Unit 701 at Carbonell in Brickell Key Revisited
Some of you may remember unit 701 at Carbonell which appeared in an earlier post entitled “Top 5 Distressed Condo Sales in December 2008“. The 1 bedroom/1.5 bath condo with 1,031 square feet of interior closed on December 19, 2008 for $215,000. Many of you felt that a condo for $209 per square foot at Carbonell was an amazing deal.
Well, the condo is back on the market. It appears that the investors who purchased the unit felt that they got such a great deal that they could flip it for a profit. The condo is now listed for $295,000 after two quick price reductions. I showed it Sunday afternoon. I didn’t realize until later that it was the same condo that previously sold as a foreclosure in December.
I know everyone hates to hear the word “flip”. However, I think the investors will be able to accomplish just that. The condo doesn’t have much of a view but it’s a very spacious floor plan, is in great condition with beautiful marble floors in the living room and kitchen and is in one of the best buildings in Brickell Key. Unit 701 is by far the best priced one bedroom at Carbonell at this time. The next best priced one bedroom is listed for $415,000. Unit 601, one floor below, is listed for $439,000.
Perhaps the investors will decide to hold onto their purchase. The condo is also listed for rent with an asking price of $1,825 per month.
Carbonell condos for sale
Valentine Message at Espirito Santo
As Valentine’s Day weekend comes to a close, I wanted to share a thoughtful message made of Jello-O that was left on the glass-enclosed shower of one of the units at Espirito Santo. I showed the unit earlier today shortly after the previous guest had checked out. Espirito Santo is a condo-hotel residence located in the heart of Brickell at 1395 Brickell Avenue.
Espirito Santo condo-hotel units for sale
The New Face of Downtown Miami
Downtown Miami has changed tremendously within the past 4-5 years. I just wanted to share a few pictures that I took earlier this week. As you can see, the construction cranes are gone from the Downtown Miami skyline.
New Downtown Miami condo developments 50 Biscayne, Vizcayne, Marina Blue, 900 Biscayne Bay, Ten Museum Park and Marquis can be seen in the pictures above and directly below. The American Airlines Arena, Bayside Marketplace and Bayfront Park appear in the picture above as well.
(Below) A look south down Biscayne Boulevard.
(Below) The view east from a Downtown Miami condo high-rise.
Bulk Sale Opportunities Emerge in the Miami Condo Market
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.
New Miami Condos – Closing Rates for February 2009
It’s been a few months since my last Miami condo closing rate update. The percentage of closed units for 25 major condo developments are provided below, starting with the first development to begin closings. Four condo developments have been added: Icon Brickell, Everglades on the Bay, Infinity at Brickell and Epic. You’ll find these towards the bottom of this post.
Below, you will find the date that each condo development began closings followed by the number of closed units in each condo development:
With the exception of Onyx on the Bay and 50 Biscayne, the first group above has remained unchanged. Onyx on the Bay was able to close one additional condo while 50 Biscayne was able to close two.
Quantum on the Bay and Plaza on Brickell once again were able to show a decent improvement in their closing rate. Quantum on the Bay closed an additional 14 condos while Plaza on Brickell was able to close 21. 1800 Club did not have any new closings but I did find another deed that had been recorded twice. This is the reason why the total number of closed condos in this update is one less than the total stated in the December 2008 post for 1800 Club. It needs just 7 more closed condos to hit the all-important 70 percent mark.
As a result of the 60-unit bulk sale, Marina Blue showed the most improvement of the above five condo developments since the last update. I did, however, find re-recorded deeds for Marina Blue that I had previously missed. The developer of Marina Blue has now closed around 82% of the total number of units.
In my opinion, the five condo developments above are all likely candidates for some sort of bulk deal taking place in the future. Met 1 was able to close 7 additional units, Asia 2, 900 Biscayne Bay 13, 500 Brickell 17 and Axis 8. As a result of the new Fannie Mae guidelines, it is not likely that we’ll see significant improvement in any of the condo developments that haven’t thus far reached the 70 percent mark.
Above, you’ll find the four newly added condo developments which began closings within the past 3 months. Timing could not have been worse for these four. They’re going to need to find a plethora of cash buyers who are willing to pay dated prices. Ivy at Riverfront, which began closings back in June 2008, was able to close 14 additional condos since the December 2008 update.
The bright side is that the condo construction cranes of Miami are gone. The cranes that remain are for commercial developments. Marquis and Paramount Bay, which should begin closings within the next 3 months, will be the last of the newly constructed condos to hit the market in Miami. It does appear, however, that Met 3 has begun to lay its foundation. Hopefully, the condo market will reach some sort of equilibrium by the time that development has been completed.
Disclaimer: The above closing rate information was derived from public County records. There can be a 2-3 week delay from the time that a closing occurs and the time that the closing is recorded. The information above is not deemed 100 percent accurate as a result of delays in the recording of deeds and deeds being re-recorded.
Top 5 Miami Distressed Condo Sales in January 2009
Overall, the distressed condos that closed last month weren’t as interesting as the ones I’ve seen in previous months but there were still a few good ones. Below, you will find what I believe to be the five best condo deals of the 24 distressed sales that closed in the month of January in the MLS located in Brickell, Brickell Key, Downtown Miami and the Arts District.
- Uptown Lofts – unit 502 – 1 bedroom/1 bath (775 square feet) – This unit sold for $84,000, or $108 per square foot, on January 15, 2009. Foreclosure
- Vue at Brickell – unit 1214 – 2 bedroom/2 bath (1,149 square feet) – This unit sold for $157,000, or $137 per square foot, on January 9, 2009. Foreclosure
- Isola – unit 2104 – 2 bedroom/2 bath (968 square feet) – This unit sold for $225,000, or $232 per square foot, on January 28, 2009. Foreclosure
- Skyline on Brickell – unit 2508 – 1 bedroom/1 bath (791 square feet) – This unit sold for $190,000, or $240 per square foot, on January 9, 2009. Foreclosure
- The Club at Brickell Bay – unit 3903 – 1 bedroom/1 bath (825 square feet) – This unit sold for $124,000, or $151 per square foot, on January 28, 2009. Foreclosure
Can the Current Financial Crisis Be a Blessing in Disguise for Condo Contract Holders Scheduled to Close?
Last Friday, I had the pleasure of having lunch with Jared Beck and Elizabeth Lee Beck of the business litigation law firm, Beck & Lee. Jared Beck, who pens The Magic City Harvard Lawyer blog, raised an interesting question: Can contract holders of condos in Miami scheduled to close in the coming months use the current financial crisis and inability to acquire financing as a valid argument for nonperformance of their contractual obligation?
I know, I know…preconstruction condo contracts clearly state that performance is not contingent upon financing. However, a recent federal ruling in Hoosier Energy Rural Electric Cooperative, Inc. v. John Hancock Life Insurance Co., contains language that may assist condo contract holders who are scheduled to close in the near future.
Here’s some background on the federal case, as provided by Jared Beck’s recent blog post entitled, “Federal Court Endorses Financial Crisis As Basis For Relief From Pre-Existing Contractual Duties; Could Real Estate Contracts Be Affected?”:
The background is somewhat complex but essentially involves the owner of an electrical generating plant in Indiana, Hoosier Energy, which in 2002 entered into a complex lease-back arrangement over some of its assets with an insurance company, John Hancock, aimed at creating a tax shelter for John Hancock. As part of the deal, Hoosier Energy was required to obtain what amounted to a line of credit from Ambac, a financial institution called a “swap provider.”
Until 2008, Hoosier Energy made all of its scheduled payments under the agreement. Then, global financial crisis ensued, and the credit rating of Hoosier Energy’s swap provider sunk like a stone. Hoosier Energy was unable to find another swap provider with a suitable credit rating who could be substituted in a timely manner. John Hancock declared Hoosier Energy to be in default and demanded a large termination payment, shortly after which Hoosier Energy filed suit, requesting a protective injunction.
Mr. Beck went on to say in his blog post that “Hoosier Energy argued that the extraordinary freeze in the global credit markets at least partially excused it from performing under the contract as an instance of ‘commercial impracticability,’ mitigating the default declared by John Hancock”. The court agreed with Hoosier Energy’s argument.
Mr. Beck concluded his post with the following:
How could this newly articulated doctrine be more broadly applied? One possibility rests with the large number of individuals who signed preconstruction real estate contracts several years ago, with the intention of obtaining mortgage financing once the project was finished. Now that many of those projects have been or will soon be competed, those buyers are unable to close because, owing to the global credit crunch, banks will no longer extend mortgage financing for certain new real estate construction at 2004 or 2005 prices.
While many of these purchase contracts were drafted with clauses stating that they were not contingent upon the buyer qualifying for a mortgage, it could be argued, on the basis of the reasoning set forth in Hoosier Energy, that the deals were signed under both parties’ reasonable assumption that financing would actually be available from somewhere once construction was completed. To quote the Southern District of Indiana in Hoosier Energy, “The crisis was not anticipated by the most senior economists in the country.” If that is true, why should the defense of commercial impracticability, based on the lack of accessible credit, be any less available to the individual real estate buyer seeking to mitigate the effect of a pre-existing contract then it would be to an electrical generating plant operator dealing at arms length with a multibillion dollar insurer? (To some degree, the question overlaps the analysis of whether “bailout” principles should apply equally to financial institutions and individual homeowners, both of whom are victims of their own inability to foresee the mortgage crisis).
The newly revised Fannie Mae guidelines, which went into effect on January 15, state that the government-controlled entity will no longer fund loans for new Florida condos if at least 70 percent of the total units in the development have not be conveyed or under a bona fide contract for purchase to either principal residence or second home purchasers. Contract holders who require financing and are scheduled to close in coming months are basically out of luck. It’ll be interesting to see how the courts handle this argument in 2009.
100 Condos Under Contract at Quantum on the Bay to Israeli Investment Group
Yesterday, a rumor was circulating that 100 condos recently went under contract at Quantum on the Bay to an investment group from Israel in a bulk sale transaction. I was able to confirm today, from multiple sources, that the rumor is true. However, everyone is keeping quiet in regards to the details involved in the bulk sale transaction. It will be interesting to learn the price per square foot that the 100 condos sell for at Quantum on the Bay once the details are revealed.
(hat tip to Kevin at South Beach Real Estate Blog for the lead on the story)
Distressed Condos Report – New Condo Developments
The spreadsheet below reveals 13 distressed condos currently listed in the MLS which reside in developments in Miami completed within the past two years. I expect this list to grow in coming months. I plan to provide future updates with new listings as well as track the outcome of condos previously listed. 12 of the 13 condos listed below are short-sales. The foreclosure process can be quite lengthy so I don’t expect to see many distressed condos in new developments become bank owned until at least the second half of the year.
View Full Spreadsheet
