Day & Night – Miami River Condos
February 25, 2009 by Lucas Lechuga
Daytime shot of Epic. Closings at Epic began in November 2008.
Nighttime shot of Epic:
Daytime shot of Wind. Closings at Wind began in February 2008 and has residents living there.
Daytime shot of The Ivy at Riverfront. Closing at The Ivy at Riverfront began in June 2008 and also has residents inhabiting the condo building.
Daytime shot of The Mint at Riverfront. As far as I know, The Mint at Riverfront has not obtained its certificate of occupancy yet. From the looks of the picture below, it appears that the pool deck has not been completed. Expect closings to begin within the next 2-4 months.
Daytime shot of The Mint at Riverfront, The Ivy at Riverfront and Wind.
Nighttime shot of The Mint at Riverfront, The Ivy at Riverfront and Wind.
The following is not a building located on the Miami River but I wanted to share this great shot that I took of the Bank of America building from the pool deck of Brickell on the River North.
This is in response to the last thread: Hoover did a lot of stuff. Read your history.
Day time offer $125.00 per square foot.
Night time offer $126.00 per square foot.
The Smart Money
Lucas,
I suggest putting some sort of watermark on these pictures or your less hard working brethren will steal them. Check out Zilbert’s site to see what I mean.
For another dose of reality, permit me to share this article (ie. throw this bucket of cold mop water) on the fires of optimism that stirred up by last night’s ” Chosen One Media Circus”! Ain’t he just grand???…….NOT!
BAILOUT ALERT!!!
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Daily Business Review – February 25
Condo Meltdown
iStar stays busy negotiating properties before foreclosure
February 25, 2009 By: Polyana da Costa
When it came to funding condominium construction in South Florida, there were few lenders as aggressive as New York-based iStar.
And now that the condo bubble has burst, iStar is moving just as aggressively to shed its troubled assets and foreclosed projects.
The publicly traded finance company, which has more than $1 billion of loans scheduled to come due over the next seven months, has been unloading properties at substantial losses.
“They are in need of capital,” said David Chiaverini, a BMO Capital Markets analyst who covers iStar. “They are trying to balance their liquidity needs.”
iStar executives did not respond to several requests for comment.
Late last year, iStar took a $16 million loss on the sale of 5.65 acres near Brickell Avenue when it sold the lot for $41.3 million. The developer, Kevin Reilly, who gave back the property to the lender in May 2008, owed the lender about $58 million.
iStar also took a $19 million loss on the sale of 141 foreclosed units at the Whitney in Downtown West Palm Beach. After taking a deed in lieu of foreclosure valued at $43 million, the lender sold the units for about $170,000 per unit, or $24 million.
It recently agreed to a short-sale on the Bermuda Cay condo conversion project in Boynton Beach. iStar allowed the developer to sell 107 units in the failed conversion for about $7 million when it was still owed about $20 million of the original $35.3 million.
And iStar continues to negotiate potential sales of projects before the developers end up in foreclosure.
That is the case with 1060 Brickell, a 576-unit condo project by Imico Brickell. iStar, which lent the developer $153 million to construct the twin towers in 2006, is negotiating a bulk sale of the 346 unsold units of the development, according to a source familiar with the deal who did not want to be identified. According to county records no foreclosure suits have been filed against the project but at least one unpaid contractor has filed a lien.
Imico Brickell is managed by New York-based Extell Development. A woman who answered the phone at the company said the company could not comment because it was no longer in control of Brickell 1060.
Miami-based BayBridge Real Estate is marketing units in 1060 Brickell for sale. Adam Greenberg, president of BayBridge, confirmed he is marketing the property on behalf of the developer but declined further comment on 1060 Brickell.
BayBridge also is working on a short sale of a failed 180-unit condo conversion project in Tampa, where iStar is the lender.
“We had a number of offers on the Tampa property and iStar is considering one of them,” he said.
A couple weeks ago, iStar sold the mortgage note on the Paramount Beach condo site in Sunny Isles Beach for an undisclosed amount to Sunny Isles Property Holdings, a company managed by Carlos Mattos, according to Miami-Dade County records. The lender, which had provided about $32 million to developer Sunny Isles Development, filed a foreclosure suit on the site in December 2008.
A call to Mattos was not returned by deadline.
iStar’s exposure
iStar, one of the lenders with the highest exposures in South Florida’s condo development market, was “very bullish in the go-go days in financing condo projects, said Steven Beauchamp, president of Mangrove Advisory Group in Fort Lauderdale.
“They have a disproportionate amount of loans in the condo finance business,” Beauchamp said. “Now they are trying to unload because they need to raise capital.”
BayBridge’s Greenberg said that despite iStar’s recent discounted sales, he does not believe the lender is acting out of desperation.
“The smart lenders are not showing desperation but a willingness to work deals that make sense,” Greenberg said. “They are very smart about not wanting to be in the REO business. They are basically saying, ‘this is what it’s worth now, do we want to get back that money and redeploy the capital or wait for it to be worth possibly less than that in a few months?’ ”
The Whitney condo sale, he said, was a good deal for iStar despite the loss.
“For this market they got a really good price on it,” Greenberg said.
Robert Given, a broker at CB Richard Ellis who represented iStar in the Whitney sale, said the lender is taking a more proactive approach than many other lenders.
“They are systematically approaching their dispositions,” he said. “A lot of the other lenders are using internal sources to market their properties, which is not as effective.”
Given, who also is marketing two condo projects in Orlando for iStar, declined further comment.
iStar has at least three other projects with pending foreclosures in South Florida, including the site of the Marina Grande in North Miami Beach; a 5.5-acre site near Brickell Avenue owned by Midtown Equities; and the Marina Oaks in Fort Lauderdale.
iStar also is the lender on the Coconut Grove Residences, a 64-unit high-end residential project in Fort Lauderdale.
The project is not in foreclosure, but there are several liens against the developer filed by unpaid contractors. A source said iStar and the developer were recently negotiating a discounted bulk sale of the remaining units but the deal fell through. The lender opted to work with Coconut Grove Ltd., headed by Fort Lauderdale attorney Ronald Matriana, which owns the project.
In 2005, iStar lent about $74 million to Coconut Grove Ltd. for the construction of the project. Coconut Grove has closed on the sale of about 22 units. The units for sale range from $750,000 to $5 million.
Mastriana did not return a call and an e-mail request for comment.
In recent months, iStar has filed foreclosure suits through out the country, including against a 203-room hotel in Hawaii — which iStar is now auctioning — and mixed-used properties in New York. The lender is owed about $100 million from one New York project.
Many of iStar’s troubled properties were inherited when the lender purchased Freemont Investment and Loan in May 2007 for about $1.9 billion. Freemont had loaned millions of dollars in construction loans through out Florida.
iStar didn’t go into the deal blind. At the time of the purchase, iStar estimated Freemont had about $840 million in non-performing loans.
iStar shed some of the loans inherited from Freemont and they have since gone into default.
In April of 2008 iStar sold a $25 million loan to AmTrust Bank on the Landmark at Doral, a mixed-use residential project. AmTrust Bank has a pending foreclosure on the project against EB Developers.
iStar also sold a $6.5 million mortgage on the 54 unsold units at Altos de Miami condominium in Miami’s Little Havana neighborhood to Glen Royal Parkway Acquisition last year. The property was foreclosed on earlier this month. The defendant was Altos de Miami.
Given today’s economic climate, lenders are realizing it’s better to write down the tainted assets and dispose of them, rather than watch the market decline further, said Howard Taft of Cohen Financial.
“The Miami condo market is going to get worse before it gets better,” he predicted.
iStar still has a lot of loans in South Florida, including a $245 million senior loan it issued to Boymelgreen Developers in 2007 for the completion of the 306-unit Marquis condominium and hotel in downtown Miami. The Africa Israel Group has taken over the project from Boymelgreen. The loan is due in February 2010 and can be extended up to a year, according to a source familiar with the project.
iStar also is owed about $26 million by Pedro Martin, developer of the 600 Biscayne condo tower. The loan was to mature last year and the lender granted the developer an extension. The loan comes due in October of 2010.
iStar (SFI) shares were trading at $1.07 on Tuesday, up from 98 cents on Monday. Over the last year the stock has ranged from $23.21 to 66 cents per share.
Despite iStar’s push to shore up its portfolio, BMO Capital’s Chiaverini said he has not been recommending iStar stock to investors. On Thursday, iStar will announce it’s fourth quarter results.
“I’m modeling for a loss of 86 cents per share,” he said. “There’s a downside risk to this number given how difficult the fourth quarter turned out to be for other financial companies.”
iStar debt coming DUE
March: $206 million unsecured note
April: $119 million secured-term loan
September: $300 million secured-term loan, $350 million line of credit and $490 million unsecured note
Ace is a wanna be who has no money so how he can he be the smart money? Get a life loser!
OMG ROFL
So now Herbert Hoover was a great president??? Yeah Hoover did a lot of great stuff Bmw m3 like leading us into the Great Depression and then failing to enact policies to pull us out. The Hoover Dam??? Give me a break. You guys are revisionists. You want to distort history to suit your ideological mindset. I suppose that you also believe that F. Roosevelt reforms like child labor laws – unemployment insurance etc. were mistakes. For all of you revisionists out there did you know that there are people in Russia who still admire and believe that Joseph Stalin was a great Russian leader.
Regardless of desperation or not, iStar has the right idea. Cut your losses and run. We all know the feeling, be it on a losing stock or the roulette table, you’re down a lot of money there is that feeling inside you that is telling you, I still have a chance to make a profit out of this. Should I take that risk or should I cut my losses and run? With housing assets contributing a very large percentage of many peoples net worth, it’s very hard to walk way (I am referring to those that put down that 20% plus down payments, not those idiots that had no business buying realestate in the first place that financed 100% + of the loan who unfortunately are in a far better position then those of us that money down because they have nothing to loose. Isn’t it amazing that the bad get rewarded and the good get punished? Maybe those of us that put all that money down are the idiots)
Anyway back to topic….we are in vicious cycle that is causing home prices to only continue to go down, the more foreclosures we have the lower the prices will go, the lower the prices go the more foreclosures we have, and I’m not talking about the millions that will become unemployed and cant pay there mortgage and thus for close. I’m talking about the millions that are defaulting that had no business investing in realestate that bought homes solely on speculation with the intent to flip them, that cant afford the mortgage even with a job. I’m also taking about the guy that 2 years ago bought his 1 million dollar home that is paying paying 7k a month of mortgage, taxes, maintaines, and insurance when the home across the street was just sold for 400k and the house on the left is being rented for 2k a month…how long can we expect this guy to continue doing this for before he decides to default adding another home on the market with an even lower foreclosed price? Folks we are really in a bad place right now!
The way I see it we have only 2 options to get out of this cycle, and we WILL get out of this cycle, nothing last forever. Those that are buying now know this, and also know you cant time the market.(although let me admit I feel we still have at least a year before we even see a sign of a recovery) #1 either lenders start reducing principal balances on outstanding mortgages on everyone thus stopping many new foreclosures by eliminating those people that are underwater that are considering to foreclose and this will also help those that have been hurt by the current state of the economy by greatly reducing there monthly payment. You may say the banks would never do this, well they kinda already are taking the losses anyway by selling all these foreclosures and short sales with huge write offs. Granted they don’t want to voluntary give away money to those that are paying because in effect with would be giving everyone a discount ( Does anyone have numbers on how many homes during the boom period have a mortgage?) but really there is no other way unless #2 inflation sets in. Some of you argued that if inflation was to come it will only affect commodity prices thus in effect making everyone just poorer as salaries would stay the same, I believe this is only at the beginning as prices begin to spike which will pour into construction costs, food, ect companies will initially start seeing higher profits and eventually will be forced to increase salaries which will in turn increase rents and housing prices thus increasing the price of the home in real terms but infact price would be the same or even lower in nominal terms, which ofcourse would decrease the debt in nominal terms and halt many of the defaults.
I believe one of these two scenarios or a combination of the two is our only way out!
Kramer,
Well spoken !!
The interesting thing in the recent Robert Shiller interview is that the home price bubble was ONLY an asset price bubble as rents stayed in line with historical norms. That is telling, the income stream from these properties was not out of whack, only the asset prices were. Just like stocks, the P/E got way way out of whack. More interesting will be that now rental prices will trend under the historical norm as there are record vacancies and people are going back to doubling up or having roommates. Such vacancies lower rents and will depress the home prices in order make it work to buy a place with the intent of renting it out. The housing mess is really limited to 4 states….let the prices fall.
Visionary
Thanks. Good to see you back online in here.
RG
Wont reducing principal balances on outstanding mortgages for everyone just exacerbate the downward spiral in home prices?
The Great Depression started about 3 years before Hoover took office. Let’s all calm down people. Take a deep breath. He didn’t “cause” the Great Depression any more than Obama caused this mess. Both were a group effort that cannot be reduced to a single cause or a single person — despite what the internets and talk radio tell you.
Can we stick to housing and the current economy? Lord knows I’ve been guilty of straying off topic too.
coolidge and his federal reserve chairman started the great depression.
Unrated:
Great post!
Were I in an unusually malicious and vindictive mood – – – not saying I am, not saying I am not – – – but I would short SFI. A big time short!
BFG IV
Stomper,
short a $1 stock? Brilliant!
Kramer
“Wont reducing principal balances on outstanding mortgages for everyone just exacerbate the downward spiral in home prices?”
In reducing principal I mean to homes that have mortgages above current fair market value, and reducing them to fair market value not below and not to people that have equity in there home, those wont walk away. I am afraid of that large group of people that bought homes or refinanced in the 2002-2007 period that have the money to pay but are deciding it’s not worth because the home in underwater thus causing home prices in a free fall. Perhaps to make people stick to the plan I suggest something like this for example: lets say Joe has a mortgage for 400k however due to short sales and foreclosures in his neighborhood the home is only worth 275k (very likely scenario in today’s environment). If Joe doesn’t pay the end result is the bank eventually forecloses on the home, loosing time and money (attorneys fees, court fees, lost interest and opportunity cost the bank would have gotten on the note had they had the money today ect.). Perhaps someone can shed some more light on this but from what I hear there is such a back log on foreclosures that it can take over a year before you actually loose the home, is that true? So lets say the back finally forecloses on Joe’s house 1 year or so from now, house is in shambles not maintained, home prices continued to go down, how much do you think the bank will get for that house 1 year later 200K maybe? So the bank lost 200k on that note plus costs that I already mentioned. The way I see it if inflation doesn’t set in the only way to avoid such a scenario would be for the bank to tell Joe hey look your home is 125K underwater, if you continue to make payments on time we will credit you 12.5k per year for the next 10 years…I think Joe will keep making those payments no matter what! The bank has saved itself over 75k on this transaction alone plus has stabilized the price of it’s other foreclosed properties which it can now sell at 275k not lower and lower like has been happening.
Honestly I know this is far fetched for this to happen, but I don’t see any other way out, we will eventually get out of this.
Do the small number of windows that are lighted represent the number of condos that some one is actually living in?
You lot are rattling on about Hoover who has no relevance to today’s financial calamity other then a hoover is a useful device that can clean the carpets after the previous owners and/or squatters have been evicted.
What The Smart Money is about to say E.F. Hutton listens, so pay attention!
The maximum value of a Miami ocean front or ocean view Condo is $125.00 per sq ft .
The value of daytime “ohhhs” of an ocean front Miami Condo: $0
The value of a nighttime “ahhhs” of an ocean front Miami Condo: $0
The value of a day or nighttime “wow factor” of an ocean front Miami Condo: $0
The value of advice from The Smart Money: $priceless
The Smart Money, need we say more.
Nope!
When the Smart Money talks, people listen.
I look forward to reading the Ace’s Smart Money reports!!
Me? I am watching and waiting…………..
The Real(R) Smart Money (RSM) doesn’t pay attention to price per/sq. ft., but rather to median income/ cost ratios. The RSM knows that an arbitrary price point wont apply to every building. That said, the RSM appreciates the Smart Money’s moxie.
The RSM will cease and desist from referring to itself in the 3rd person now.
«leading us into the Great Depression and then failing to enact policies to pull us out»
Corrections, repricings, and ends of bubbles are part and parcel of any economic cycle anywhere in any era. Recently, we had them in 1987, 1992, and 2001.
End of the world, anyone?
What you don’t want is for government to intervene and make things worse. Hoover’s recession of 1930 might have ended in 1932.
Roosevelt made yet another recession into a Depression that lasted into the early 40’s with his disastrous policies of price controls, supreme court packing, and central planning of the economy.
It is Roosevelt who is the villain.
I wonder how many people on this blog talking economic policies and what will lengthen the recession actually get paid to do economic forcasting. I am willing to bet none. I bet most haven’t even taken more than 1 0r 2 economic classes at the college level. They need to relax and stop repeating what they hear on radio. Nobody gives a darn about your opinion on 1930’s depression unless you can show us you were at least of college age during that time or you are actually being paid by some employer for your views on the economy. We want to hear about your Views/Opinion about real estate, thank you.
makes me think,
I fully concur with your statement !
makes me think,
Some economical posts on this blog are repeating like a prayer wheel.
makes me think,
Most paid economists got everything about this downtown wrong. They got it wrong during the pre-crash years, they were woefully wrong in 2008 after the crash had started, and most are still way off base.
I can think of several highly trained economists who are paid to make economic decisions of global import who, based on their recent track record, appear to be clueless.
Economics is mostly informed common sense. The professionals use highfalutin words to hide the fact that their “forecasts” are simply guesstimates made to look very purdy with charts and tables and stuff.
Percentage growth “forecasts” to several decimal places are guesses laden with loads of professional BS.
RG
the problem with your hypo is that you assume prices won’t go down any further. what happens if you do a modification and then six months later, joe’s house is worth less than the modified loan amount? that’s the likely scenario, right? you now have to go through the same process again…and perhaps again…and again.
that’s the problem with these silly modification programs. it just retards the inevitable movement toward fundamental value. it is the proverbial death by a thousand cuts.
Can we rename Epic: “Epic Fail”? Icon = “A Con”?
Any other suggestions?
“Brickell up the River”
“Hood Lofts”
“Misfortune House”
“Blue (my life savings) Condominium”
“Wind by REO”
Miami Herald 2/26/09 local section article “Sales heat up, prices lagging”
Sales apparently heated up to 786 condo and SFHs in January 2009.
But wait the Miami-Dade County Clerk’s web site shows that 6,000+ foreclosures were filed in January 09 in the county. To go along with the 50,000 plus filed in 2008 and which most are still pending.
I am afraid I see a potential problem. Push back the recovery a month or two. That’s my NAR advice.
jcrimes
Well the theory is if you stop foreclosures you will stabilizes prices. The cycle we are in is the exact opposite of the boom, each foreclosed house that comes on the market is priced less then the pervious home which in turn is killing to comps. The current modification program is flawed because house prices will NOT go back up in the short term, so someone that is underwater today will be underwater in 12 months because prices will not go up. So instead of him losing is house today he will loose it in 12 months, my idea would stop foreclosures not delay them. If principal balances were recalculated we now have a floor on prices, the homeowner knows if he continues making his payments he wont be upside down, because he will be getting the predetermined write off every year that I already discussed. This plan would stop all those foreclosures that are occurring from people that are just walking away because it’s now a bad investment. This could contain the foreclosure rate to those in the sub prime category vs what we are beginning to see that will quite literally ruin us which is foreclosures on every level from Joes’s with good credit, to Mary that put down 25% but is still underwater because the home is down 50% to Jon who can afford his monthly payments but figures my mortgage is $200,000 more then the house is worth I might as well walk away. Perhaps this way plus some added inflation and stimulation in the over all economy to curb unemployment we can get through this without prime south beach condos getting down to $125 a sq/ft because as absurd as that sounds we are headed that way without the implantation of the above fixes. I see no other way!
The RSM! lol
moretroops,
Good ones!
I like the “new” Blue & Wind names. Is “Hood Lofts” a play on “Parc Lofts”? Who thought to put such a beautiful building with such great spaces in such a horrible area? I haven’t figured out which is worst, that, or Cynergi.
As for your list, that building near Parc Lofts? Failing Station.
Realist Bob,
That is my point exactly. The people who studied this stuff all their lives and have experienced it longer than us can’t get it right. If I don’t want to hear from them on the topic why the heck would I value some joe smoe’s opinion on a real estate blog? People come on here talking about this stuff like they are experts on the subject matter. No body knows how long this thing will last or how deep it will go before it turns around.
“Economics is mostly informed common sense”
well then there is a whole lot of people out there without common sense because a lot of people are taking a drubbing in this economic downturn.
mmt,
Many people who did not study economics all their lives got it right. Most of the “experts” didn’t.
Non experts have a right to express an opinion. Even if they’re wrong.
Opinions on the economy are relevant because the Miami condo market does not exist in a vacuum. Its viability depends on economic factors to a great extent.
Neither “informed common sense” nor knowledge of economics prevent a bad economic environment from affecting investors any more than knowledge of physics prevents gravity from affecting physicists and other earthlings.
makes me think,
I sold in 05 my Gables properties.
The Smart Money money will buy the same properties at 97 prices.
We do not know if this will be in 09, 10 0r 2011.
Muir, member of the Smart Money.
p.s. Smart Money insists that we are currently in a deflation (AMX offers $300 for return of cards) and predicts DOW below 6000.
p.s.s The Smart Money reminds everyone that economists are necessary to control the shepple.
dont underestimate the ideas of those on this website. we may not be “academic” economists, but we are what i would call “professional” economists and should not be overlooked. those that have assets (cash, housing, stock, etc) and deploy them into the economy actually have a greater say over economic direction than any economic policy maker. we are the practice, not the theory. our reasoning and rationale may not follow the standard textbook, but we actually define the rules of the economy for good and bad. that is why policy makers are always chasing the action of the economy, not blazing its path.
wind by reo…that’s actually about to play out.
NJ Handy Girl — Failing Station is gold. Yeah, perhaps we should call its neighbor “Narc Lofts” instead. Those guys are prisoners in their own homes — and not just because their 150% underwater.
The Ivy = The Empty
The Sail = The Sale
Jade = Jaded
ICON = ICAN’t
Plaza on Brickell = Plasma flowing on Brickell
ICan’t! Nice. Or:
Midtown 4 (Closed)
Platinum = Pewter
guys, in my original post it said, “Nobody gives a darn about your opinion on 1930’s depression “.
1930 depression.
I agree the economy today is very much relevant to the real estate market.
Most folks are taking a drubbing in this economy that is obvious.
moretroops asked: “Can we rename Icon = “A Con”?”
NO…….I have renamed the ICON Brickell. STALINGRAD I, II, AND III. “Stalingrad” ia a symbol of “the beginning of the end”, in this case, of the “Donald Trump of the Tropics and his band of foreign thieves!
Update on the “Stalingrad Hotel” (a.k.a. Viceroy):
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Commercial Real Estate
Related seeks hotel investor as loan’s maturity looms
February 20, 2009 By: Paola Iuspa-Abbott
he Related Group, whose new Icon Brickell is saddled with a hefty debt load, is looking for an investor or buyer for the project’s hotel component.
Jorge Perez, chairman of the Related Group, recently recruited Holliday Fenoglio Fowler in Coral Gables to find a buyer or an investor for the Viceroy Hotel, Resorts & Residences at Icon Brickell in Miami’s financial district.
The hotel opened last week at 501 Brickell Ave.
If a deal goes through, the cash could help Perez pay down Icon Brickell’s $176.5 million construction loan from LaSalle Bank. The loan is set to mature in November, according to Miami-Dade County property records.
Executives of the Related Group did not return calls for comment.
Representatives of Holliday Fenoglio confirmed they were marketing the property but declined further comment.
The 150-room luxury hotel is part of the 50-story building in Perez’s three-tower Icon Brickell development.
Although the hotel is part of a high-profile project, it’s a bad time to be seeking a buyer, several real estate experts said.
“There is no financing available for hotels, and occupancy and [room] rates are going down,” real estate broker Abraham Wien said. “The only reason someone would put a hotel on the market [at this time] is because they are in financial trouble.”
Related recently completed the three-tower Icon Brickell, which has a total of 1,700 units. Closings at Tower I began in December. So far, only 17 condo sales have been recorded with Miami-Dade County. Contract holders of more than 120 units are suing Related in an effort to get out of their purchase agreements.
Related built six condo projects in downtown Miami and the Brickell Area during the 2002-2007 housing boom. Icon Brickell is the last project to come on line.
The market value of a hotel, as with most income-producing properties, is largely based on its revenue history. Determining the value of the newly opened hotel will be difficult.
“Selling a hotel in today’s market without even having a track record, [means] they are going to have to accept a price that is probably not much more than their [construction] cost,” said Mel Roth, president of International Mortgage & Equity Advisors of Florida in Parkland.
“Without a track record, you have an asset that no one knows what it is worth. You are not going to be able to sell it at a premium under any circumstances. It is absolutely impossible.”
That means Perez may have to sell at a discount.
Wien, who often represents European and Latin American funds, said his clients are only interested in cut-rate properties.
Hotel buyers that need financing are likely to come up empty-handed, Roth said.
“It is more difficult to get a permanent loan on a brand-new hotel, than it would be getting a construction loan to build a hotel,” Roth said.
Lenders will finance about 65 percent of the value a hotel if the operator can prove its net operating income generates at least 140 percent of the debt coverage, he said.
Roth knows how hard it is to land financing since the financial market began to implode in late 2007. After more than a year of negotiations, he helped secure a $250 million loan in October to complete construction of Met 2 Financial Center in downtown Miami. Met 2 will be an office tower that will include a hotel under the JW Marriott Marquis Hotel Beaux Arts name.
Roth had initially negotiated the loan with Bank of America and Wachovia, but as the credit market deteriorated, the banks had to join forces with HSBC Bank, RBC and Bank of Scotland to come up with the $250 million loan.
The recession is taking a toll on tourism, one of Florida’s main economic engines. Hotel owners are seeing room rates slide and occupancy levels drop.
Miami’s downtown and Brickell areas saw the hotel occupancy rate fall to 60.8 percent in December 2008 from 64 percent in December 2007, a drop of 5.1 percent, according to the Greater Miami Convention & Visitors Bureau.
Countywide, the hotel occupancy level declined by 8.5 percent.
Daily room rates in downtown and Brickell slipped to $168.30 from $189.90, a drop of 11.4 percent. Countywide, room rates declined 6.6 percent.
Click play to listen to Guy Trusty
“We are now at a point where we have peaked in terms of rates and occupancy,” said Guy Trusty, a hospitality consultant in Coral Gables. He said the hotel industry began a downward trend in early 2008, after almost seven years of growth.
Hotel values across the nation are expected to plummet by up to 30 percent in 2009, said Scott Smith, vice president of the Atlanta office of PKF Consulting, a hospitality and real estate advisory firm.
In an indication of falling values, declining revenues are increasing capitalization rates, a measure of cash flow that determines a property’s market value.
In the last year, cap rates of luxury hotels have increased one to two basis points, to more than 8.5 percent, lowering the market value of properties, said Wien, with Holly Sime Real Estate in Coral Gables.
“It means your money goes further as a buyer,” Trusty said.
Kor Hotel Group, which also operates of The Tides in Miami Beach, is introducing the Viceroy brand to South Florida through Icon Brickell. Hotel rates at Viceroy Miami start at $500 a night.
The fact the hotel flag doesn’t have much name recognition in the region won’t help boost the sale price or improve the chances for financing, Roth said.
Kor did not return a call for comment before deadline.
OTHER RELATED DEALS
In the last six months, Related has refinanced and sold at big discounts condos it couldn’t sell at two of its new high rises in Miami-Dade.
In December, Related’s TRG-Harbour House affiliate sold 101 units for $27 million in Bal Harbour’s New Harbour House, a condo conversion project. Related sold the units at prices as much as 60 percent below the cost of units sold to individual buyers in the last two years.
In July, Related sold 146 condos for $36.4 million in the 50 Biscayne condominium tower in downtown Miami. The bulk buyer at 50 Biscayne was a company owned by Related and an equity partner, Lubert-Adler Partners of Philadelphia. Related and Lubert-Adler bought out Atlanta-based Cousins Properties, which built 50 Biscayne in partnership with Related.
The price per unit in the 50 Biscayne bulk purchase averaged $247,739 at a time when individual condos on Biscayne Boulevard were selling for an average of about $309,936.
A few months later, Related and Lubert-Adler financed some of the condos acquired in the bulk deal with a $20.87 million loan from Prudential Insurance Company of America.
If Related doesn’t find a buyer or investor for the Viceroy, the company may have to negotiate with LaSalle Bank for a loan extension.
“The natural thing to do in today’s market is you go back to the construction lender, who has to recognize that there is no financing [available] for a hotel with no track record,” Roth said.
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ICON BRICKELL
Tower I: 57-story tower with 715 condos
Tower II: 57-story tower with 561 condos
Tower III: 50-story building with 520 condos and about 150 hotel rooms
Hotel to be operated under the Kor Hotel Group Viceroy brand
$176.5 million construction loan from LaSalle Bank comes due in November
Paola Iuspa-Abbott can be reached at (305) 347-6657.
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Big Gorge: Better run to Wal-Mart for some white flags!!!!!!!!!!!
For those of you waiting for The Smart Money report here it is……
$125.00 per square foot.
The Smart Money.
Back home today. It feels great to be back in America.
Well, Lucas posted a nice thread. This could have been a great discussion about the Miami River Condos. Instead I read the most irrelevant drivel and blather from the readers. I think you guys can do better than this.
I personally think that Mint, Ivy and Wind (Latitude, Brickell on River etc) are the best candidates for being taken over and converted to affordable housing. All downtown workers in the government buildings should be offered these units at a great discount. Bring them here from the far far away suburbs such as North Miami and watch downtown take off. Taking away all Miami river condos would also reduce the available unsold pool of total downtown condos from 11,000(out of a total 22K) to probably 7,000 or 8,000 bringing stability to the market quicker.
“All downtown workers in the government buildings should be offered these units at a great discount. ”
Will you put up your condo for section 8?
Amazing, some still have the arrogance of the upper class (yet never were.)
AJ,
I actually believe that would be a great idea. There are a LOT of lawyers, social workers and law enforcement officers in those government buildings who do not make enough to live and play downtown. Instead, we take our money outside, to the suburbs and after dark, the courthouse areas are ghost towns. I think that would help stimulate the area. There are a lot of little businesses that close up tight once the government buildings close because there is not enough “residential” life to keep things active.
Muir,
Not all downtown government workers require section 8. Some of us are state prosecutors who barely make enough to live in the city we protect.
BTW, section 8 (I do not know how much they pay in Miami for it)is considered pretty good in NY. Some tenants are great who require 8. In NY investing in section 8 housing(if you buy for the right price) is consided to be a very good and safe opportunity. I know several investors who specialize in section 8 and make a very deceny return on their investments.