Last week I mentioned that I was planning to create a Miami Condo Index to provide pricing insight to homebuyers in various neighborhoods in Miami and Miami Beach. This week I decided to kick things off with Brickell.
It was difficult to come up with a final list of buildings that should be included in the Brickell index. For example, is Neo Vertika in Brickell or should it be in a different category like West Brickell? Is One Miami part of downtown or should it be grouped with Brickell buildings? After much thought, I decided to include both. There simply aren’t enough buildings of interest in West Brickell or downtown to necessitate a separate neighborhood index for West Brickell and downtown. Eventually, One Miami will be grouped with downtown buildings as more developments are completed north of the Miami River. Another question remained as to whether buildings in Brickell Key should be grouped with buildings in Brickell to create a Brickell/Brickell Key index or should a separate index be created for each? I decided on the latter.
Earlier today, I finished crunching the numbers and evaluated my findings. Much of it was quite shocking. I took 18 prominent buildings in Brickell and created two separate spreadsheets. The first spreadsheet calculated the average price per square foot of units currently listed in the 18 buildings in Brickell. The second calculated the average price per square foot of units that have sold in those 18 buildings in the past six months. I also weighted each building according to how many units they had when compared to the sum of the units of all 18 buildings. This helped to arrive at a more accurate representation of the typicalBrickell condo.
First I’m going to show you the average price per square foot of the units currently listed on the market:
Some of those averages shocked the hell out of me. How can condo units at The Club at Brickell Bay have an average list price of over $650 per square foot? (I’ve heard reports of mortgage fraud in that building as well as at Jade and Vue at Brickell.) The average price per square foot for condos currently listed in Brickell using these 18 buildings came out to $536.28. The weight-adjusted average came out to $547.06. The Club at Brickell Bay, with 642 total units, skewed the weight-adjusted average higher than the regular average.
Next we’ll take a look at the average price per square foot in these buildings based on closed sales. Keep in mind that this is the average price per square foot. Condos that have a better view or are on a higher floor than the average condo in the building will obviously have a higher price per square foot. These figures were equally shocking.
Atlantis – 2025 Brickell Ave | 33129 | $335.12
Brickell on the River – 31 SE 5 St | 33131 | $411.79
Solaris at Brickell – 186 SE 12 Ter | 33131 | $436.21
The Club at Brickell Bay – 1200 Brickell Bay Dr | 33131 | $634.15
The Mark on Brickell – 1155 Brickelly Bay Dr | 33131 | $506.81
The Palace – 1541 Brickell Ave | 33129 | $350.88
Villa Regina – 1581 Brickell Ave | 33129 | $316.62
Vue at Brickell – 1250 S Miami Ave | 33131 | $556.59
Condo units at The Club at Brickell Bay had a higher average price per square foot than condos at Santa Maria when looking at closed sales. I had to double check my work once I saw that, but everything checked out.
I tried to eliminate any data that was irregular. For example, in the past six months Pharrell Williams purchased developer Ugo Colombo’s Penthouse unit at Bristol Tower for $13,950,000, or over $1,500 per square foot. I discarded it because it was deemed irregular.
The average price per square foot for these 18 buildings, based on closed sales, came out to $471.76. The weight-adjusted average came out to $495.13.
Using both data sets I also wanted to figure out how overpriced listings are in Brickell when compared to what they actually sell for, on average. I also was curious to find out which buildings were the most overpriced. Here is the data below:
Atlantis – 2025 Brickell Ave | 33129 | 0.73%
Brickell on the River – 31 SE 5 St | 33131 | 12.01%
Solaris at Brickell – 186 SE 12 Ter | 33131 | 16.09%
The Club at Brickell Bay – 1200 Brickell Bay Dr | 33131 | 3.63%
The Mark on Brickell – 1155 Brickelly Bay Dr | 33131 | 2.78%
The Palace – 1541 Brickell Ave | 33129 | 9.99%
Villa Regina – 1581 Brickell Ave | 33129 | 29.67%
Vue at Brickell – 1250 S Miami Ave | 33131 | -1.04%
On average, condo units at The Sail on Brickell have a list price that is 45.78% higher than the average sales price of units sold in the past six months. Either owners of units in that building have unrealistic expectations or agents conducting business there have not provided their clients with an accurate comparable market analysis.
On average, Brickell condo listings were priced 13.98% over the average sales price of units sold in the past six months in these 18 buildings. When using a weighted average, the typical Brickell condo is overpriced by 10.48%. The weighted average is lower because most of the large differences occur in smaller buildings such as The Sail on Brickell.
Keep in mind that statistical data is never perfect. It grows more accurate as additional data is incorporated. The same holds true for a major league baseball player. The first five at-bats in his major league career won’t dictate how the rest of his major league career will fair. The Miami Condo Index will shed more light as time goes on and patterns and trends begin to emerge in the data.
In the next two weeks I will reveal the findings for Brickell Key and South Beach. I will follow-up each neighborhood index report with a post highlighting any fantastic deals that I come across in the buildings covered.
An Analytical Analysis of Analyzing Condominiums
People often ask me why I chose to focus on condominiums rather than single family homes when I began my career in real estate. I guess the answer is mainly attributable to my formal education and the work experience I gained after graduating college.
As mentioned in the About Me section of this site, I graduated from the University of Illinois at Champaign-Urbana with a Bachelor of Science Degree in Finance with a specialization in Investments. After graduation, I worked as an equity options trader on the floor of the Chicago Board of Options Exchange for four years.
It became second nature for me to begin to analogize most aspects of my life in investment terms. Condominiums to me had similar homogeneous characteristics as that of a financial security than single family homes.
In my opinion, it is much easier to analyze the true market value of a condominium than it is for a single family home. A price per square foot analysis of condo units in a building, and even a neighborhood, reveals more truth than the price per square foot analysis of single family homes on a particular street or in a particular neighborhood.
A 2 bedroom condo in a particular building, in many instances, will have the same characteristics of another 2 bedroom condo in that same building, such as shared common areas, amenities, year built, square footage, appliances, floor plan, maintenance fees, view, parking spaces and so on. Any differentiations in the aforementioned qualities can be easily adjusted in the value of the subject property versus comparable properties.
It is much more difficult to assess the value of a single family home. It is common to see a small, outdated home situated right down the street from a large, recently built home. Of course there are ways to appraise the values of each by making adjustments for any differentiations in each home but it just isn’t the same, in my mind. A home buyer may fall in love with one home while he or she finds the home right down the street an eyesore.
It becomes much more expensive to turn a home down the street into your dream home than it is to turn a condo down the hallway into your ideal abode. The expense of replacing or changing the floors, paint job, window treatments, light fixtures and other elements of a condo can more easily be ascertained.
These thoughts guided me into the decision of choosing to specialize in condominiums over single family homes when I began my career in real estate. As the housing bubble talk began to escalate a few years ago, I began to think of how nice it would be conceive a way to hedge real estate investments for the average home purchaser or investor in case of a bubble-popping scenario.
I guess fellow Chicagoans at the Chicago Mercantile Exchange had similar thoughts. They created a tradable home market index based upon the Case-Shiller Home Price Index, which measures home prices based on recorded changes in home values and a repeat sales methodology.
The futures and options instruments that were enacted by the CME began trading in May of 2006. The purpose was to offer jittery homeowners a way to hedge the investment in their homes against future price declines. The CME also saw a large interest from investors to directly participate in the much-talked-about housing market.
While being a giant leap in the right direction, the CME’s housing index is far from perfect. They introduced tradable securities based upon large metropolitan areas which include the following: Miami, Chicago, Boston, Las Vegas, Los Angeles, New York, San Diego, San Francisco, Denver, Washington, as well as a weighted composite index.
However, it is difficult to adequately hedge the value of a condo in a building such as The Setai in South Beach from a condo in a boutique building in Hialeah using their index.
I have decided to create my own, localized, index. This index will be based upon market data derived from major condo buildings in Miami. I will create a graphical representation of a six-month price per square foot moving average using data of closed sales and a month-to-month price per square foot analysis of units currently on the market. I may include other relevant statistics in the future to provide more in-depth information relevant to the Miami condo market. I hope you guys trading the Miami housing index at the CME appreciate the information. I’d love to hear from you.
I plan to release an index update each week. At the outset, I will rotate Miami neighborhoods for a total of four neighborhoods (South Beach, Brickell, Arts & Design District and Miami Beach minus South Beach). In the future I plan to add Downtown Miami and Park West as its own index once the nearly constructed buildings in those areas are fully built.
I’ve decided to name my index the “Miami Condo Index”, or MCI for short. Obviously my index won’t be tradable as is the Chicago Mercantile Exchange’s housing index, but I hope that it will provide more insight to localized housing markets throughout Miami’s major neighborhoods.
The Miami Condo Index will launch next week with an in-depth look at Brickell.
I urge other Realtors throughout the country to create their own localized housing indices to fully encompass their own markets and provide market transparency to home buyers like no other.
Foreclosure Listings at Vue at Brickell Doubles in Three Weeks
On May 24, 2007 I posted an entry entitled, “Vue at Brickell – Overpriced or Insanely Overpriced?“, in which I questioned the average price per square foot of the condo units at a building called Vue at Brickell. I surmised that mortgage fraud may have been partly at fault for prices at Vue at Brickell reaching such irrational levels.
At that time there were three listed foreclosure units in the building. Now, there are a total of six. In three weeks the number of the listed units that are currently in the foreclosure process have doubled. Those are just the ones that are listed. I’m sure there are others. Below you will see those six listings, as well as relevant property information.
(FL#=floor number, #BEDS=number of bedrooms, #FB=number of full baths, #HB=number of half baths, LA=living area square footage, LP$=list price, LP$/SqFt=average price per square foot, #GAR=number of parking spaces, WTRFR=waterfront?)
I find it humorous that two of the listings categorize Vue at Brickell as being a waterfront building. It is far from being a waterfront building.
As you can see, the average price per square foot of the listed foreclosure units at Vue at Brickell is currently $475.81. The non-foreclosure units in the building have a much higher price per square foot. Only one of the six listings penetrated the $400 per square foot mark on the downside. Mark my words, within 18 months the majority of condo listings in Vue at Brickell, both foreclosure and non-foreclosure, will be under $400 per square foot. The availability of such a large number of newly constructed condo units within the next 18 months, in much higher-end buildings, will be the driving force. These buildings already offer price points below $400 per square foot and the growing supply will push those prices even lower.
It now more important than ever that you research various buildings in the neighborhood and receive a comparative market analysis when making a home purchase to ensure that you are making a wise investment. You know what they say…”Buying a home is the most important investment that you’ll make in your life”.
Icon Brickell – 2 Bedroom+Den/2 Bath Becomes Available
Word came to me today that an early contract holder at Icon Brickell has passed away and his contract is up for grabs. The contract has passed from his estate to the developer and The Related Group has it back on the market at the initial price offered when it was purchased in mid-2005. Icon Brickell sold out relatively fast in 2005 and availability is now limited to the condo-hotel units in the Viceroy tower. The Related Group is the most successful developer in Florida and has the reputation of selling out their buildings within the first week. They are known to price their units very well and to leave profit on the table for purchasers rather than squeeze every last penny out of a project. They price their units slightly below market, sell out and then move onto the next project. Great business plan, and it has worked quite well for them.
The condo unit that just came back on the market is unit 2703, located in tower one of the Icon Brickell development. It is floor plan B, which has a southeast view. The picture below will give you an idea of the view that you would have.
It is a 2 bedroom plus den/2 bath with 1,503 square feet of living space and has a 219 square foot balcony. It is priced at $916,000, or $607 per square foot.
Icon Brickell is the second development with the Icon name attached. Icon South Beach was the first and is one of the most well known buildings in South Beach. Icon Brickell is sure to be as spectacular as its South Beach counterpart. The picture slideshow below will show you some renderings of the building and amenities.
Neo Vertika – Living in a War Zone (pictures)
If the building, Neo Vertika, were a stock, I’d be selling it short all day long! This is a follow-up to a previous entry that I wrote on May 21, 2007 entitled, “Shoddy Construction at Neo Vertika?“. Now, there is no question about it.
When I wrote that piece, I had heard about all kinds of problems from residents including three major water leakages, the sprinkler system needing to be replaced in the entire building and each individual unit, and the air conditioning system being unusually loud. I didn’t realize just how bad it was until today. A client of mine, who is renting a Penthouse unit at Neo Vertika, sent me some pictures of the present condition of his condo unit. He began his lease at the very end of April and still has not been able to move his belongings into the unit. It goes without saying that he is looking to break his lease and get his money back. After seeing the following pictures I don’t blame him one bit. Work to replace the sprinkler system in his unit began last week, and he was told that it would take a total of 2-3 weeks. This is occurring in each and every condo unit in the entire building! Neo Vertika is not even one year old yet.
Imagine how high the cost of insurance will be for the building after all the work has been completed. I’m predicting that within the next six months, the association will increase maintenance fees and/or declare a special assessment. If that happens, which I feel is inevitable, prices at Neo Vertika will surely continue to head south.
Short-Sale @ Neo Vertika in Brickell
A short-sale at Neo Vertika just came 0nto my radar yesterday. It is a one bedroom flat with 638 square feet of living space. It has parquet wood floors and is currently tenant-occupied. This condo unit, located on the 10th floor, faces south and overlooks the swimming pool and amenity deck. At a list price of $260,000, it is currently the third best priced unit in the building, but still has room for a few more price reductions before it is snagged by an investor. The great thing about a short-sale is that you are dealing with a bank. Banks hate having bad loans on their books and risk having the property go to auction where they could lose a large portion of the outstanding loan. With foreclosures on the rise, banks have become more open to accepting significant discounts on properties so they can write off the bad debt and avoid foreclosure. It wouldn’t surprise me if this one goes for around $200,000.
The maintenance on this condo unit is $322 per month. I’m trying to find out how much the current tenant is paying but units of this size tend to get anywhere from $1,250 to $1,450 per month in rent. I am going to try to see this condo in the next couple of days to take some pictures and a quick video so I can post it for everyone to see.
Neo Vertika was built in 2006 and has a fabulous lobby and amenities. There have been some construction issues that have tainted the building in the past 6 months but it is currently one of the best priced buildings in Brickell for sales and rentals. It is located along the Miami River and southwest 1st Court. Many of the condo units at Neo Vertika offer great views of Biscayne Bay and the Miami River. Neo Vertika is considered a loft building, with both flat-level and split-level floor plans which have 10-foot and 20-foot ceilings, respectively.
The video below will show you the common areas and amenities at Neo Vertika.
Vue at Brickell – Overpriced or Insanely Overpriced?
I’d have to go with the latter on this one. A look at the current inventory of condo units for sale at the Vue at Brickell will show that the average price per square foot that these units are currently listed for is over $550. $550 per square foot! That’s for a non-waterfront condo unit, with partial bay views at best, in a building that is, by most standards, NOT a luxury high-rise building. In fact, Vue at Brickell was formerly known as Summit Brickell View when it was a rental building. The acquisition of the Summit Brickell View was made in December 2004 and conversion of the 323 units to condos began quickly thereafter. Grant it, the Summit Brickell View had recently been completed when the acquisition was made, and almost 70% of the units had never been occupied. Either way, it had, and in most cases still has, the features of a rental building. The majority of the units currently for sale still have the ceramic tile and carpeting throughout just the way they were sold when the units were sold as condos. The pictures below will show you a typical unit at Vue at Brickell.
Keep in mind that this is a typical unit at Vue at Brickell. I realize that some units have upgraded flooring and appliances, but the majority of units listed at Vue at Brickell look like this. Some units are even listed at over $700 per square foot! Those better come with marble floors, a Sub-Zero refrigerator, a Miele dishwasher, and a butler and maid! But they don’t even come close. In fact, two of those listings priced at over $700 per square foot come with ceramic tile and carpeting throughout, just as they were when the building was known as Summit Brickell View. One of those listings says “motivated sellers”. Motivated? Maybe they’re motivated to WAIT. Even the three bank-owned listings in this building are overpriced, ranging from $436 to $510 per square foot.
So what made this building so insanely overpriced? Did everyone get together and smoke the wacky tobacky without me or is something more afoul going on here? A look at closed sales for 2007 in the building reveal that mortgage fraud may have been the culprit. Three of the eight closed sales in 2007 sold for prices much higher than the asking price. Here they are below:
List price: $549,995
Sales price: $720,000
List price: $619,000
Sales price: $770,000
List price: $647,000
Sales price: $830,000
These types of cash-back deals have been the focus of a recent mortgage fraud investigation throughout the country. A cash-back scam occurs when a buyer offers to pay a significant amount more than the asking price, with the difference returned to them at closing. Most banks like to keep the cash-back amount to no more than 3% of the purchase price, and almost all lenders have a ceiling of 6%. In most cases, the seller and the listing agent are not aware that anything wrong is occuring and are just happy to have finally sold the property. Lenders, on the otherhand, are unaware of these large cash-back payments because the details of the arrangement are concealed within an addendum that does not get submitted to the bank along with the rest of the sales contract. Unscrupulous appraisers are often used to justify the inflated value of the property and the bank lends based on the purchase price stated on the contract after review of the appraisal.
It is no secret that Florida is well known for the mortgage fraud that has been running rampant throughout the state. In fact, according to a report released by the Mortgage Bankers Association, Florida led the nation in mortgage fraud in 2006. Hopefully, the mortgage fraud investigation throughout the state, and the rest of the country, will put an end to this nonsense so property values can return to an equilibrium state as dictated by the law of supply and demand.
If my assumptions are correct, and previous condo owners at the Vue at Brickell did fall prey to this sort of cash-back scam, then prices there will come in for a crash landing. There’s another building in Brickell that I feel may have a similar fate but I’ll leave that for an upcoming blog entry.
Shoddy Construction at Neo Vertika?
This has been a blog topic that has been on the back of my mind for the past couple of months. I kept brushing it off as nothing more than residents griping out loud, but after delving deeper into the issues, I now realize that there are major questions to the quality of construction that was put into the development of Neo Vertika. Neo Vertika resides in the neighborhood of Miami known as Brickell, or West Brickell to some. It was completed in August of 2006 and has had nothing but problems since its inception. There have been three major water leakages, two of which resulted in entire floors being flooded; the building sprinkler system has needed replacement, requiring worker-access to each and every unit; and the air conditioning system is unusually loud. I have personally spoken to a few condo owners at Neo Vertika who received hefty insurance checks after having their units flooded, which had destroyed their recently laid hardwood floors. While these payments might be justifiable to the afflicted parties, they will inevitably be paid for by current and future condo owners of that building, either directly or indirectly. My guess is that a major increase in association fees is just around the corner for condo owners at Neo Vertika.
Prices at Neo Vertika have dipped in the last six months. The various problems with the building, such as the ones mentioned here, will likely pour salt in an open wound and make matters worse. I have also heard similiar construction complaints about the first Neo LLC development known as Neo Lofts. This makes me wonder how sound the other two developments currently under construction by Neo LLC, known as Wind and Cima, can be. Maybe Coastal Construction Group, the construction company used to build Neo Vertika, can get it right this time with Wind and Cima.
In other news at Neo Vertika, the pool-side bar is now complete. While Miami has the reputation of being a 24/7 party, this type of action is unheard of for a condo building in Miami. Prior to the installation of the pool-side bar, I have had several clients complain that the building has turned into a fraternity house. While this might be an ideal situation for some, most condo owners there will suffer. I’m guessing that the opening of the pool-side bar, and the money that will be made from it, is management’s answer to the ensuing insurance hike that will inevitably occur. Anything not tackled by the profit of the pool-side bar will eventually be passed along to condo owners in higher association fees.
At least the construction of the bar looks good. Take a look at the pictures above and the video below to see it for yourself. Cheers!
There’s a good short-sale opportunity in Brickell in a development known as Brickell on the River. The building is fairly new, having been completed in 2006, and has amenities which include: valet parking, a tri-level state-of-the-art fitness center, business center, 24-hour security, concierge, swimming pool, hot tub and club room. The monthly association fees also covers basic Cable TV, DSL, water, sewer and garbage.
I took a look at the unit in question last night and was very impressed with what I saw. Click on the thumbnails above to see full-size pictures of the actual unit. The 1 bedroom/1 bathroom condo located on the 27th floor has 775 square feet of living space, a balcony, stackable washer/dryer, stainless steel appliances, track lighting, blackout blinds, marble floors in the bathroom and hard wood floors throughout the rest of the unit. The unit faces west and has great views of the sunset and the boats passing by along the Miami River.
The current owner is in the foreclosure process and the bank has decided to accept short-sale offers. The owner paid $341,000 for the unit in September 2006 and it is currently listed at $280,000. I took a look at the closed sales in the building for the past six moths for 1 bedroom units with the same floor plan. There were only two closings for 1 bedroom units with the exact same floor plan as the unit in question. Both units were sold “decorator-ready” which means that the unit was sold without any flooring, light fixtures or window treatments. The first unit is located on the 12th floor and sold for $290,000 in February of this year while the second unit is located on the 16th floor and sold for $325,000 in December 2006. Keep in mind that the foreclosure unit is fully decorated and doesn’t require any additional money to make the unit complete. I am relatively confident that the bank would accept an offer in the ballpark of $240,000 to $250,000.
The unit is currently occupied by a tenant who is paying $1,650 per month. The lease ends at the end of July but the tenant has made it clear that he would be willing to terminate the lease early if the buyer is looking to occupy the property prior to the lease termination date. The maintenance fee is $440 per month.
Feel free to call or email me with any questions that you might have.
