New law could cause an influx of Bulk Buyers to Miami

This week, Florida Governor Charlie Christ signed a new law into effect that significantly changes current Florida condominium statutes and may give Bulk Buyers a leg up.

First things first: What qualifies an Investor as a Bulk Buyer?

Answer - Believe it or not, according to Regulators a Bulk Buyer is any investor who owns or leases out seven units or more.

Prior to the passing of this new law, the Distressed Condominium Relief Act, deemed Bulk Buyers with the same responsibilities of Developers such as construction warranties as well as other responsibilities in association control. This new provision which will go into effect July 1, 2010 has a limited two year time window but removes the responsibilities of the Developer on the Bulk Buyer.

"Condominum law defines a developer as anyone who creates a condo, but also creates or offers units for sale or lease in the ordinary course of business," says Mark Grant, a partner at Ruden McClosky law firm in Fort Lauderdale. He helped draft the Bulk Buyer provision. "With the new law, it is very clear that a bulk buyer does not fit into the definition of a developer --- they're exempt."

The Golan Team who have been involved with and following closely Bulk Sale purchases in Miami feel this is added bonus to Bulk Buyers who have been deliberating when to enter the market. "We have spoken with Buyers who were interested in making big purchases but were very worried about the potential liabilites or future liabilities that would fall on their shoulders if they were to burden the responsibility of the Developer" says Debra Golan, Managing Partner of The Golan Team, Keller Williams Realty. She continues, "Our Buyers were willing to pay for the units and manage the responsibility of holding, leasing and reselling of those units but did not want to be part of the running of the building or association." Another benefit to the new law is that Bulk Buyers no longer have to budget for possible litigation.

Two other major provisions of the new law include:

a) A provision that doubles the amount of condo assesments that Lenders will have to pay when they take title to in foreclosure, from six months to 12 months. Payments to condo associations have been one reason that some Banks have been relunctant to foreclose on condo units.

b) A provision that now Condo associations can suspend uses of common area facilities when owners fail to pay their assessments.

SOUTH FLORIDA REAL ESTATE BULK DEALS

For the past two years the two buzz terms in Real Estate in South Florida have been “Foreclosure” or “Short Sale”. Buyers looking for deals or to buy below current market value were constantly looking for these two “adjectives” or what The Golan Team calls “qualifiers”. It was amazing there were Buyers out there that literally would only want to see properties with these criteria and then would decide of the choices they saw which one to take.

Now these buzz terms have taken a back seat to the newest buzz in the Real Estate world “BULK SALE”. A Bulk Sale is defined as an investor lead individual or group that purchases a group or Bulk of units ranging in numbers from a low quantity such as 10 units to 500+ units at a discounted rate. They are usually purchasing from the Developer units that either were never sold or were sold and not closed (due to lack of financing) and returned to the Developer. Some of these Bulk Deals are also being negotiated directly with Lenders who are looking to Foreclose on other Developers or on complexes that are in default. The Bulk deals are almost always "ALL CASH" scenarios. After the deal closes there are opportunities to obtain some financing.

According to our research over 1700 units have exchanged hands in the past year to year and a half as “Bulk Sales” in our local area (Dade, Broward, Palm Beach counties). Other smaller deals if included (smaller we classify as 10 or less) can take this number even higher.

Some of the highlight deals include:

1) July 2008 - 50 Biscayne (Downtown Miami, FL) – 146 units sold to a group of investors from Philadelphia (Lubert-Adler Partners LP) who joined Related group (the Developer) in this bulk sales @ $246/ft. ($36.4m) Shortly after closing they sold 10 units $367/ft.


2) January 2009 - Harbour House, Bal Harbour – a consortium of Related investors paid $277/ft for 101 units. Total purchase price was $27m. (Note the Related Group was said to have raised $1 billion in a consortium just to buy Bulk Sale Condo opportunities).

3) July 2009 - A South Florida private equity group, Elcom Condominium LLC paid $2.6 million to purchase 51 new, oceanfront condo-hotel units in the luxury One Bal Harbour complex – Regent (now called Bal Harbour Hotel) and another $12 million for 67,031 square feet of hotel common areas and land. (This equates to approximately $135/ft average for the common area and hotel compared to the average selling price of $1100/ft that the Developer WCI Communities charged Buyers for preconstruction pricing at the One Bal Harbour Regent Hotel project.) Interesting to note, the day after this Bulk deal went through, the Regent Hotel chain pulled out of their contract to run the hotel. There are a total of 124 hotel condo units in the Regent/Bal Harbour Hotel.


Now there are two Bulk deals arising that are of interest

1) WCI Communities – the builder of the One Bal Harbour/Regent Bal Harbour project, is seeking court approval to hold a September 22, 2009 auction for its Pompano Beach condo complex. Currently a New York based company, Chetrit Group LLC is bidding $46.7 million. According to the Miami Herald , WCI Communities and it’s chairman, billionaire investor, Carl Icahn wants this $46.7m bid to be the opening bid at an auction A September 2, hearing has been requested for court approval of the auction proceedings. The Chetrit Group have been huge players in the Real Estate world and have been linked to bids and purchases of such iconic structures as the Sears Tower in Chicago ($840m sale), Roney Palace in Miami Beach (bid was $150m) and various iconic buildings in Manhattan.

2) The Related Group of Florida (whose iconic Condo King head is Jorge Perez easily the most recognizable name in South Florida Real Estate) associate company, New York Developer, Related Cos and the Lubert-Adler Partners LP of Philadelphia (you will recognize their name from the purchase of Bulk units at 50 Biscayne in Downtown Miami) have teamed up to bid on the assets of condo lender Chicago based, Corus Bank. A sale could be weeks away though according to the Wall Street Journal there are up to three other key bidders for these assets. Some of the most prominent condo projects in South Florida: Jade Beach and Jade Ocean Condominiums in Sunny Isles Beach, FL, the Trump International Hotel and Tower in Fort Lauderdale and Edge Condominium in West Palm Beach. All in all the assets could be as high as 6,400 condo units in South Florida.

The Golan Team are working with investors interested in purchasing Bulk Deals particularly on Oceanfront properties and Downtown Miami/Brickell area. We have identified several key opportunities for purchase. If you are interested, please contact us at 786-333-6200 or send an email with your requirements and preferences to debra@golanteam.com