel rods and straps that tie down the roof, and base floors elevated above flood levels — it’s possible to invest profitably in coastal real estate.

Before Harvey, he says, he believed in the hurricane construction codes in theory. “But now I really believe in them.”

Related: Storm-prone states ease off building codes as climate risk grows