One Bal Harbour Condo Closings Appear to be Troubled
December 28, 2007 by Lucas Lechuga
Last week, a client called me to let me know that he would be flying into Miami and would specifically like to take a look at One Bal Harbour. He wanted to schedule a showing for Monday afternoon. I contacted a WCI agent today to find out if we could get in to see some units on Monday. I was told that WCI has decided to take a holiday leave until Wednesday. Unfortunately, my client will be flying back to Canada on Monday evening.
After hearing this, I was thinking to myself "Wow! WCI must have closed a lot of condos these past couple of weeks in order to take a vacation". I was curious to find out what their latest closing rate was since closings began on condos for this Bal Harbour development. I got back to my office and checked it out. The following graph reveals that 33.51% of units have closed at One Bal Harbour. December 8, 2007 I revealed that only 23.24% of units had closed since November 16, 2007, the first day that closings began.
Does this look problematic to anyone else? If I were a developer in this position I would be holding 24/7 open houses and not taking a holiday leave. Oh well...my client will return in a few months when those who do close are really struggling and condos will be much more aggressively priced. We'll see if WCI can remain afloat until then. It looks like prices at One Bal Harbour will only go down over the next six months.
The most humorous quote to me was a Realtor saying in an article published on August 17, 2007 that she was "very confident that every single unit will close". I hope she meant eventually every condo will close. If she meant that every contract holder will close then I think she was being way overly optimistic.
The closing rate cited above was obtained from public records. There can be a 2-3 week lag in getting a closing recorded although most closings are records within the first 7 days.
Now that its all over the news that WCI is goi ng under what is the verifiable closing rate on OBH?
“Realtor Linda Gustafson saying in an article published on August 17, 2007 that she was “very confident that every single unit will close””
I don’t know why real estate agents even say things like that any more. All they are doing is setting themselves up to look like fools later on. Nobody in their right mind could possibly think that One Bal Harbour will have anywhere near a 100% closing rate. In that same article where she is quoted, they also mention that nearly half of the buyers were speculators. Meaning that a huge portion of the “buyers” weren’t really buyers. They were people hoping to get in on a get-rich-quick scheme.
Many of them probably don’t even have the means to close on these units (especially now that banks are being ultra-conservative). And the ones that do have the means to close would be wise to walk away from their deposits. A good investor knows when to cut their losses and move on. There is no point in making the loss even worse by closing on the unit and hoping for a rebound in the market which will not come for many years, all the while bleeding even more cash in holding costs on the unit.
I’m sure One Bal Harbour is a fantastic building. But that doesn’t mean that people are going to grossly overpay for the units. Given the high prices in this building and huge number of speculators, you’ll see a big default rate on the closings.
it amazes me how realtors can be so proud, the conditions across the country are very unstable, has anyone been paying attention to wall street? especially with the numbers today.
One Bal Harbour IS a great building and IS a great project but the facts are the facts. How can they remain so rigid knowing the conditions of the market place?
It’s with quotes like those that agents loose credibility, no doubt about it.
You seem to have all these clients contacting and visiting from abroad. You are so fortunate.
I don’t know the total number of units, but closing on 1/3 of the building in only 6 weeks sounds pretty good to me, and may pick up after the new year. Regardless, someone should have been made available on a Monday to show the units.
It has a very unique location, but it seems like you’d have to get in your car to get anywhere. Maybe your client would be interested in Canyon Ranch in North Beach, with similar amenities, but more commercial diversity within walking distance.
i heard the slow closing is due to the issuance of COO which has been delayed. is this still true?
I’ve been inside One Bal Harbour several times and it is one of the best new condominium developments. However, I am concerned about the closing rate. Perez, closing on 1/3 of the units within 6 weeks normally would be okay given the state of the market. However, WCI gave everyone a closing deadline the first week of December. I think the deadline date was December 6, 2007. That means that everything is basically said and done.
I know a few people who have been able to get extensions but those extensions are going to be expiring by the end of the month. They are also paying a fee of around $500 for each day that they aren’t able to close. I think at best WCI will be able to close on 40% of the building. WCI was relying on One Bal Harbour to contribute a large portion of their 2007 revenue. I don’t think that’s going to happen.
If WCI is willing to discount the defaulted units then I think it will make for the best investment property in South Florida. Once all of the condos have been closed I think people will realize that the condos are undervalued.
I’ve been looking at OBH for over several months, beginning with Lucas’ add in late September. It is truly the best condo in Miami and the hotel units seem attractive to a New Yorker like me who will probably use it 3 or 4 weeks a year tops. But once I started digging into WCI, it becomes clear this company is 3 months away from bankruptcy. The CFO promised closing all of the condo units by late December and hotel units by early January. According to his statements late last week, they supposededly closed approx 100 units and wont even begin closing hotel units until mid-February. At this point, all that matters with WCI is cash to pay salaries and subcontractors. The debt is trading in the 50’s meaning equity is worthless (the bonds are worthless as well) and the banks are just waiting until they get the cash from OBH, Watermark (NJ project), and Oceanside and then force a bankruptcy filing.
Lucas, if the hotel units do not close until February/March, won’t they miss the peak season? If so, how can the hotel survive as a 5 star hotel with only 110 units (50% of which will not close) and high vacancy rates. Will the hotel unit owners be responsible for the costs or the hotel manager? I want to purchase a hotel unit but think it might be best to wait until next year.
Just saw Fight Club last night, and just adapted a very memorable quote (the survival rate one) from the movie.
“In a long enough timeline everyone [condos] closing rate increases to100%!”
This interesting piece was in the New York Times last week:
http://www.nytimes.com/2007/12/26/business/26real.html?pagewanted=1&ref=patrick.net
From the article linked to above:
“The market changes have forced a third developer, Mr. Pérez, who has built 50,000 condos in Miami over the last decade with Related Group, into a defensive position. Now he is battling a lawsuit from buyers of 38 apartments at Harbour House and 26 condos at Biscayne Bay. His company is operating in emergency mode. He has set up a team to raise capital to buy back apartments that he expects buyers will not close on…”
Guess this sheds more light on what he is really doing with this “vulture fund” he is supposedly setting up. It’s clearly an attempt to bail out his own properties using other people’s money.
Lucas..
Do you have the original pre-construction prices for the One Bal Harbor units? If so, would you please post them or I’ll send you my email address if you prefer.
Great blog and info!
Bill,
On the right hand side of this blog you will find a section that says “File Sharing”. In there you will find a file called “One Bal Harbour pricing sheet Dec 2003”. I think sales began in the summer of 2003. While that price sheet won’t give you initial prices it will give you an idea.
Thanks Lucas.
I have been looking for some time to purchase in the Miami, South Beach, etc. area, but with personal experiences similar to the one mentioned by the prospective buyer of One Bal Harbour, I will just “sit tight” for a while. I can afford to wait. How long can you (developers/sellers) afford to wait??
Looking at the Dec 2003 One Bal Harbour sheet and comparing it to present listings, it appears current asking prices are around 10% UNDER
sorry… did not mean to hit submit…
…it appears current asking prices are aroung 10% UNDER the 2003 price sheet and that’s with about 35% of the units close. Assuming 50% of the units or so do eventually close at the pre-purchase price, what do you expect the eventual prices of the remaining units to sell for?
It seems probable to me that many of the current closings are being made hoping to resell. If WCI reduces the prices of the unsold units then won’t that put pressure on the price of the sold units as well?
In any event, it appears to me to be early to buy and that waiting is the best recourse, especially with the credit contraction still in full force.
Hi Lucas,
Thanks for all your efforts . Love your blog, and I always know where to get the right info.
I would love to get one of these units at OBH, can you represent me? I know from your earlier blog that you represent buyers at auction. Do you think some of these units will go to auction since the development appears to be in trouble based on your stats? what do you think is a fair auction price and how much off the current price will they bring at auction?
Happy New Year!
Marcus
Oops I forgot, what do you think of the cond-hotel section versus the residence as an investment. They are I understand the same building? How do you think the condo-hotel is going to do?
WCI is also the developer of Mosaic on Miami Beach. Most closings took place from 12/06 to 9/07. According to their website, they have only one more condo to sell. It seems they didn’t have too many walkways and were sucessful. Does anyone have any insight into this project?
http://www.wcicommunities.com/default.asp?pageID=home&siteID=53&vid=53_6&url=www.mosaicwci.com&col=0
Perez,
Mosaic is a fantastic project. However, the market has changed dramatically over the past 1.5-2 years. I think One Bal Harbour is nicer than Mosaic and should eventually become a better long-term investment. OBH, unfortunately, was complete at the wrong time and a lot of the purchasers were speculators.
Except over half of Mosaic’s condos are on the market!! Drive past it…empty.
WCI flop.
One of the things we have to keep in perspective is that not every building or location is created equally. Usually every different area of South Florida has a few stand-out properties. Also some buyers are specific about their location requirements – close to work, family, etc. No matter what the price, not many people would want to buy in Bal Harbour if they work in Downtown and vice-versa. It would be nice if the media did a better job of segregating all of the areas in terms of “condo units hitting the market.” I believe all of the units at One Bal Harbour will EVENTUALLY close but we have to remember that many developers in the past have expected slow sales. It was only recently – 2002-2004 that projects sold out in 24-48 hours. Oceanfront is oceanfront and the big guy upstairs isn’t creating any more oceanfront land. We aren’t in Dubai.
Spoke with WCI, and was told most units will close (anticipated 95% close rate.) More than 50% of the units have closed already. Maybe the buyers/speculators do not to lose their deposits. I have seen a lot of resale listing so maybe the buyers are closing on the units and have relisted them.
I think the important thing to remember is that these units are just about 1million bucks!
Let’s face it Millionaires just don’t pop up to buy condos or atleast not everday so you gotta expect that it will take some time to find people with this type of money and willing to buy in that property. We walk around everyday and how many people do you know personally who are millionaires. Bottom line the majority of incomes mostly middle class inventory is what should get absorbed at a faster rate vs the million dollar properties.
The listings have been on for ages, so they are not to re-sell!
You’d have to be crazy, even a cash buyer like myself wouldn’t close. Forget about depreciating asset or not, but you have locked yourself into an almost wholly illiquid asset at almost any price except a fire sale for probably a time period of between 1 and 3 years.
Unless you expect the $ to appreciate, or the real estate value to be significantly higher in 3 years than your price today and with holding costs, your opportunity cost is too big.
Unless you genuinely have money to burn (and even millionaires do not burn money!), you would not close unless you intended this to be your primary residence for the next 5-10 years.
My name is John Boyle and I am very proud to say that I have been with WCI Communities for six years and am dismayed at the negative comments that are made in this blog about One Bal Harbour that are completely baseless. I was a part of the pre-construction sales team at One Bal Barbour and Linda “G” was the top producer for three years running. WE KNOW THIS PROJECT like no one else. Here’s the skinny. .. We are closing units daily and have now closed well over 2/3 of the building. I personally give 8 to 12 tours a day to prospective buyers. NO FIRE SALE HERE!! The fact is One Bal Harbour is immune to the Real Estate downturn in Florida. Here are the undisputable reasons. 1. Location 2. Unmatched WCI quality! 3. Five Star Amenities that include 24 hour room service, Spa Amenities from the Guerlain Spa and many more. 4. Fine Dining as well as casual dining and poolside service… Everyone who has toured One Bal Harbour with me has agreed it is the finest building and the best location in South Florida. We have the most knowledgeable team of professionals in the Real Estate Industry headed up by Mike Patrizio, our extremely talented and experienced Vice President here in South Florida who has personally headed up One Bal Harbour from its inception. I promise you I am willing and able to back up everything I have said here. Can anyone else? Please feel free to contact me if you would like an exclusive personal tour of the most magnificent tower in South Florida. I know you’ll agree that it’s the best of the best. No one should offer an expert opinion unless they know One Bal Harbour up close and personal. John Boyle
As I’ve mentioned in previous posts about closing rates, there can be a 2-3 week lag in getting a closing recorded although most are recorded within the first 7 days. I did not get these numbers out of thin air. I obtained them from public records. At the time of this post there were 62 closed sales that were recorded. There are now 90 closed sales, or a 48.65% closing rate. There may in fact be more closings if there has been a delay in recording the closings with the county.
Lucas,
Why don’t you post some accurate up to date information, instead of posting out of date information with a chart that does not reflect the current closing rate. Your damaging the building and other buyers property values, and WCI share value by such inaccurate information you insist on posting, now with a disclaimer warning people that the information is out date. So what is the purpose of posting out of date information, whom do you have an axe to grind with? I hope the condo association sues you, if WCI and Regent does not first.
Maybe you should refund the airplane ticket to your supposed “interested party”. All you had to do was call any listing agent and you could have easily gotten into the building to see units. I doubt that will be the case now. ……Who are you going to call, Linda G, after smearing her stellar reputation. Or another well respected Bal Harbour real estate specialist. You don’t speak well for the industry, especially after you have fielded several complaints on this matter (including from WCI correcting your misinformation), Hence, you still insist on putting your inaccurate blog back up. On your blog you state that you are leaving the covering of Miami Beach to another blogger, and you will be focusing on Brickell. That is is quite a long distance away, and based on your blog not your specialty.
OBH Insight,
I guess you expect me to provide you with a daily update to that post. I wrote the post on the 28th so the information is dated now. Take it in the context of the date that it was written.
When posting closing rates for other buildings in the past I have always stated that closings can take 2-3 weeks to be recorded. People who regularly read my blog know this. It isn’t a sudden disclaimer that I just added. Most closings are recorded, however, within the first 7 days. Although the information may be a bit lagged in some cases, I post this information to reveal trends. I’ve noticed that around 80% of a development’s closings occur within the first five weeks. We are beyond that point now with One Bal Harbour.
Bal Harbour may not be my specialty but I don’t need to be a specialist to check public records and provide information about closings. This is information that anyone has access to.
Looks like Mr. Boyle has been posting the same message wherever he finds negative comments on WCI:
http://tinyurl.com/2uunkq
I don’t think anyone is doubting the quality and location of OBH. But saying things like OBH is “immune to the Real Estate downturn in Florida” gives everything else in his message less credibility. Nothing is “immune” to a terrible market.
Maybe WCI will be lucky with this one and get a high closing rate. But I doubt the default rate will be in the single digits, as suggested.
I think that Lucas is taking the correct approach and simply reporting the facts (in this case, the actual public records data). There is a lag in that data, but not more than a month. If the public records don’t back up what is being claimed by WCI, then we can dismiss their information as false.
We’ll wait and see.
I have to agree with the posting This blog has done a great job is highlighting how great OBH is. No one denies that.
I just think Lucas is correct in showing his information that is made public. Obviously he is very clear to state that that is the information from public records at the time he posted it. And goes far enough to say that there is that lag in documenting the closings from the City.
However, to critize him is ridicoulous. He does a great job and I think eveyone is gettign upset because if you read it today you say wow they haven tclosed crap. But bottom line in ou have to look at the date of the original posting. Readers are not dumb and Lucas always does a good job in updateing his postings and his blog. But I don’t think he has the time or should have to do it every single day to keep a development happy.
Bottom line don’t critize cause if anything this blog actually made me realize OBH with his posting of hi spics and comments which I otherwise wouldn’t have even considered or bothered to look at had it not been for his blog.
So to critics of him don’t knock on him for reporting public information when he’s actually doing you a service and informing the public about your gran development which he has always said is one of the best.
I think any blog would benefit from the input of insiders like John Boyle. We should appreciate his input.
Lucas was reporting on a snapshot of what the public records indicated about the closings. There was no factual errors. In his opinion the closing rate was slow. If you’ll read my prior comment, I didn’t agree with him, but that’s Ok. We all benefit from the transparency of information; opinions may differ on the facts. This blog tracks closing of various projects and I personally was looking forward to an update some time in the future. But if anyone wants a daily closing updates they are welcome to start their own blog.
Lucas has built quite a following of loyal readers, based on his fair evaluations. If OBH’s success continues it will be reflected in a future update, and OBH and WCI will benefit from the favorable publicity.
Mr. Boyle: I think it most unfair of you to attack Mr. Lechuga for reporting the facts as he saw them on the date of his post. If you are correct, the facts will be there for all to see. You have nothing to fear from anyone that maliciously or otherwise doubts your success. If OBH is a success, I am sure you will look back on all of this and have a good laugh on those that doubted it. In the meantime, there is nothing wrong with this blog following the developments and reporting them truthfully.
Let’s be honest though. If Mr Boyle’s statements were verifiable and true then the banks would be happy to negotiate the new loans because the cash to repay them would be in the bank. Instead they get week by week waivers. I.e. they are watching and waiting like we are. Further, if this is material non-public information that Mr Boyle is publishing (I think it is – it probably determines the future of WCI) then Mr Boyle should watch his door for an SEC notice and his managers at WCI should suspend him.
In addition, if the information is public (material or not) why isn’t their a PR newswire on my Bloomberg telling me that OBH is 2/3rds closed.
Either way, Mr Boyle and WCI have stirred up a hornets’ nest by writing these entries.
We have been working on upgrading a condo in OBH since the first week of December and thanks to the help of the management office, the city of Bal Harbour and WCI., we were able to complete our quickest renovation to date. Don’t mistake my generous complements with the inability to identify a building that does not stand up to its hype. We have worked in many “luxury buildings” and its actually when you need to get something done that service is really put to the test. Getting the subcontractors in and out of the building was a breeze, however strictly controlled and not confused with those of WCI finishing up the hotel. I do have to mention that the recieving department and sublevels can be VERY confusing since they are intertwined with the hotels service areas but everyone is so willing to help that there was rarely a problem.
The common areas were spared no expense and the actual buildout of the units were done very well also. We found a couple of issues that WCI was happy to quickly address and the over all use of space was done very well. I would highly recommend this property to anyone that enjoys five star ammenities, a spacious floorplan and an accomodating city building department to work with should you actually choose to pull permits.
We just finished last week, and I am really going to miss my daily, “welcome back Mrs. Ronderos.”
Bal Harbour next, what have you heard?
Has anyone seen the Regent and WCI what they are doing to current owners? The have failed to disclose fees, and quarterly charges. Owners are now at a brick wall…8,000 for advertizing, Administrative “COSTS” over 5000.00 and so many pumped up, over inflated (Maid service $175 to make up a room? I doubt the maids are piad 10.00 a hour and it would take more than a hour to do a general room make-up). WCI has filed for BANKRUPTCY-meaning they are looking for anyway to collect monies un-ethically-especially in concert with the Regent management. If anyone has just gotten their 1st Quarterly statement and is in shock and disbelief, please email me, as we are looking at a possible lawsuit for the non-disclosure tactics along with several other key issues as to accounting and spenditures. [email protected] Please email me!
I just got my statement. I have a studio condo and am shocked at the undisclosed fee that I received…$177.00 per night for maid serive….over $7,000 for marketing, $3,000 for admin fees? The list goes on and on. We need to get together in a class action suit. We cannot let them get away with this! We will never make any money in the rental program….we will owe money. WCI is in trouble and must show high recievables on their balance sheet…we are the scapegoats….e-mail me at [email protected] asap!
Way to go Lucas you really put the nail in WCI’s coffin on your blog, One Bal Harbour and Regent Hotel. Millions of investors around the world were alerted to WCI going bankrupt before they did, and the many valid issues about One Bal Harbour you pointed out. Glad to see you were able to steer investors and prospective buyers around the world on your high profile influencial investment blog, http://www.miamicondoinvestements.com away from a property and company with so many serious issues. I am sure Tim Hamilton wish he had not bought at One Bal Harbour.
I might add that after reading your blog I shorted the stock and steered many investors away from investing in One Bal Harbour and WCI, including fund manager in New York City.
John,
Seems like they are giving away room rates at 3 star prices. $265 dollars a night is certainly not a 5 star rate. I think that is less than the Marriott on south beach.
Who sets those prices? Or maybe we should ask, who gives away the rooms at such cheap prices so the losses are so steep?
for your info follow the link below:
http://www.regenthotelsmedia.tekgroup.com/article_display.cfm?article_id=403
What have you heard? Regent pulled out of Battery Park, Boston after nearly 6 years being affiliated with the project. It is now opening in August/September as the The Hotel at Battery Park; A few years back Regent pulled out of South Beach after approximately 9 months; Regent pulled out of Winter Park, Florida high end highly promoted condo and hotel deal; Regent Costa Rica project was highly advertised on regent’s website. Now it is off the website, is this one gone too? Oh, I think Regent pulled out of the Regent Beverly Wilshire Hotel, such a nice hotel, what a shame. News on how WCI communities bankrupcy may effect Regent Hotel? Thoughts?
I think these hotels ar estarting to be more of a marketing ploy more than anything.
Think about it. They use the Regent or other other name such as St regis etc…to intrique you to buy into a project and then a few month later they pull out an dyou’re stuck with a no name hotel project.
Sounds to me they may be benefitting from the franshise naming right fees and then have the option to pull out.
Seems a bit shaddy!
Once Again said: “Think about it. They use the Regent or other other name such as St regis etc…to intrique you to buy into a project and then a few month later they pull out an dyou’re stuck with a no name hotel project. ”
Not exactly. Condo franchisor from the high-end names like Regent, Four Seasons, Ritz Carlton, etc. generally make every effort to keep their names off of condo-hotels. When they do permit a franchise, the rules are extremely tight and the use their legal exits to pull out.They make way more money franchising a property to a resort operator or run it themselves as a hotel / resort.
Unrelated,
Regent does not own anything at One Bal Harbour, they are just operating/managing the property. WCI Communities is the owner of the actual hotel/condos and then of course the other owners. Anyone know how high the maintenance has shot up?
Based on prior posts and it’s history Regent does not seem to be a reliable operator, ie. announcing then pulling out of properties. Thoughts?
WCI and One…
I realize that regent is only the franchisor of the property involed at Bal Harbour. IThe employees of the property are employees of the franchisee (the owner(s)…
The new restaurant One Bleu at One Bal Harbour-Regent Hotel seems to have blown it. It had a scorching honest review of how bad the restaurant was. Uneatable food and 30 minutes between servings. One diner of two had to wait 30 minutes for the other diner’s food to arrive. Just an example. My opinion and prediction is the restaurant closes down and the Regent leaves. I ate their and the food was uneatable one month ago. Glad to see the word is out at what a sham the regent is running in bad service and food. On top of that after you eat at the restaurant, you still have to pay 10 dollars to valet with validation.
Based on the posts above by homeowners, I guess Regent and WCI is too busy trying how to fleece homeowners, rather than providing any level of quality or service in it’s restaurant.
thoughts?
The review mentioned above was a full page in the Miami Herald, August 15, 2008
This is a great blog. What about the new lawsuits filed. Including mold in condos. The building before was torn down because of mold contamination. Wow! A repeat?