Bulk Sale Opportunities Emerge in the Miami Condo Market

February 11, 2009 by Lucas Lechuga

Turkey Vulture

For the past couple of years, vultures have been circling the skies of Miami waiting for the right moment to swoop in for the kill.  Their day of reckoning seems to have finally arrived.  I am now familiar with over 30 condo developments in Miami and Miami Beach with units available to be purchased in bulk.  The list consists of partial and entire condo developments, including a few with Section 8 potential.  Ballpark prices for these bulk sale opportunities range from $3M-$60M.

Throughout much of 2008, there seemed to be a stalemate between developers and vulture funds about price.  However, market conditions have worsened considerably within the past six months, due in large part to ever-tightening lending practices.  Even for creditworthy individuals, it has become extremely difficult to obtain financing for condominiums in Miami.  As a result of the new Fannie Mae guidelines, financing has become especially restrictive for condos in recently completed buildings.  Lately, it has been individual buyers strapped with cash, for the most part, who have been the ones pecking away at the remaining inventory in these new condo developments.  Facing the realities of the market, developers – and their lenders – have begun to turn to vulture funds as a quick, easy way to part with unclosed condos.

Recently, two major arms-length bulk sales have closed in Miami-Dade County: the 60-unit bulk sale in the Downtown Miami high-rise called Marina Blue and the 101-unit bulk sale at Harbour House, a beachfront condo-conversion located in Bal Harbour.  Both deals closed in December 2008.  The 60 units at Marina Blue sold for $200 per square foot while the 101 condos at Harbour House sold for approximately $277 per square foot.

There are some who negatively portray vulture funds as entities who feast upon the misery of others.  Personally, I feel that vulture funds are a necessity to a real estate market such as Miami and do more good than harm.  Bulks sales provide instantaneous feedback as to where the intermediate level of pricing resides for condos in the given development, as well as those in the surrounding area.  Bulk sales also provide stability to a condo building which would otherwise have many uncertainties concerning its financial condition.  One can assume that the vulture fund will have the capital resources to pay monthly homeowners association fees on time.  It also has a vested interest to ensure that the condo development is well managed.  The greatest benefit, however, is that thousands of unoccupied condos in Miami will be filled with residents much faster.

Most of the vulture funds that I’ve come into contact with over the past year have plans to buy condos in bulk, lease them over a period of 5-10 years and resell them for a profit on the back-end once market conditions have improved.

Please feel free to contact me if you have an interest in the bulk sale opportunities that are now available in Miami and Miami Beach.  Investment packets complete with estimated operating budgets, a rental and sale market analysis, neighborhood demographics and projected cash flow statements are available to serious buyers for most of the bulk sale opportunities.

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45 Comments on "Bulk Sale Opportunities Emerge in the Miami Condo Market"


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Anonymous
AJ
7 years 7 months ago
Isn’t this what I have been saying in the past few weeks?….. “There are some who negatively portray vulture funds as entities who feast upon the misery of others. Personally, I feel that vulture funds are a necessity to a real estate market such as Miami and do more good than harm. Bulks sales provide instantaneous feedback as to where the intermediate level of pricing resides for condos in the given development, as well as those in the surrounding area. Bulk sales also provide stability to a condo building which would otherwise have many uncertainties concerning its financial condition. One… Read more »
Anonymous
Kramer
7 years 7 months ago

A bulk buyer still cant purchase more than 10% of a larger project – like Icon for example without limiting all owners, including themselves, from selling their units to cash buyers only. In addition they then have to convince eventual buyers owners to buy into what effectively becomes a rental building. This factor has to be reflected in lower values. This is a TRAP. Every owner becomes trapped including the bulk buyer. This is going to get very ugly.

Anonymous
Wild Bill
7 years 7 months ago

Bulk sales create an instantaneous rental building. Bulk buyer will control the condo board. Bulk buyer will control the maintenance issues. This is a sad joke. The developer should give people their money back.

Anonymous
Kramer
7 years 7 months ago

This is a trap even for bulk buyers because they need to purchase more than 10% of a project to have majority control of the board – yet more than 10% ownership means only cash buyers qualify to purchase.

Anonymous
Muir
7 years 7 months ago

“Both deals closed in December 2008. ”

Which means they signed when?
And, since that point in time to now, have things changed substantially?
Will things change substantially in 6 months?
The trap could be for the fund themselves.

Anonymous
Muir
7 years 7 months ago

AJ,
I think this is a GREAT opportunity!
You should avail yourself of this and do a mini-bulk purchase (5-10 units)
You will be kicking yourself for the rest of your life if you let this opportunity pass you by.

Anonymous
Angel
7 years 7 months ago

So when will the recent Marina Blue bulk sale units hit the rental market?

Anonymous
Muir
7 years 7 months ago

“Let’s not mince words…this looks an awful lot like the beginning of the second Great Depression,” says Nobel-prize winning economist Paul Krugman.
(Yesterday)
International Monetary Fund chief Dominique Strauss-Kahn said the world’s advanced economies — the U.S., Western Europe and Japan — are “already in depression,” and that the IMF could slash its global growth forecasts further. The “worst cannot be ruled out,” he said.
WSJ

Forget condos.
Got gold?

Anonymous
Muir
7 years 7 months ago

Am I the only one here that sees the obvious?
Am not going to attempt to sound smart by using words like “macro economics,” I’ll just state what for me is the obvious; when you buy a condo, technically, you buy the rights to the air between the walls and between the floor and ceiling (this is true.)
Is that what you want to do in a depression?

Anonymous
AJ
7 years 7 months ago
Kramer, you can very easily skirt around the 10% rule. 1. The developer can sell no more than 9.9% of the flats to a single entity. This would work very well with a building that is closed 50 or 60 or 70% but not like Icon Brickell which is 0.5% closed. Buildings like that will require 8-10 different bulk buyers. 2. A single bulk buyer can buy more than 10% of the flats but split them into different purchases by floating another company. For example if ACME I company wants to pick up 15% of the flats in a building,… Read more »
Anonymous
chris
7 years 7 months ago

Wait for the market to recover to what? The building boom over the last few years was a complete fraud and sham. There was NO real demand for end users. Miami does not have the job base like an Atlanta, NYC, or Chicago that will eventually gobble up urban, downtown condos.

Then, just say the market somehow does have an uptick in strong demand…there are dozens of shovel ready condo sites ready to break ground at any moment. Buyers will want the shiny, new towers versus these old rental units.

Anonymous
BMW M3
7 years 7 months ago

Lucas, opportunities? Really? Why don’t you just change your name to Lawrence Yun.

Anonymous
Kelly Thomas
7 years 7 months ago

We were looking very closely at Harbour House I am just glad we held off, we are most probably going to hold off until the end of this year.

Anonymous
Doctor
7 years 7 months ago
AJ, You’re right about #1, but I think #2 is incorrect. Parent-child entity relationships will probably be viewed in terms of the parent, and not the children. They’ll define entities by ownership rights, so if the same fund or set of people split their 15% into two child entities, the gov’t won’t recognize the two children as different owners. What could work (depending on interpretation) is if the ownership group differs between the two children, i.e. not everybody has ownership stakes in both children. The fund GP’s own and run both children, but divide the fund’s LPs between the children… Read more »
Anonymous
Renter Tom
7 years 7 months ago
AJ said: “Kramer, you can very easily skirt around the 10% rule. 1. The developer can sell no more than 9.9% of the flats to a single entity. This would work very well with a building that is closed 50 or 60 or 70% but not like Icon Brickell which is 0.5% closed. Buildings like that will require 8-10 different bulk buyers. 2. A single bulk buyer can buy more than 10% of the flats but split them into different purchases by floating another company. For example if ACME I company wants to pick up 15% of the flats in… Read more »
Anonymous
ocean5
7 years 7 months ago

Using loopholes to your advantage is perfectly legal and done all the time. Many commercial transactions are done and corporate sturctures created to avoid certain thresholds like this 10% rule. Bulk buyers would still maintain effective control even if all condos are not held by the same entity.

Anonymous
Renter Tom
7 years 7 months ago

ocean5 – You are mistaken. If the control is with one entity, then this is an attempt to defraud the fed govt/Fannie/Freddie. Typically these things are drafted to included related entities so the “loophole” will get you in trouble since the fine print will get you. Why not just do it above board? Aren’t we all just sick and tired of creative criminals?

Anonymous
Renter Tom
7 years 7 months ago

ocean5 – You are mistaken. If the control is with one entity, then this is an attempt to defraud the fed govt/Fannie/Freddie. Typically these things are drafted to included related entities so the “loophole” will get you in trouble since the fine print will get you. Why not just do it above board? Aren’t we all just sick and tired of creative criminals? I know I am.

Anonymous
RAM
7 years 7 months ago

Renter Tom & Doctor,

Private Equity funds (i.e. bulk buyers) are more concerned over the return on their investment (IRR) than control over carrying costs, lease terms, etc.

Besides skirting the 10% rule, bulk buyers set up different LLCs as materially different entities to reduce their liabilities /risks with the units purchased.

Anonymous
ocean5
7 years 7 months ago
Renter Tom – Where do you see the rule was written the way you suggested? If that’s the case then you are correct. All I’m saying is that loopholes are exploited all the time and it is perfectly legal until some authority says it is illegal. Using those loopholes may go against the “spirit” of the law but does not violate the “letter” of the law. Why do you think companies use numerous legal structures to do business? Mostly to shield against liabilities and tax reasons. When people take losses on investments at certain specified times to offset gains somewhere… Read more »
Anonymous
H20
7 years 7 months ago

Ocean5,

That is excellent reasoning.

I’m sure you will even convince the judge you’ll be in front of after trying it.

Anonymous
H20
7 years 7 months ago

Off topic but here goes…

What is the closing rate for Trump Tower 1 & 2?

Anybody know?

Anonymous
7 years 7 months ago

I got the solution, a bulk buyer can marry that single nut job with the 14 kids and put 7.14% in each kid’s name.

Anonymous
Alex
7 years 7 months ago

Lucas,

Questions for you.

Do the funds approach the developers, agents or banks when they have interest? Are the sales fees negotiated up front?

How many funds have now set up shop in Miami? Who are they?

You make reference there are bulk sale opportunities from $3M-$60M. Where can somebody find out which projects these are?

Anonymous
jcrimes
7 years 7 months ago

RAM
sorry, but the days of lenders and secondary buyers being that stupid are over. their stupidity these days is primarily relegated to handling all the defaulted loans and REO.

Anonymous
RAM
7 years 7 months ago

jcrimes,

I was not referring to lenders / secondary buyers and their current responsibilities.

My reference was about private equity funds (i.e. bulk buyers.) and how they structure their investments.

Anonymous
7 years 7 months ago

We are spending a lot of time negotiating how bulk buyers will slip through the 10% loop-hole… it doesn’t matter if bulk investors create a thousand little companies… smart banks aren’t going to lend in Miami condo’s, and will “Black-list” these condos simply due to deceitful Bulk Buyer Purchases, along with high rental percentages… we’re entering a new era, creating new banking rules as we go.

There will not be any bank loans in these buildings, unless the Obama Team is going to subsidize/guarantee loans for home owners.

Anonymous
RCR
7 years 7 months ago

Chris said it all. Recover to what?

Anonymous
Renter Tom
7 years 7 months ago
ocean5 – I understand business entities and structuring deals using different business entities to minimize risk. However, when the same group forms First, LLC; Second, LLC; and Third, LLC to buy condos in the SAME building…..little risk reduction occurs and if done for the purpose of “evading” the 10% ownership rule….I doubt that will fly. The point is Freddie/Fannie/Whatever don’t want to lend in building where ownership is concentrated in whatever percent ownership. Simple due diligence would reveal that the same parties own all three so Freddie/Fannie then won’t lend or buy those mortgages up as the case may be.… Read more »
Anonymous
Renter Tom
7 years 7 months ago

RCR – Recovery to 1999….

Anonymous
Renter Tom
7 years 7 months ago

CNBC “House of Cards” special is on…..looks to be good.

Anonymous
AJ
7 years 7 months ago

RT,
Forget about wishing jail on someone, why don’t you break free from the solitary confinement that you are in right now. You are a loner and forever under house arrest in front of your computer. I sincerely wish some freedom for you.

Anonymous
The Ace
7 years 7 months ago

Bulk Buying – A Smart Money specialty @ $125.00 per sq ft average price.

The Smart Money in action.

Anonymous
Muir
7 years 7 months ago

The Ace <—— wakes up early (5:48) The Smart money always gets the worm! :-)

Anonymous
Muir
7 years 7 months ago

Greenspan: “greed happens.”

Anonymous
K-Rich
7 years 7 months ago
As a bulk buyer, I would absolutely want to invoke the 10% rule. Most bulk buyers want to hold for 5-10 years anyway. The lack of Fannie financing in the short term is not a problem for the bulk buyer, only the individual unit owner. Removing the possibility of Fannie financing from all the individual unit owners will instantly reduce values in the building even further, giving the bulk buyer an opportunity to increase his ownership in the building at even more depressed values as the individual owners throw in the towel + CONTROL OF THE BOARD. It is now… Read more »
Anonymous
Realist Bob
7 years 7 months ago
Unfortunately, some people are terribly displeased with the Miami media’s reportage on the bursting real estate bubble. From Miami CBS news reporter David Sutta’s blog: Feb 11, 2009 4:21 PM The Realtor Who Created Quite a Stir Posted by Sutta God bless Karol of Coral Springs. She sent us an email last night and the forwarding/replies inside our building haven’t stopped since. Here is what she wrote: Karol XXXXXX xxxxxxxx@aol.com Coral Springs 954-xxx-xxxx STOP! STOP! STOP! ALREADY WITH THE NEGATIVE NEWS ABOUT THE HOUSING MARKET! YOU’RE KILLING THE REAL ESTATE COMMUNITY!!! WHY CAN’T YOU ACCENTUATE THE POSITIVE!!! IT’S THE BEST… Read more »
Anonymous
Realist Bob
7 years 7 months ago

Still waiting for the comment to appear… let’s see if David Sutta approves it.

Here’s the link to the post:
http://pod08.prospero.com/n/blogs/blog.aspx?nav=main&webtag=wfor_davidsutta&entry=144

Anonymous
Mike
7 years 7 months ago

Ace! You are so ridiculous it’s almost obscene to read. It’s funny how you call yourself “the smart money”. I am taking a wild guess that you still live with your mom and don’t pay any rent, most girls wouldn’t call you “the smart money” but “the pathetic money who knows absolutely nothing bout the market unless you ask his mom”.

Anonymous
Renter Tom
7 years 7 months ago

AJ wrote: “RT,
Forget about wishing jail on someone, why don’t you break free from the solitary confinement that you are in right now. You are a loner and forever under house arrest in front of your computer. I sincerely wish some freedom for you.”

– Thanks AJ….love and kisses to you too. Sorry to hear you are a total real estate fraud though. No credibility left I am afraid. Go back to DJing or VJing and rockin’ to the oldies you past primetime investment fool.

Anonymous

[…] have continued to hit the market, financing has become extremely difficult to obtain and a few bulk condo deals have closed in that time.  As a result, it should come as to no surprise that overall condo prices […]

Anonymous
Mark
7 years 6 months ago

Hello:

I am interested in additional information on bulk condo sales as mentioned in your note. I appreciate any information you might provide.

Thank you
MK

Anonymous
7 years 4 months ago

I have clients that are intrested in bulk condos, must be finished buildings and not so many sold, if you have something please contact me asap. Thanks

Anonymous
7 years 4 months ago
Anonymous
anthony
6 years 7 months ago

condo package F/S–package consist of 170 units
florida location
great location!
great investment!
serious buyers only please!

contact anthony: Broker
(727) 645-5272
apollo29@tampabay.rr.com

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