Another Look at Corus Bank
December 1, 2008 by Lucas Lechuga
Before reading any further, please read the post I published on September 10, 2007 entitled, "Corus Bank - One of the Many Publicly Owned Real Estate-Related Companies to See Trouble Ahead". There are two things that amaze me most about that post. One, the growth in the number of comments left by visitors astonishes me. That was one of the most informative posts that I've ever written yet it only received 6 comments. Now, I write about a CVS opening at the base of Everglades on the Bay and there's over 130 comments. I guess, as they say "If you build it, they will come". Two, I'm amazed by just how dead on target my words turned out to be.
As the post mentions, Corus Bank had, and still has, significant exposure in the Miami condo market. The day that the September 2007 post was published, Corus Bank's stock price closed at $12.50. Currently, the stock price is hovering around the $1 mark and has dipped as low as 82 cents per share recently. A few weeks ago, Corus Bank announced that they would be deferring interest payments on their debt and had also applied for funds under the U.S. Treasury's Troubled Asset Relief Program (TARP).
Corus Bank was successful in having its construction loan for Quantum on the Bay and Marina Blue paid in full in 2008. I believe they also had equal success with Continuum North Tower. How will Corus Bank fare in future months, however, with the condo developments that either recently began closings or have yet to begin? The following are some of the condo developments in South Florida in which Corus Bank still has an outstanding construction loan along with the original loan amount:
- Artecity - $60,300,000
- Caribbean Miami Beach - $124,700,000
- Infinity at Brickell - $140,300,000
- Ivy at Riverfront - $130,400,000
- Jade Ocean - $288,115,000
- Mint at Riverfront - $191,800,000
- Onyx on the Bay - $44,100,000
- Paramount Bay - $216,000,000
Of the condo developments listed above, Onyx on the Bay is the only one in which Corus Bank has recovered most of its loan amount judging by the closing figures I published in September 2008. They may be very close to being paid in full on it, if they they haven't been already.
Closings for condos at Jade Ocean, Paramount Bay and Mint at Riverfront have yet to begin. I've heard that closings for condos at Infinity at Brickell began a few weeks ago. These four condo developments alone represent slightly over $800M in outstanding loans. All four condo developments were priced relatively late in the game and could prove to be disastrous for an already troubled Corus Bank.
On top of this, it was announced a little over a week ago that the developer of Tao, a 396-unit condo development in Sunrise, Florida, handed the property over to Corus Bank with work unfinished and closings yet to begin. The construction loan extended by Corus Bank to the developer of Tao was in the amount of $126,250,000. Additionally, Corus Bank purchased the mezzanine loan on Tao in the amount of $32.3M, which included principal plus outstanding interest.
It appears that Corus Bank could be wobbling on its last leg. If it were to go bankrupt, the Miami condo market could see a number of bulk sales occur in 2009. Even if it were to be granted federal funds from the Troubled Asset Relief Program, how long could that money delay the inevitable?
so let’s get this straight: a regional bank which made irresponsible loans and didn’t do enough due dilligence to gauge long-term demand (and is probably way over-exposed to one single market, Miami condos) and when things go tits up they expect the government to give them a hand out?
is it the role of government to prevent financial Darwinism?
so if they’re $158,750,000 exposed to Tao ($126M senior and the $32M mezzanine) then if they foreclose, can’t they break even if they average just over $400K per unit? is this possible in this building? how big are the units? is it waterfront? can they fire sale 400 units in Sunrise at $400,000 per unit?
One bank holds the senior on Infinity, Mint, and Ivy? OUCH! this must have been the lender of last resort for some real dogs.
why am I the only one commenting here?
not so sure Lucas that Corus will take the beatdown you envision. it really depends on how much the equity slice was in every deal (which was usually then financed by a mezz lender instead of being true equity). based on tao, it looks like they did a loan to value of 80% (also when did they buy the mezz for tao? if it was recently, i’m sure they paid a substantial discount for the loan). casting that pct. on the other projects, the equity would have to be worthless for corus to be arguably in a loss position. you’d also need to know the original release prices from the senior loan docs compared to the third party contract prices and today’s appraisal values. also, do the original loan amounts you post above reflect what was actually advanced under the loan? i don’t doubt borrowers would take every penny that was committed to them, but…perhaps less was borrowed
finally, if Corus gets TARP funds, they may well emerge from this alive (yet extremely battered). with a TARP commitment, they could sell the loans at a huge discount, clean up the balance sheet in the process and start anew. i’m not sure what the the bank’s BS reflects….what’s the level 3 assets?
So there’s going to be a CVS opening at the base of Everglades on the Bay?
😉
PTC
i remember two years ago driving by Tao, seeing the sign advertising the prices and then laughing. i mean, who the f%^k in their right mind would ever pay that kind of money, REGARDLESS of how big the unit was, to live in a condo in the damn swamp. it was ridiculous then and it’s even more ridiculous now.
Lucas,
“Even if it were to be granted federal funds from the Troubled Asset Relief Program, how long could that money delay the inevitable?”
🙂
🙂
🙂
The key is that it is “inevitable.”
Not when.
🙂
:-]]]
wild guess?
2011
Why?
Look what happened to buildings that were under Lehman Brothers’ control.
It is a mess in a building I follow, sales on hold….
Lucas where are prices headed in price per square foot terms by December 2009?
Oh please release me, let me go
For I can’t afford you anymore
To waste my cash would be a sin
Release me and let me buy again
I have found a new Condo
And I will always want it near
Her colors are warm while yours are cold
Oh release me my bank and let me go
Please release me, let me go
For I just won’t pay you anymore
To waste my cash would be a sin
Release me and let me buy again
Let me go, oh release me my bank
Let me go
The Smart Money getting in tune with the straight and narrow.
The Smart Money rarely responds to individual posts but this response is for:
‘Probably too Cynical’ who wrongly stated and we quote “when things go tits up they expect the government to give them a hand out?” referring to the imminent FDIC take over of Corus Bank.
Corus Bank does not expect the Government to give them a “hand out” Corus Bank expects YOU the Tax Payer to give them a hand out. The Smart Money will play no part in this deal as we do not pay taxes.
The Smart Money
[applause]
🙂
🙂
–
For Ace (The Smart Money)
I found your posts on Corus Bank interesting. I don’t Corus will receive any TARP funding; it does not pose a systemic risk like Citigroup. Just like National City, the FDIC will put it into receivership and sell its deposits to another bank. The FDIC will have to liquidate its condo assets at bulk sale rates (as you say).
I also have been following Corus Bank. I am VERY suprised they have not filed for bankruptcy. I hope they go under as they were giving loans like it was candy.
“I found your posts on Corus Bank interesting. I don’t Corus will receive any TARP funding; it does not pose a systemic risk like Citigroup. Just like National City, the FDIC will put it into receivership and sell its deposits to another bank. The FDIC will have to liquidate its condo assets at bulk sale rates (as you say).”
–
Don’t think so there, big fellow!
Just how much money does the FDIC have nowadays?
Not a rhetorical question, do you actually knows?
Cause last time I checked after IndiMac they were kinda cash strapped.
Oh yes, the gov can always… and blah blah.
But, you knows we gots to keeps the folks as ignorant as possible.
How do you think it’d play on the nightly news if Sheila had to go to Congress with hat in hand?
🙂
“Two, I’m amazed by just how dead on target my words turned out to be.”
LMAO
Way to pat yourself on the back there. You must have searched long and hard within the archives to find one of your many predictions that actually came to fruition. While I appreciate your efforts on adminstering the site lets not get carried away with your esteemed foresight of today’s market conditions.
Corus deserves everything they get. They were one of the only, and probably the biggest, lender around still lending when all the other banks left town. Everyone knew the market here was overbuilt, but Corus plunged ahead.
Their other two big markets to invest heavily in was Las Vegas and Atlanta – two other severely overbuilt condo markets currently in shambles. Genius.
I just noticed a development called Marina Grande in North Miami Beach (gotta use Grande with an “e” at the end to sound sophisticated I suppose). Drove past this afternoon….looked like the sales office is dead. Anyone know? Looked like it would be nice…but as a northerner I only am looking at places on the beach….but for a boat lover might now be bad except probably luxury priced and there are sooo many options out there. Anyone know if this Marina Grande is DOA or what? Thanks.
RT,
Marina Grande was a development by Boca Developers. That was taken over by the lender a long time ago. I think it happened towards the beginning of 2008 if I recall correctly.
Quantum, MB, Continuum all sucessful.
It took Oynx 18 months, but they will pay back principle. Corus should also get interest that has not been paid.
Ivy is about 40% closed in 5 months, so Corus should eventually get it’s equity back.
Artecity has sold 37 of 60 Govenor condos, sales slowed to crawl.
Infinity “may” be the one loan Corus is foreclosing in Miami.
Mint is in same complex as Ivy.
Does anyone know if Jade Beach has started closings?
Corus has 202M in loan loss reserves, only around 50M is specific reserves.
Corus has 731M in shareholder equity as of 3rd quarter.
Marina Grande came to a dead stop over 1 1/2 years ago. As you can see the cranes and pilings are the only thing remaining of the project. This was a Boca Developer project that failed because of lack of demand and the coming housing crunch. Boca developers is currently involved in several other projects that are either failing or about to fail. I doubt this site will be developed any time soon. It would be nice if someone returns it to its marina state and create new and much needed boat slips.
I have always held my ground.
The projects sold and started construction in 2003/2004 and came on line 2007- Early2008 and mostly priced between $300-$450/sf preconstruction will do OK.
The projects sold and started construction in 2005/2006 and coming on line 2008-2009 and mostly priced between $400-$600/sf preconstruction will fall by the wayside.
All flats and all buildings are not made the same. The super six will fall in the later category and will mostly fail. Corus lending to 2 of the super six (Infinity and Paramount) does not bode well.
Hey thanks Lucas and doc T. I noticed the cranes and marketing office building there for Marina Grande….from driving by it looked like the place was abandoned although the marketing pictures outside and inside the building looked nice….I also went to their website. Looked nice, but not for me since I need the beach. Amazing how these things just stopped, probably would have been a very nice place but probably overpriced. I liked the east facing double story flooplans.
SLS – I’m pretty sure that Jade Beach started closings based on listing for resale and rentals along with the guards out front for the last couple of months. The water falls in front look really great at night esp. when sitting in the outdoor seating at the Porter House with the 3 for 1 drink specials and pretty Russian waitresses….
Continuum North still has about 20% unsold. They did pay off their construction loan, but the developer still has a big chunk of units he’s carrying. They converted many to rentals.
Brian
how much is a rental at continuum north going for?
A little birdie told me now is the time to buy or forever be priced out of the market!!
Interesting report from David Rosenberg from Merrill Lynch… Again, this is a NATIONAL analsys, so you have to believe that in submarkets like Miami things have to be even worse.
(excerpt from a longer article)
Housing market is not close to bottoming out
Fifth, we learned that the housing market is nowhere close to bottoming out. New home sales dropped 5.3% in November to a 433k annualized rate – the worst since the 1982 recession. Even though sales are now down 69% from the July 2005 bubble peak of 1.39 million units, we believe builders have not been aggressive enough in curbing production because the most critical variable of all, the unsold inventory backlog, rose to 11.1 months’ supply from 10.9 in September.
Need to see inventory backlog drop to 8 months’ supply
The reality is that even though single-family starts have dropped to 26-year lows of 531,000, they are still running 23% above the prevailing level of new home sales. The worst the inventory-sales ratio ever got in the early 1990s real estate meltdown was 9.4 months’ supply. We are currently 18% above that level and almost 40% higher than the 8 months’ supply we would need to see before calling an end to the housing deflation phase.
Another 15-20% decline in home prices likely from here
As we saw last week, the Case-Shiller index fell 1.85% MoM or at a 20% annual rate. All 20 cities were down both sequentially and YoY. Home prices are now down a remarkable 22% from the 2007 peaks. With the unsold inventory sitting at the third highest level of the past three decades and mortgage approvals for new home purchases falling to their lowest level in nine years, we believe the laws of supply and demand point to a further 15-20% decline from here. So, of all the things that happened last week in the market, retailing stocks up 17%, the bank stocks up 26%, tech up 9%, the one development that probably has the greatest chance of being reversed is the 60% surge we saw in the homebuilding group.
Ldk
Keep drinking that Kool Aid… maybe you should go work for RCR
Lucas,
Just saw the segment on CBS4 at the gym. Really good segment, some decent insight. The one renter said he rented for 2k/month, but would have to pay 3 times that amount to own. I think that’s a little exaggeration. I see the asking prices for a 1/1 in Marina Blue, what do you think someone can land a 1/1 for? $300/sq ft?
Lucas you called it all bro!
Jane Q,
I have been following line 8 in MB (my fav) from the beginning. The lowest asking price on line 8 dropped from $600/sf to $450/sf (37th floor). That is quite a drop. Being the super premium line, Line 8 will be an excellent buy for anything less than $450 such as $400.
Having observed that, I won’t be surprised to see if the 1/1.5 in MB might be available for $300/sf. Even if the prices do not fall to $300/sf for every 1/1.5 accross the board, you might get one or two distressed flats for that price. If you are in the market for a 1BR in MB and if one ever hits the market at $300/sf at a decently higher floor, jump at it with out trying to second guess if you will get another one cheaper than that. I very much doubt it. If it ever happens (further price fall), it will be isolated and short lived. I have seen the 1/1.5 in MB and it is gorgeous. Both the flat and the view. And you don’t have to pay for that glorified storage room they call a second bed room in a 2/2 in the same building.
Check out Zilbert’s legendary “Bubbles are for Bathtubs” idiotic statement here…
http://web.archive.org/web/20060208160236/http://www.condoflip.com/
…we will look back at those days and that level of stupidity years from now and laugh.
I would only buy the super duper premium line.
just a question: what is the liklihood of Corus selling off Mint, Ivy, Infinity for pennies on the dollar and these building becoming public-housing? could turn the Brickell area into Detroit pretty quickly, no?
Condos in Brickell were sold for pennies on the dollar in the 1980s and none of those were turned into public housing. It’s not like the city would alter its plans and relocate all future public housing to Brickell just because they became cheap. I think that’s pretty ridiculous.
Came across an article that may share relevance to this subject:
http://hosted.ap.org/dynamic/stories/M/MELTDOWN_COMING_SOON?SITE=FLDAY&SECTION=HOME&TEMPLATE=DEFAULT
According to this AP report, commercial real estate is only in the FIRST INNING in terms of their meltdown. Retail sales are slow, tenants are leaving, creating more and more job loss destruction, which will in turn only continue to put downward pressure on home prices. If people don’t have jobs, they can’t get loans. The demand side of this price equation will continue to shrink, as supply continue to grows.
If the building fails financially the sate will assign a receiver to run it. When a state appointed receiver runs a building you will start to see how fraudulent a building was being run.
The state appointed receiver couldn’t care less if you maintenance fees are ten thousand a month. Their job is to adhere to state statues that govern condominiums.
CASTLE BEACH CLUB CONDOMINIUM is a good reference of how things will go down, from a maintenance stand point.
Hey lucas, didn’t you say that thinking prices would fall below $400/sf was pretty ridiculous just a few months ago?
900 guy,
No. Why would I say that when prices had already fallen below $200 per square foot a few months ago?
I haven’t ben in this forum/blog for a long time but Lucas seems a straight shooter to me.
Wild Bill
some would say a receiver can run a place pretty fraudulently as well.
I agree in MB the 08 line is the better line. Eveything else that is a 2/2 with the exception of the bgger 2/2 in the highest floors with special floor plans are preety much a joke. They call it a 2/2 but it’s looks and feels more of a 1 with a office/den.
It’s a shame the bldg is nice but they overcrammed it with too many units and as a result most of the lines floor plans sux. Views are great but living space practicallity is terrible.
Even the 08 it’s nice but still doesnt offer as much space for what you’re paying. You’r e paying mostly for the view.
IMO.it’s not worth it at current pricing.
Those huge columns in Marina Blue in many of the units dont help much either. What a waste of space.
Corus has a huge amount of cash – that is why they are still around plus they never loaned more than 80% of a project’s cost. They survived the last recession but this one is going to be tougher – they may have done one too many condos – they just foreclosed on a large project in Panama City. It is almost a private bank since the Glickmans own like 40% of the stock.
Corus Bank just took back the $160M+ Montage project in downtown Reno. It is complete, and the developer walked before a single unit closed.
Corus could, but does not, post the status of all projects at its website. Tao plus Panama City plus Reno = 3 complete projects now owned by Corus. Their future depends on how much and how fast they can sell these projects.
While some of you may have some very strong feelings about Tao and whether or not it was a good place to buy, my family and I bought for the right reasons. We wanted the opportunity to live somewhere as nice as the buildings on the beach without the million dollar price tag and away from some of the less favorable elements near downtown. We did our homework, bought way early and have now waited 4 years for our home to be available. All that being said, this whole thing is getting rediculous. Does anybody know what happens next for us? Is there a chance of us getting our money back? Is the the contract between us and the developer even binding now that the developer is out of the picture? If Corus goes under, then what?
i m from brasil i lives sao paulo i m jail mr chairman globo tv mr roberto irineu marinho today but when i go to travel i likes to visited this museun a lot my adress prison rue chucri zaidan 46 morumbi at sao paulo sp
Help !! what does this mean for my investment???! Yikes
January 5, 2009, 1:56pm EST | Modified: Tuesday, January 6, 2009, 12:00am
Bulk buyer snags 60 units at Marina Blue
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A Singer Island-based group has paid nearly $13 million for 60 units at the Marina Blue high-rise across from American Airlines Arena inMiami.
The deal was recorded in separate deed transactions between developer MistTowers – a subsidiary of Miami-based Hyperion Development – and buyer Welcome Bay on Dec. 24.
Joseph Kuharcik, an attorney in Palm Beach County who represented the buyer, declined to comment. Hyperion Development could not be reached immediately for comment.
The developer issued 374 deeds for the 516-unit Marina Blue before making the bulk deal with Welcome Bay, according to court records.
The total price, based on the taxable value paid for each deed, was about $12.9 million. The unit prices ranged from $165,000 to $264,000.
Robert Given, CB Richard Ellis executive VP in the South Florida Multi-Housing Group, estimated that the units sold for about $200 a square foot.
Given, who is not involved in the deal, suggested that senior lenders at projects like Marina Blue would be happy if units sold at $200 a square foot because that price could generate enough cash to pay them off.
“What you are going to find is that premium buildings and premium sites are going to have enough value to satisfy the senior lenders on new construction and additionally pay back some of the mezzanine and investor positions to a degree and those sites in marginal locations are going to be more challenged,” he said.
However, during preconstruction, units at Marina Blue were selling for about $400 a square foot.
The $200-a-square-foot price provides a ceiling for inferior pricing at inferior locations. But equal or better-quality condos may be able to generate a higher per-square-foot price, Given said.
When the 60-unit bulk sale is factored in, the building is about 84 percent sold, which is “very good” in this market, Given said.
Although $200 a square foot is less than what a lot of units in premier buildings sold for, even at preconstruction prices, it gives developers the breathing room to rent units immediately, and sell the units for more down the line, Given added.
“Once they pay off the senior lenders, they can slow down and maximize sales on the remaining units for investors,” he said. “Senior debt creates pressure to liquidate.”
Given also said that it could be an all-cash deal because financing is so hard to come by in the current market.
Many groups are on the prowl for bulk buys in downtown Miami.
The Related Group’s Jorge Perez is responsible for one of the few bulk buys that have been made public. He launched a buying fund that made two deals in the 528-unit 50 Biscayne, which Related Group built in partnership with Atlanta-based Cousins Properties. The bulk deal sold out the project and closed out its loan.
The 50 Biscayne buying fund, Lubert-Adler Partners, paid $6.1 million in May for 26 units –an average of $236,294 a unit – and $30.3 million for 120 units –an average of $252,504 a condo.
Condo Vultures Realty CEO Peter Zalewski, who was featured recently on 60 Minutes and frequently is quoted about his work to facilitate various bulk buys in Miami, was uncharacteristically silent on the Marina Blue deal.
Kevin Tomlinson, an Esslinger Wooten Maxwell broker specializing in condominiums, speculated that Corus Bank, Marina Blue’s lender, might be getting less from the developer. With individual condo buys becoming harder to come by, bulk buys are a lender’s best chance at recovering any of their money.
“The people who own the senior debt – they may be taking a discount,” Tomlinson said, noting that the deal may not be what the banked wanted or what it was owed, but it is better than nothing.
Homeless family;
You need a consult with an experienced attorney.
The contract is assignable to Corus and is valid. There may be a loophole but I wouldn’t count on it.
You should watch the following:
Corus’ management of Laketown Wharf in Panama City Beach, FL. See PCBDaily discussions.
Corus’ management recent decisions of a property they are taking over in Reno, NV ~ see The Montage website and related Reno articles via the web.
Any poster on this board that says Corus is dead cannot read a balance sheet or analyze a bank.
What do you know about the Caribbean? It’s almost finished, started closings several months ago and still very empty.
Beautiful building but prices remain in the impossible range of $900 to $1,200/SF!
Christa and Corus seem to be holding on good.
And the W? Nearing completion, great location and nice building. But it also sold very high, maybe they run it as strait hotel o maybe not. It looks like condo-hotels aren’t doing that bad.