Strategies of the Condo Vultures®

As the U.S. financial crisis deepens, regulators have seized two more financial institutions with combined assets of $6.2 billion and deposits of $4.2 billion, pushing the total number of bank failures this year to 19.

Franklin Bank, a Houston-based institution established in 1987 with assets of $5.6 billion, and Security Pacific Bank, a Los Angeles-based institution created in 1981 with assets of $588 million, were seized by regulators on Nov. 7. The Federal Deposit Insurance Corp, which insures deposits up to $250,000, was named receiver of both failed institutions.

The two most recent failures are estimated to cost the FDIC’s insurance fund between $1.6 billion and $1.8 billion. The 19 bank failures to date are expected to cost the insurance fund between $7.9 billion and $12.3 billion, according to the FDIC.

In anticipation of the two planned seizures, the FDIC negotiated “purchase and assumption” agreements beforehand for the assets of both failed financial institutions to be absorbed immediately by existing banks in hopes that customers would not be hindered.

Prosperity Bank, an El Campos, Texas-based institution created in 1949 with assets of $6.8 billion, assumed all of the deposits, $850 million of assets, and the 46 branches of the failed Franklin Bank.

Concurrently, Pacific Western Bank, a San Diego-based institution established in 1982 with assets of $4.3 billion, assumed all of the deposits, $51.8 million in assets, and the four branches of the failed Security Pacific Bank.

The remaining assets of the two most recent failed banks are to be sold off in the future, according to the FDIC.

The failure of Franklin Bank and Security Pacific Bank means that six financial institutions have been shuttered by regulators in the fourth quarter, which began Oct. 1.

Nine institutions were shuttered in the third quarter at an estimated cost of between $5.7 billion and $10 billion, according to the FDIC.

Regulators shut two institutions in the second quarter at an estimated cost of $216 million and two more institutions in the first quarter at an expense of nearly $6 million, according to the FDIC.

The bank failures have been scattered throughout the United States. California leads the nation with three bank failures. Nevada, Georgia, Missouri, and Florida are all tied for second with two bank failures each. Arkansas, Minnesota, Kansas, West Virginia, Washington state, Michigan, Illinois, and Texas each have had one institution shuttered this year.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .

Copyright © 2008, Condo Vultures® LLC

A South Florida developer sold 33 new condo units, including 17 units to one buyer, for 46 cents on the retail dollar at a private auction on Nov. 17 in West Palm Beach, according to the Palm Beach Post.

The total sellout price of Saturday’s 90-minute auction was $6.3 million for Downtown West Palm Beach product that had previously set a retail asking price of $13.7 million. The discount reflects a 54 percent decrease off the original asking price.

Properties in The Edge sold for prices ranging from $195 per square foot for a 671-square-foot, one-bedroom unit that traded for $131,000 to $245 per square foot for a 1,175-square-foot, two-bedroom unit on the pool deck that went under contract for $290,000.

Given the deeply discounted prices realized, the developer Wood Partners decided to only sell 33 of the 41 units that were originally scheduled to be auctioned off to the highest bidder.

It is unclear what the developer plans to do with the remaining inventory, whether that inventory was withdrawn from the auction block or never made available at auction.

“We didn’t get the number we wanted at all, but no one else is selling, so you’ve got to start somewhere,” Jon Gollinger, the head of Accelerated Marketing Partners which handled The Edge auction, told the Palm Beach Post.

Unlike many other developers saddled with excess inventory, Wood Partners decided to attempt to unload the excess condo inventory at auction rather than sell out in a bulk deal to an opportunistic fund, according to the article.

Apparently that strategy didn’t work as a one buyer, who refused to give her name, purchased 52 percent of the units that were sold, according to the article.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .

Copyright © 2008, Condo Vultures® LLC

Considering the nearly $700 million in foreclosure exposure that Citigroup has in South Florida alone, it is not hard to understand why the New York financial giant just introduced a new Homeowner Assistance Program to keep borrowers in their homes.

Citigroup and its subsidiaries have filed 2,742 foreclosures actions worth $694 million of troubled loans against South Florida properties in the first three quarters of 2008, according to a report by Condo Vultures® LLC compiled using government records.

Broward County, where Fort Lauderdale is located, represents the greatest concentration of Citigroup foreclosures in South Florida with 1,148 actions totaling $276 million.
Miami-Dade County is second with 812 actions totaling $220 million, and Palm Beach County is third with 782 actions totaling $199 million, according to the report.

Citigroup unveiled its strategy on Nov. 11 to preemptively contact 500,000 borrowers nationwide with mortgages of about $20 billion to discuss a series of options in hopes of keeping them in their homes.

“Under our new Citi Homeownership Assistance program we will preemptively reach out to help homeowners before they become delinquent, which is critical to avoiding the loss of a home and protecting their credit score and future borrowing potential,” said Sanjiv Das, CEO of CitiMortgage in a statement.

In the first nine month of this year through Sept. 30, there have been nearly 56,000 foreclosures actions filed in Miami-Dade, Broward, and Palm Beach counties. An additional 19,000 properties (also known as Real Estate Owned) are now in the hands of the bank after a lengthy foreclosure process, according to Condo Vultures® LLC.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .

Copyright © 2008, Condo Vultures® LLC

An investment fund has paid $22 million for an undeveloped site on Brickell Avenue in the heart of Downtown Miami’s Financial District, marking the third land deal to close in the fourth quarter, according to a report compiled by Condo Vultures® LLC.

A newly created entity called 1451 Brickell, Inc., with Jorge Hernandez as president and director paid $840 per square foot on Nov. 4 for an undeveloped 26,182-square-foot site with frontage on Brickell Avenue, Southeast 15th Road, and Southeast 14th Lane, according to state and county government records.

The seller was Fourteen Fifty One Brickell, LLC, with Walter Defortuna, who is the younger brother of condominium developer Edgardo Defortuna, who built the Jade on Brickell Bay high-end condominium in Miami’s Brickell Avenue area and the Jade Beach and Jade Ocean luxury condominium towers in Sunny Isles Beach.

“Three is normally a trend, but I’m not sure that we can apply that rule of thumb to this scenario as the purchase prices of these three land deals are all over the board,” said Peter Zalewski, a principal with the Bal Harbour, Fla.-based consultancy Condo Vultures® LLC that produced the report. “What we take away from the surprising number of land transactions in such a short period of time is that many investors, regardless of market conditions and overbuilding, are bullish on the Brickell Avenue area.”

The newly traded site at 1451 Brickell Ave., which is zoned high-density, mixed use, is immediately south of the Millenium Tower/Four Seasons mixed-use project at 1441 Brickell Ave., and east of a new 600,000-square-foot office tower being developed by Alan Ojeda’s Rilea Group at 1450 Brickell Ave.

The 1451 Brickell site consists of two contiguous undeveloped parcels that form a rectangular site on the corner of Brickell Avenue and Southeast 15th Road, which is the traditional boundary between residential condo living to the south and mixed-use office towers to the north.

The southern portion of the property located at 1451 Brickell Ave. has 15,682 square feet. The northern portion of the property located at 1449 Brickell Ave. has 10,500 square feet, according to government records.

The buyer obtained a $13.2 million, or $504 per square foot, mortgage on the property from the seller, Fourteen Fifty One Brickell, LLC, according to government records.

The selling group originally purchased the property in December 2000 for $4.89 million or $187 per square foot. In 2008, Miami-Dade County assessed the value of the land at $6.41 million, or $245 per square foot.

The members of the selling entity are Fortunate Investments, Inc., with Walter Defortuna; Roam Investments, Inc., with Ricardo D’Amato; and Abbey, Inc., with Haracio L. Bossi, according to the Florida Secretary of State.

This is the third land deal to close in the Brickell Avenue area since the beginning of the fourth quarter on Oct. 1.

In October, an investment group purchased the former Brickell Citicentre site for $23.3 million or $95 per square foot, according to the Miami Daily Business Review. In the same month of October, a hotel investment group paid $6.27 million, or $275 per square foot, for a site just west of the recently opened Mary Brickell Village retail center in the popular Brickell Avenue area, according to the Miami Herald.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .

Copyright © 2008, Condo Vultures® LLC

A Tampa area bank has been seized by regulators, marking the 17th U.S. institution to fail this year and the second in the state of Florida since August.

Freedom Bank, a Brandenton, Fla.-based institution with four branches and assets of $284 million, was seized by Florida regulators on the afternoon of Oct. 31. The Federal Deposit Insurance Corp., which insures deposits up to $250,000 per account, has been named receiver.

“The FDIC estimates that the cost to the Deposit Insurance Fund will be between $80 million and $104 million,” according to an FDIC statement.

The failure of Freedom Bank pushes the overall bank failure losses to the FDIC for the year to between $6.2 billion and $10.5 billion. Florida’s portion of the losses represent between $152 million to $176 million, according to the FDIC.

In preparation for the latest seizure, Fifth Third Bank, a Michigan-based institution with an existing Florida presence, entered into a “purchase and assumption agreement” to assume all of Freedom Bank’s deposits, $36 million of assets, and the former Florida bank’s branch locations. The FDIC plans to dispose of the remaining assets in the future.

Fifth Third Bank is a Grand Rapids, Mich.-based institution created in 1853 that has assets of $54.2 billion, loans of $40.8 billion, and deposits of $37.4 billion. Fifth Third has 847 locations nationwide, including 165 in Florida. Before the real estate market turned in 2005, FifthThird Bank had been on in a Florida expansion mode primarily through acquiring existing institutions.

Founded in 2005, Freedom Bank was a state-chartered institution on Florida’ Gulf Coast with three branches in Bradenton and a fourth location in the affluent area of Sarasota. Freedom Bank had deposits of $265 million and loans of $214 million in the first half of 2008 ending June 30, according to the most recent FDIC data.

Freedom Bank lost $14.8 million in the first half of 2008 through June 30 as the institution’s noncurrent-loans-to-loans ratio jumped from 1.66 percent in 2007 to 15.49 percent in 2008.

The bulk of Freedom Bank’s noncurrent loans are concentrated in construction and development, representing 31.72 percent; commercial real estate, representing 8.13 percent; and commercial and industrial loans, representing 8.91 percent, according to the FDIC.

Freedom Bank’s failure marks the fourth institution to be shut in the fourth quarter, and the second Florida institution to fail since Brandenton-based First Priority Bank, which was closed on August 1, 2008. Prior to 2008, the last time a Florida bank was closed was 2004.

In the fourth quarter which began Oct. 1, four banks have failed costing the FDIC between $284 million to $316 million. Nine institutions were shuttered in the third quarter at an estimated cost of between $5.7 billion and $10 billion, according to the FDIC.

Regulators shut two institutions in the second quarter at an estimated cost of $216 million and two more institutions in the first quarter at an expense of nearly $6 million, according to the FDIC.

The bank failures have been scattered throughout the United States. California, Nevada, Georgia, Missouri, and Florida lead the nation in failed institutions with two banks each. Arkansas, Minnesota, Kansas, West Virginia, Washington state, Michigan, and Illinois each have had one institution shuttered this year.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .

Copyright © 2008, Condo Vultures® LLC

Opportunistic buyers scouring the South Florida market for deeply discounted residential property deals will shortly have to deal with yet another competitor: local government.

The governments of Miami-Dade and Broward counties have compiled a combined $80 million to spend on bank-owned properties in South Florida. The governments plan to spend the money purchasing, renovating, and then either renting out or selling off the properties.

Miami-Dade government has created a $62.2 million pool to purchase distressed residential properties in the devastated real estate market of Florida’s most populous county, according to the Miami Herald.

Miami-Dade plans to use the money to acquire and renovate foreclosed properties in the central and southeastern parts of the county. Once the properties can be made marketable, the county would then either sell off or rent out the residences.

The county plan calls for using $26.6 million to buy troubled apartment buildings and $10 million of the capital to purchase bank-owned properties. An additional $1 million has been set aside to tear down about 80 delapidated structures.

‘’We’re figuring we can get the biggest bang for our buck if we utilize the money for rentals because we can house the most people that way faster,'’ Miami-Dade senior advisor Cynthia Curry told the Miami Herald.
Miami-Dade’s investment pool is being created with grant money provided under the federal government’s $4 billion neighborhood stabilization program that was passed by last summer by Congress.

Broward County, where Fort Lauderdale is located, has received $17.7 million for the program. Florida counties received a combined $541 million, according to the article.

South Florida’s county governments will have plenty of product to choose from once they begin purchasing bank-owned properties.

Lenders repossessed an average of 69 homes a day in South Florida in the first nine months of the year, according to a new report from Condo Vultures® LLC.

At that pace, the number of bank-owned properties in South Florida is skyrocketing, increasing by 134 percent to 7,100 properties in the third quarter and by 190 percent to 18,960 homes for the year, according to the report by the Bal Harbour, Fla.-based consultancy.

A year ago in 2007, lenders took back 3,035 properties in the third quarter and 6,545 properties in the first nine months of the year, according to Condo Vultures®.

On a geographical basis, Miami-Dade County accounts for 46 percent of the bank-owned properties repossessed in the tricounty South Florida region in 2008.

Broward County represents 39 percent of the total REO inventory for 2008, and Palm Beach County the remaining 15 percent, according to the report.

Miami-Dade County had 8,656 bank-owned properties in the first nine months of this year, up 188 percent compared to the 3,009 REO properties during the same period in 2007, according to the report.

Broward County ranked second with 7,370 bank-owned properties through the first nine months of 2008, compared to 2,339 foreclosed properties in 2007. Palm Beach County was third in the tricounty region with 2,934 REO properties in 2008 compared to 1,197 properties in 2007, according to the report.

“Miami-Dade County experienced a spike in foreclosure actions in 2007 that eventually became bank-owned properties in 2008,” said Peter Zalewski, a principal with Condo Vultures® LLC. “Given the current surge in foreclosure actions in Broward and Palm Beach counties right now, we would expect the number of bank-owned properties to spike in these two counties in 2009.”

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .

Copyright © 2008, Condo Vultures® LLC

A new opportunity fund launched by Miami homebuilder Sergio Pino plans to gobble up as much as $500 million in discounted raw and developable land throughout Florida, according to the Miami Herald.

Pino’s creation of an opportunity fund marks no fewer than four influential Miami business leaders who have established buying pools to purchase discounted real estate.

‘’Some day, after doomsday, housing will be in demand again,'’ Pino told the Miami Herald. “We want to stockpile valuable land.'’

It is not difficult to see why Pino is so interested in purchasing land.

Many banks and financiers are having an impossible time unloading land as there is no revenue to be generated and the likelihood of building again is years away. Given the bearish outlook, many lenders and developers are considering and increasingly dumping land at discounts of nearly 90 percent.

Pino’s newly created Century Opportunity Fund has already secured $100 million, and is working diligently to obtain commitments for the remaining 80 percent of the desired amount.

Pino’s Century Homebuilders of South Florida and other entities have developed about 10,000 residences in about 25 South Florida communities, according to the company’s website.

It is unclear if the Century Opportunity Fund will acquire any real estate already owned by one of Pino’s various Florida corporations.

The Century Opportunity Fund is to be run by the same board of directors that currently governs Pino’s Century Partners Group, according to the Miami Herald.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™.

Copyright © 2008, Condo Vultures® LLC

A new opportunity fund launched by Miami homebuilder Sergio Pino plans to gobble up as much as $500 million in discounted raw and developable land throughout Florida, according to the Miami Herald.

Pino’s creation of an opportunity fund marks no fewer than four influential Miami business leaders who have established buying pools to purchase discounted real estate.

‘’Some day, after doomsday, housing will be in demand again,'’ Pino told the Miami Herald. “We want to stockpile valuable land.'’

It is not difficult to see why Pino is so interested in purchasing land.

Many banks and financiers are having an impossible time unloading land as there is no revenue to be generated and the likelihood of building again is years away. Given the bearish outlook, many lenders and developers are considering and increasingly dumping land at discounts of nearly 90 percent.

Pino’s newly created Century Opportunity Fund has already secured $100 million, and is working diligently to obtain commitments for the remaining 80 percent of the desired amount.

Pino’s Century Homebuilders of South Florida and other entities have developed about 10,000 residences in about 25 South Florida communities, according to the company’s website.

It is unclear if the Century Opportunity Fund will acquire any real estate already owned by one of Pino’s various Florida corporations.

The Century Opportunity Fund is to be run by the same board of directors that currently governs Pino’s Century Partners Group, according to the Miami Herald.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™.

Copyright © 2008, Condo Vultures® LLC

A new opportunity fund launched by Miami homebuilder Sergio Pino plans to gobble up as much as $500 million in discounted raw and developable land throughout Florida, according to the Miami Herald.

Pino’s creation of an opportunity fund marks no fewer than four influential Miami business leaders who have established buying pools to purchase discounted real estate.

‘’Some day, after doomsday, housing will be in demand again,'’ Pino told the Miami Herald. “We want to stockpile valuable land.'’

It is not difficult to see why Pino is so interested in purchasing land.

Many banks and financiers are having an impossible time unloading land as there is no revenue to be generated and the likelihood of building again is years away. Given the bearish outlook, many lenders and developers are considering and increasingly dumping land at discounts of nearly 90 percent.

Pino’s newly created Century Opportunity Fund has already secured $100 million, and is working diligently to obtain commitments for the remaining 80 percent of the desired amount.

Pino’s Century Homebuilders of South Florida and other entities have developed about 10,000 residences in about 25 South Florida communities, according to the company’s website.

It is unclear if the Century Opportunity Fund will acquire any real estate already owned by one of Pino’s various Florida corporations.

The Century Opportunity Fund is to be run by the same board of directors that currently governs Pino’s Century Partners Group, according to the Miami Herald.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™.

Copyright © 2008, Condo Vultures® LLC

The last residential construction crane of Greater Downtown Miami’s speculative condo era was disassembled last week and hauled off on flatbed trucks north on Interstate 95.

The removal of the construction crane at the 47-story, 346-unit Paramount Bay condominium tower situated in the Biscayne Boulevard Corridor just north of Downtown Miami ends a building boom period in which some 40 cranes filled the sky at the peak. (The only cranes still standing today in Greater Downtown Miami are building three new office towers under construction.)

Earlier this month, construction cranes were removed from the 51-story, 530-unit Mint condominium tower located on the north bank of the Miami River and the new 67-story, 306-unit Marquis condominium tower on Biscayne Boulevard in Downtown Miami.

Many industry watchers see the removal of the last crane as the symbolic end of vertical residential condo construction boom era in Greater Downtown Miami for at least seven years.

Greater Downtown Miami is considered by most to be the epicenter of the Florida housing crash as 74 condos with nearly 23,000 new units have been built or are under construction in a 60-block stretch between 2003 and 2010. In the 40 years prior to the boom years, developer constructed a total of 11,500 units in the same area, according to the Condo Vultures® Official Condo Buyers Guide To Miami™.

Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don’t forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .

Copyright © 2008, Condo Vultures® LLC