Developers Renting Their Inventory as a Last Resort
On Friday, the Daily Business Review published an article entitled, “Condominiums: Holding Pattern”. The article points out that several developers of recently completed condo developments have opted to rent their unsold or defaulted inventory to remain afloat.
The question that resounds throughout the article is whether or not this approach makes economic sense for these developers. Their hope is that the rental income earned will buy them time until the market rebounds.
The Midtown Miami development lies at the forefront of the article. Midtown 2 has had considerable problems with closings since they began in May of this year. As stated in the article, I have found only 179 closings for their 338 total units. The class-action lawsuit against the developer by contract holders certainly hasn’t helped matters. However, the root of the problem lies in the fact that the preconstruction prices offered by the developer were much too high for that neighborhood. Units were sold with a promise that the neighborhood would somehow be transformed within three short years. The reality is that the neighborhood is still at least another 3-5 years away from delivering on that promise. Initial prices at Midtown 2, and Midtown 4 for that matter, were higher than more desirable Brickell condo developments such as Plaza on Brickell, 500 Brickell and Axis.
Sandra de la Torre, a sales agent at Midtown Miami, stated in the article that 20 developer units were available for rent and 20-25 were available for sale. I highly doubt that this is the only inventory that the developer has in his possession, given that only 179 closings at Midtown 2 appear in public records. It is much more likely that at least 30 percent of the building will eventually be available for lease through the developer. I haven’t heard anything lately regarding the class-action lawsuit, so maybe it is still pending and a large portion of the unaccounted units can be tied to that.
Rental prices will need to be quite attractive at 2 Midtown in order for potential tenants to be enticed into signing a lease there. Many more options will become available for renters in the upcoming months in more desirable neighborhoods at attractive prices. In the Miami Arts District, The 1800 Club, in my opinion, will drive rental prices down throughout the neighborhood once closings begin and investors eventually opt to lease their units. The prices at The 1800 Club were quite attractive when sales were initially launched. This is one condo building where it might make economic sense for the developer to rent its remaining inventory. The neighborhood immediately surrounding The 1800 Club has a greater chance of rebounding within the next couple of years than that surrounding Midtown Miami. Vulture capital funds should keep a close eye on The 1800 Club because it could become the ideal development to invest in future months if prices dip below initial preconstruction prices.
Plaza on Brickell and Axis are two condo developments in Brickell that will drive down rental prices throughout the neighborhood once they are completed. Both were attractively priced and will ultimately provide Brickell renters with highly competitive rental prices. Both developments were backed by a high percentage of investors who will also likely lease their units to wait for the next upturn in the condo market.
The Sail on Brickell was also mentioned in the article as being another development that has sought to rent its remaining inventory. I was not aware that Renzi Development had failed to close on it 152 total units until I read this story. I wasn’t surprised, however, given that it is a second-tier condo development in Brickell that has been riddled by mortgage fraud. As a result, the Sail on Brickell will no longer be included in the Brickell Condo Index. It will eventually be replaced by Latitude on the River once it has closed on all of its units.
As for Midtown 2, I think they’ll be lucky to get rental rates of $1.75 per square foot. The “rent and wait” option doesn’t make economic sense for this development, in my opinion. The developers of the Sail on Brickell, which doesn’t reside on Brickell Avenue, will also have difficulties in making their rental numbers work. I think one bedrooms there will eventually rent for around $1,250 per month.
Bayfront Brickell Condo Foreclosure to Sell Below $200 Per Squar Foot?
I’ve been keeping a close eye on a 4 bedroom/4 bath split-level bank-owned condo at Atlantis on Brickell for quite some time. It has 2,628 square feet of interior living space and is located on the third floor. The price has continually been reduced throughout the months that I’ve kept an eye on it, but it now looks appealing. The list price on this unit is $559,900, or $213 per square foot, at the present time.
Below you will see the price changes since it was listed on May 16, 2007:
05/16/2007 – $799,900
06/13/2007 – $759,900
07/16/2007 – $719,900
08/03/2007 – $679,900
08/28/2007 – $644,900
09/25/2007 – $559,900
Unfortunately, the pictures that accompanied the listing are no longer available. I haven’t personally viewed this property yet, but the pictures that were previously available made it apparent that the unit definitely needed some TLC. A few people in my office did visit the unit about six weeks ago and did confirm that the unit does need much work. On the high end, a $170,820, or $65 per square foot, build-out project should make this unit into an A+ residence. A $500,000, or $190 per square foot, offer should seal the deal on this condo given the continual decrease in price every month. I’m sure that Deutsche Bank is growing tired of keeping this property on their books month after month.
A 3/3 with 2,171 square feet of interior space on the same floor at Atlantis on Brickell, which needs some work of its own, is currently listed on the MLS for $750,000, or $345 per square foot. Invest $65 per square foot to fully renovate the unit, with an overall price per square foot of $255, and you should do well.
Jorge of the Jungle
A few months ago I wrote a post entitled, “Advice to Miami Condo Sellers“. It was a highly read piece because of the inventory figures that were provided. I highly recommend that you read it if you recently discovered this blog and are curious about the developments that are scheduled to close within the next two years in Miami.
Of the 6,951 condos scheduled to be delivered within the next 17 months in Brickell, the new inventory represented by The Related Group of Florida roughly amounts to 50 percent. Matt Allen, chief operating officer and executive VP of The Related Group, indicated in yesterday’s Miami Herald article about the Platinum Condominium auction that The Related Group would never resort to utilizing the auction system to sell defaulted condo units.
This statement is neither inaccurate nor misleading for a number of reasons:
The Related Group is known to leave money on the table for investors. Their preconstruction prices are, for the most part, well below those that were offered at comparable developments in the area. Some developers sell their preconstruction inventory in batches, with each subsequent group of condos sold at a higher price per square foot than the preceding batch. The Related Group, however, sells out in one day and moves on to their next development.
The Related Group is a highly reputable developer. Reputation goes a long way in this business. Many investors made a lot of money by investing in developments that were tagged with The Related Group name. Thereafter, investors blindly endorsed deposit checks to them for preconstruction condo units solely based on their reputation. Their reputation would be highly damaged if they ever sold their unsold inventory via an auction.
The Related Group is well connected. They will never utilize the auction system because they have strong ties to the investment community. George can make one to two phone calls and have the excess inventory from his developments disappear at much higher prices than what can be obtained through the auction system. As Matt Allen stated in the Miami Herald article, “When you have an auction, the bottom feeders come out”.
My high school pitching coach taught me that pitching is just like real estate. It’s all about location, location, location. The Related Group has an uncanny knack of choosing the best locations upon which to develop.
It is inevitable that even a developer as highly regarded as The Related Group will have a high number of defaults. However, their excess inventory will likely be swallowed by investment groups looking to buy at a discount. It will happen so fast that the public won’t know about it until months after.
Miami Condo Index – Brickell – September 2007
I received an email last week from a potential investor asking me if Miami is now safer than the “Miami Vice days” that he saw on TV. Indeed, the streets of Miami are much safer than they were 20 years ago, but the corruption that infested the city back then is still prevalent now.
Another month, another fraudulent transaction. I guess nobody cares. As I mentioned last month, the rumors are out there that a government agency is on the lookout for such activity but I’ve begun to lose hope that these rumors hold much water. If these rumors are true, then shame on them for allowing such activity to continue, and allowing the reputation of this city to be equated to that of which was prevalent in the 1980s. This past month, I’ve heard that an FBI agent is living at Vue at Brickell and Jade at Brickell Bay. I wouldn’t be surprised if one lives at The Club at Brickell Bay as well.
The continuance of fraudulent activity in Brickell has sickened me. The sooner that the Miami Herald, or some other major newspaper, goes public with this story, the better. The fraudulent activity just needs to stop. It is doing nobody any good to let the fraudulent activity prevail, except those who are facilitating it.
Sorry, but I just had to rant and rave for a moment. Now, back to our regularly scheduled program (but I’ll continue to rant and rave towards the end when I disclose the latest fraudulent transaction).
The average price per square foot of condos listed in the 18 Brickell buildings included in the Brickell Condo Index has dropped to $525.88 from last month’s average price per square foot of $529.05. The weight-adjusted average has also dropped to $530.15 versus last month’s weight-adjusted average price per square foot of $537.67. Both figures are below those that were calculated in July as well.
Average price per square foot of units currently listed on the MLS:
The average price of condos sold over the past six months has dropped to $467.47 per square foot versus last month’s figure of $471.94 per square foot. The weight-adjusted average has also dropped to $486.30 per square foot from last month’s weight-adjusted average of $498.36 per square foot. Much of the decrease is due to the a sizable drop in the averages at The Club at Brickell Bay and Vue at Brickell. Both buildings had fraudulent transactions that fell off the six month average.
The Sail at Brickell had yet another fraudulent transaction this past month. It was conducted by the same broker that conducted the fraudulent transaction at The Sail at Brickell that I spoke of in July. Once again, the broker acted as the listing agent and the selling agent. He must have some luck! He was also able to close the deal the same day that the deal went pending. Imagine that! This guy works miracles. He was able to sell a 2 bedroom/2 bath at The Sail on Brickell for $670,000. Well at least he was able to negotiate the price down $10,000 for his buyer. He has some smooth negotiating skills. He must also have some great persuasion skills because nobody in their right mind would pay $670,000 for a 2 bedroom at The Sail on Brickell.
Average price per square foot of condos sold in the past 6 months:
Solaris at Brickell – 186 SE 12 Ter | 33131 | $457.45
The Club at Brickell Bay – 1200 Brickell Bay Dr | 33131 | $660.39
The Mark on Brickell – 1155 Brickell Bay Dr | 33131 | $501.16
The Palace – 1541 Brickell Ave | 33129 | $363.32
Villa Regina – 1581 Brickell Ave | 33129 | $316.62
Vue at Brickell – 1250 S Miami Ave | 33131 | $464.83
This is the first month that a development has had a price per square foot under $300 for condos sold over the previous six months since I began this index. Atlantis on Brickell broke through this barrier with an average price per square foot of $298.11. This figure for Atlantis on Brickell will likely continue to decline as a bank-owned listing has remained on the market for quite some time and will likely sell for around $200 per square foot.
Below you will find the new statistics that I have included in this month’s Brickell Condo Index. The first number directly to the right of each development name represents the total number of active listings. The second number, in parentheses, is the number of currently listed condos expressed as a percentage of the total number of condos in the development. The third number represents the number of pending sales while the fourth is the number of closed sales within the past month.
Atlantis on Brickell – 13 (13.54%) | 1 | 1
Brickell on the River North– 59 (18.21%) | 4 | 0
Bristol Tower – 19 (12.93%) | 3 | 1
Emerald at Brickell – 34 (23.94%) | 1 | 0
Four Seasons Residences – 18 (6.67%) | 3 | 0
Imperial at Brickell – 15 (9.32%) | 2 | 0
Jade at Brickell Bay – 76 (23.31%) | 6 | 1
Neo Vertika – 78 (17.61%) | 7 | 0
One Miami – 165 (18.42%) | 6 | 2
Sail on Brickell – 64 (42.11%) | 2 | 1
Santa Maria – 10 (5.75%) | 1 | 1
Skyline on Brickell – 54 (15.00%) | 2 | 1
Solaris at Brickell – 21 (15.22%) | 2 | 1
The Club at Brickell Bay – 145 (22.55%) | 11 | 1
The Mark on Brickell – 43 (11.62%) | 0 | 1
The Palace – 25 (9.84%) | 1 | 0
Villa Regina – 20 (9.62%) | 0 | 0
Vue at Brickell – 62 (19.20%) | 1 | 0
Two numbers jumped out at me when reviewing this month’s findings: the 42.11% of available listings at The Sail on Brickell and the 11 pending sales at The Club at Brickell Bay.
I knew that prices were high and unjustified at The Sail on Brickell with mortgage fraud having much to do with it, but I never would have imagined that over 40 percent of the building would be available for sale. That’s incredible! However, a look at the current list prices should make those who have visited this building realize that the prices at The Sail on Brickell are ridiculous. Of the 18 buildings included in the Brickell Condo Index, I would rank The Sail at Brickell at the bottom. There are no views and the common areas and amenities are below Brickell standards. The developer, Renzi Development, recently announced that they plan to go forth with their Beacon at Brickell Village development. I sure hope they have second thoughts. The Sail on Brickell will eventually sell for around $250 per square foot (and that’s being generous). If I were a condo owner who is motivated to sell at The Sail on Brickell then I would be priced at the front of the large pack.
When I saw the 11 pending sales at The Club at Brickell Bay I was quite surprised. At first I thought it was my lack of REM sleep setting in. Once I realized that it wasn’t, I had to investigate further. What I found made this number a complete sham. Of the 11 pending sales, 9 of them have been pending since 2005 and 2006. What the….? It usually takes two months, maybe three months tops, to take a pending sale to the closing table. The other two pending sales have been pending since January and March of 2007. Something just isn’t right. Most likely the sales prices couldn’t be justified. Take 6 months, 12, months, 36 months and the prices still won’t be justified. These transactions should be reclassified as “hopeless” rather than pending. A 1 bedroom/1 bath at The Club at Brickell Bay will be going up for auction tomorrow, September 19, 2007 at 3pm. That will give everyone a good indication as to the fate of prices at The Club at Brickell Bay. You can be sure that I’ll report about it within the next couple of days.
So there you have it, that is the latest Brickell Condo Index. The good news is that there were 11 closed sales within the past month versus a total of eight closed sales the month prior to last. There were a total of nine closed sales the month prior to that.
There are a total of 42 pending sales disregarding the 11 at The Club at Brickell Bay since those have been discredited. As long as half of those transactions actually close, then there should be about 10-11 closed sales next month. I guess we’ll just have to wait and see. I’m praying that we won’t have another fraudulent transaction then. If we do, and you thought I ranted and raved now, just wait until next month.
Highly Motivated Seller of Two Latitude on the River 2 bedroom/2.5 Bath Condos – $395,000!!!
The owner of two condos at Latitude on the River contacted me earlier this week. He is highly motivated to sell both of his 2 bedroom/2.5 bath condos and is willing to consider all reasonable offers. He has already closed on both of these B12 units and is willing to accept a loss on each of them.
One of the condos is located on the 17th floor while the other is located on the 20th floor. He went into contract on both of these units in Summer of 2005 but paid the original prices that were offered when sales were initially launched. The contract price on the condo located on the 17th floor was $455,000 while the one on the 20th floor was $461,000. His closing costs were approximately $10,000 for each unit. The slideshow below will show some pictures that I took of the unit on the 17th floor.
The unit on the 17th floor is listed at $459,000 which currently offers the best price per square foot of all 2 bedroom condos at Latitude on the River. There’s a two bedroom listed on the MLS for less but the square footage is inaccurate. The listing agent of that unit decided to include the terrace space as well. The interior space of that condo is actually only 1,179 square feet.
The amenities at Latitude on the River are highly impressive and is a huge selling point for this building. It has some of the best amenities that I’ve seen of the newer condo developments. At this price point, I haven’t seen any that match the quality of amenities that can be found at Latitude on the River. The lobby, landscaping and water features of the building are quite impressive as well.
2-story state-of-the-art fitness center and yoga room
4 high-speed elevators
If you’re in the market to buy a 2 bedroom/2.5 bath at Latitude on the River then this is your chance to score a great deal. Contact me today if you’d like to submit an offer on one or both of these condos.
Both of the units come decorator-ready with concrete floors. The following slideshow will show you a few pictures of a fully decorated unit so you can see what one of these can look like.
Update: This condo closed on December 27, 2008 for $546,000.
Emerald at Brickell 3 Bedroom/4.5 Bathroom Penthouse Looks Like a Steal
This past week I came across a 3 bedroom/4.5 bath Penthouse condo at Emerald at Brickell that is priced at $975,000. I had to do a double-take when I saw the listing because I know that the 2 bedroom residences at Emerald at Brickell are listed in the $900K’s to as high as $1.45M. The listing shows this 3 bedroom/4.5 bath condo as having 2,847 square feet of living space.
I believe there are only 4 Penthouse units at Emerald at Brickell. Currently, this is the only Penthouse condo that is available on the market at Emerald at Brickell. The Penthouse units have a spiral staircase which lead to the rooftop pool and fitness center. The views from the pool deck are the best that I have seen from the pool deck of a condo building in Miami. (Unfortunately, the picture below shows only a bit of how great the views are from the rooftop).
Penthouse condos are supposed to sell towards the high end of a building’s average price per square foot. The August Brickell Condo Index revealed that condos at Emerald at Brickell had an average list price of $535.01 per square foot while condos sold over the previous six months had an average price of $474.85. This 3 bedroom/4.5 bath condo at Emerald at Brickell is listed at $342.47 per square foot. This seems like a steal to me.
I haven’t been able to get a hold of the listing agent, however. The only contact number that accompanies the listing is that of his office. I’ve called and they have told me that he is out of the country and are not sure when he will return. The price may be a misprint but if it it is not, then I assure you that this is a fantastic deal.
A 3 bedroom/3.5 bath Penthouse sold for $1.25M in October of 2006. That unit has 3,098 square feet. That amounts to $403.49 per square foot. With the views that the penthouse units offer at Emerald at Brickell, I think anything under $1M is a bargain. This is an east-facing penthouse condo by the way.
Villa Regina – 3 Bedroom/2 Bath – Motivated to Sell Now!!!
A few days ago, I acquired a great listing for a 3 bedroom/2 bath condo with direct bay views from the 19th floor at Villa Regina. I normally don’t discuss my listings on this blog. However, due to the motivation of the seller, I decided that this could be a good opportunity for a buyer looking to buy a beautiful condo at Villa Regina at a great price.
The owners of the condo recently accepted a job offer in another state and need to sell right away. It would make their lives much easier knowing that their Miami residence is sold so they can concentrate on their new move. They are planning to relocate within 60 days.
The listing agreement was signed on Monday and I input it into the MLS later that night. We listed it for $685,000. At $685,000, the condo is well priced, given the competition in the building and the fact that the owner is willing to pay two years worth of monthly maintenance fees. This amounts to a savings of $27,134.40 over the following 24 months after closing. The next best priced condo in this line is priced at $699,000 and is located 11 floors below the condo that I have listed. That unit did not convert its space to three bedrooms, nor does it offer any type of buyer incentive.
Okay, okay…so a $14,000 ($41,134.40 with the two years worth of monthly maintenance fees paid) difference in price doesn’t make for an outstanding deal. How would it sound though if a buyer could acquire this property for $600,000 even? Sound more enticing? The owners are so motivated to have their condo under contract within the next 30 days that they are willing to accept an offer that would net them $600,000 before, not after, commissions.
This newly listed condo at Villa Regina has 1,895 square feet of interior space and two large balconies. It was formerly a 2 bedroom/2 bath but was converted by the current owners to a 3 bedroom soon after they purchased the condo in 2002. It is the only currently listed condo at Villa Regina to be converted into a 3 bedroom. I’ve seen a lot of condos at Villa Regina and this one is a fantastic buy. The condo has hard wood floors throughout all living areas except both bathrooms and the master bedroom. Both bathrooms have marble flooring while the master bedroom has Berber carpet. The condo also have a dry bar with wine cooler, upgraded kitchen cabinetry and appliances, upgraded washer/dryer and upgraded master bath and second bath. The furniture that currently resides in the condo is negotiable.
I received a phone call from a local Realtor Tuesday evening to find out if she could show the condo Wednesday at 5pm. She doesn’t know that my client is motivated to the point to accept a $600,000 offer. The fact that I received a showing appointment within 24 hours of it being listed at $685,000 goes to show me that the condo is well priced. At $600,00, it is priced phenomenally.
My clients hope to have their condo under contract within the next 30 days. For that peace of mind, they are willing to accept a much lower price. They realize that an executed contract normally takes 30-60 days to close so they are only willing accept a $600,000 offer if it is presented within the next 30 days.
Villa Regina recently had a special assessment to modernize its lobby, hallways, marina, fitness center, club room and landscaping. The special assessment has been paid in full by the current owner.
I am encouraging all buyers who have an interest in purchasing a 3 bedroom on Brickell Avenue to take a look at this condo. I dare you to find a better 3 bedroom condo in a building that resides on Brickell Avenue for $600,000 or less. I constantly search the MLS for great deals and I just don’t think you’ll find a better deal. Contact me if you would like to take a look at this condo in person.
Neo Vertika 2 Bedroom + Den on the 29th Floor – $303,000
Two Mondays ago I reported that a 2 bedroom + den loft at Neo Vertika went up for auction. The auction had a dismal turnout and the highest bid was quickly rejected by the bank.
Since that time I have submitted two offers to the bank. The bank has recently stated that they would accept an offer of $303,000 if the closing can happen by September 20, 2007. They want absolutely no contingencies, such as financing or inspections. The unit has never been lived in and comes “decorator-ready”.
The loft faces south and has views of the bay and overlooks the swimming pool. The unit is on the 29th and 30th floors and has 1,255 square feet of interior space as well as a large balcony off the main floor. It has 20-foot ceilings and comes with the upgraded stainless-steel appliance package.
The lowest that a 2 bedroom at Neo Vertika of this size has sold for in 2007 is $400,000. If you, or anyone you know, would like to make an offer then please contact me. A pre-approval letter must accompany the offer.
Now That’s What I Call a View – Penthouse Condo at Santa Maria
Scanning through MLS listings a few weeks ago I came across an extraordinary condo for sale at Santa Maria. It is a 5 bedroom/6.5 bath condo with an amazing 6,300 square feet of interior space and a total of 3,250 square feet of terrace space. The views from this penthouse are breathtaking, to say the least. In my opinion, this is the best luxury condo currently available for sale of all Brickell condos. The price tag on this baby is a cool $5.6M.
The following description accompanies the listing:
Eclectic sophistication at Santa Maria. Unsurpassed panoramic views from the downtown skyline to Key Biscayne & the Atlantic Ocean. This luxurious 6,300 SF private penthouse boasts the largest curving terraces: 3,250 SF total. The 5BD, 6.5 Bath split floor plan affords maximum privacy for family living. Floor to ceiling glass walls, marble floors. Motorized window treatments & lighting, plasma TVs & surround sound, custom built-in bar with 2 wine coolers. A lavish master suite with his & her baths, walk-in closets & office. Secondary bedrooms with Ensuite marble baths & walk-in closets. Fully equipped kitchen with Snaidero cabinets and 3 parking spaces.
Click here to view the listing information and other pictures of this 5 bedroom/6.5 bath Penthouse condo at Santa Maria.
