Marina Blue Bulk Sale – A Closer Look

oh man! What was it that someone said about people elbowing each other to buy at $300/sf in MB just one week ago? Pwned!!!!!

While I agree that individual buyers cannot get these prices, you have to assume that if the bulk buyer bought to sell (might be the case, at least for some units), getting 10-20% more in less than a year is a great return.

If this is the case, and you take a typical 2 BR unit ( 1,318 sf – $241,600 – $182/sf) that sells for 20% more than the bulk sale would still be a GREAT discount to other units ($220/sf, $290,000).

AJ, want to revise your estimate or still sticking with $350/sf?

These prices will continue to go down for 2009. Count on that. Wait until we get 10 of these bulk sales recorded.

Has EWM stopped updating their ‘facts and trends’? The last info for condos in Dade county is from September and shows 25,116 condos for sale, 513 sold – a little over 4 YEAR SUPPLY.

Does anyone know where to get newer inventory data?

please correct this. Otherwise you are misinforming your clients.

What are the odds that the bulk buyer bought more units than really desired, in order to get his hands on a number of premium units that he could not buy in bulk otherwise? AJ, you are good with the lines, can you possibly separate this bulk purchase into desirable vs average units? Over the next year, unless they are renting for nice profit, would be interesting to see how many of these average units the buyer unloads for minimal profit, so they can hold the desirables longer term and make a nice profit after a rebound, without tying up the entire $13m for years. Such a move, if it occurred, would not be good for the other condo owners looking to sell. just a thought on business motive.

gables,
The best line and my favorite line 08 is not there. When I first saw that line I saud, You got to be a Movie Star or a Drug Dealer to get a 08 line. It is stuff dreams are made of.

OK, some lines are decent if not the best. I wouldn’t mind line 09. I would challenge anyone to go to Welcome Bay and say “Dude, you paid $200/sf average, can I please have one of those prizes for $300/sf” and see what happens. May be the bulk buyer will laugh his butt off.

Hugo,

There is your answer. As I said before, when a guy on the street can purchase a water front/water view flat for $300-$350 in a open market, then talk to me. Until then don’t quote me a foreclosure or a bulk buy and tell me to change my position.
I am not rigid or stubborn. My position is not set in stone. I will revise my stand when things happen for real. But I do not believe MB flats can be had for $300-$350/sf.

The 1/1 units have 13′ wide living rooms. You enter the unit with the dishwasher and sink to your side. Hardly premium units.
I suspect in a few months the building will go from only allowing yearly rental contracts to monthly agreements. All they need is a flashing neon vacancy sign out front.

This will be a slow bleeding building.

Lucas,
Thanks for the recent rentals link. Absolute wealth of info. You are the first RE agent who is willing to part with privileged information. Thanks.
I am sure Good things will come your way as there are plenty of grateful people here.

To temper the praise, there is one thing that your site lacks. I have to go to a couple of other sites to get this info. It is imperative that you add this to make your site complete and a one stop Miami RE exchange (hope I’m not being too pushy):

FlOOR PLANS!

AJ, You said that you don’t believe Marina Blue flats could be had for 300-350/sf. But when I check the recent sales Lucas lists for MB it shows that one of the 3 listed sales was at 307.98/sf (unit 3701).

AJ,
Those rental quotes are a little misleading. The previous several leases were at or under $1500 for the 1B. And the 2B and 3B appear to be HUGE appartments-pretty good bargains when you check out price per sq ft. Not sure if you would consider them a standard 2B, although you know the building far better than myself. I would not hold my breath on rental rates hanging tough. A review of several other buildings with more transactions does show a decrease over the past year.

Just a guess, but by summer I think many new buildings in the area will offer 1B $1100-1600 and 2B $1600-2100. This will bring rents better in line with incomes and similar to costs in other cities. Curious to see what the bulk buyers rent at.

Agree, the addition of rental info is GREAT! Gives one a bit more insight into the direction a building may be headed. Get a feel for prices as well as number of units under rental-great for guessing at stability of the building. Be forewarned, however, the numbers are not complete. For instance, I just started a new lease on my unit at a 20% discount to previous lease, but it is not listed in my building stats. So there are some hidden numbers at play which we cannot see in Lucas’ numbers.

click on view all miami condos at top of the page

AJ,

This Miami condo renter (and homeowner elsewhere) is paying much less than advertised rental rates. Much lower than rates advertised on Craigslist and everywhere else. I suspect Renter Tom is paying well below-advertised rental rates. Dumb money pays full price. Dumb money exists in every market.

Markets move in fits and starts and it’s often difficult to discern macro trends without the perspective of hindsight. But the trend is here and it’s downward. To paraphrase William Gibson, the deflationary future is here. It’s just not widely distributed yet.

Before you bought in Miami, you were warned several times not to buy because prices had further to fall. As I pointed out then, readers of this blog will not need to know how much you paid to know that you got a bad deal. I think you now know that you made a bad buying decision so it’s downright inconsiderate of you to try to lead the gullible down the same path to financial ruin.

MB, I think the best you can do is just hope that prices for individual sales don’t fall to this level. Unfortunately you can’t sue someone for making a bad investment decision.

Realist Bob,

In the heady days 05-06, the Right Wing Extremists (RE agents, Developers, Mortgage Brokers etc) scared the shit out of everyone – It’s now or never. They told stories, lies, inane statistics and opinions – God is not making anymore land etc. Millions of people believed them and they also succumbed to their own greed too.

I was a moderationist (If there is such a word). I was crowing back in winter 2004 that this is headed for a major disaster when I saw 5% price gains per month! Except for a few housing bubble blogs, no one seemed to cared about what I said. Come 2008 and I was proved right.

Now the Left Wing Extremists (LWE Housing Bears on this blog and others with interest to see the housing market collapse) are doing exactly the same thing what the right wingers did then. Using scare tactics, irrelevant statistics, economic-job data to scare the people into not buying.

Again I am a moderationist here. I am telling people not to get carried away but such scare mongering. Just the way people went one extreme in 05-06, I am cautioning them not to go the other extreme in 09-10. I am not telling anyone to commit economic suicide, on the contrary, If you read all my previous posts I have cautioned the people and told them to keep their eyes open for deals, unlike the LWE who are telling people that there is a pot of gold at the end of the rainbow (December 2009 or later in 2010).

Now let us say, there was a great foreclosure deal in a choice building and line and someone got influenced by all this talk and passed it up waiting for something better to come along. This person is actually looking for a place of his own. Now 2009 has passed and he/she realized that the foreclosure opportunity was the best deal they had. Then what?

All those people who are jumping with joy due to this Bulk sale have absolutely no idea that this is actually going to strengthen MB just like 50 Biscayne or 1800 Club and not make its values go down. Here is why.

Listen up and pay attention:

The first rule in RE or any other commodity business is to keep the values up or steady, take the inventory or supply off the market. This is exactly what has happened here.

1. In 50 Biscayne, by selling off 120 units to a bulk buyer, the developer has paid off the banks and the building is now 100% sold.
2. In 1800 club, even though the developers hold 139 units (29%) they have paid off the banks and own the units out right and are not discounting any unit either for rent or for sale.
3. In MB, Hyperion sold 60 units in Bulk to Welcome Bay. The developers paid off the banks. The building is now 90% sold. The developers only hold 10% and I will bet they will employ the exact same strategy as the 1800 developer, release them one by one to retail buyers with no discounts.

OK in all the 3 above buildings we have the flats held by 3 different entities.
1) Developer 2) A bulk Buyer 3) individuals

1. Developers: Having paid off the construction loan and satisfied all liens, they are free to rent these or sell these at their convenience and choosing. No fire sales or dumpings.
2. Bulk Buyers: Usually financially viable companies. Bought the flats for 50 cents on the dollar paying all cash. No mortgage on the units. Will rent the units, generating +ve cash flow even after paying the taxes and the maintenance until they can sell it off to retail buyers at their choosing and convenience.
3. Individual Owners: Most of the buildings have 60-70% individual owners. These people are either wealthy, who paid cash to buy them at closing or people with good credit and solid history, otherwise there is no way in hell these owners were able to close in 2008 by borrowing money from the bank.
Individual investors who booked the flat on borrowed money who never would have qualified for a loan anyway already walked off the deposits. They are not even in the picture.
So all the flats in the above 3 buildings are held by financially well off (relatively speaking) Developers, Investment funds and Individual owners. The buildings are considered 100% sold and have no liens on them and every flat paying their share of maintenance! What else does one expect in a building? In fact in the 469 unit 1800 Club, there is only (one and only) one unit which is 3 months behind in the maintenance. Everyone else is current.
That is exactly the reason why you will never find a deal in 50 Biscayne or 1800 Club unless it is a foreclosure or distress sale and that is also the reason why you will not find a deal in MB. In fact I challenged people to explain me the 50 Biscayne Paradox but no one ever did. As they do not know. On one hand I explain the reasons for my conclusions, and all I get from others is just a stuck record repetition of “the market is going down”.

OK, I will throw a bone to the bears. When a building such as above which sold about 2/3rd (66%) to individual owners, the developers will sell just enough in a bulk sale to pay off the bank and will hold the rest for themselves for future sale and profit. These buildings are all but closed for retail discounts.
On the other hand, buildings which have not reached that critical 66% point will not be able to pull off this trick and these are the buildings that are in trouble. That is where you can expect some turmoil and bank take overs and auctions etc. So if Jorge can come up with enough money to ward off the banks, he can keep ICON. But what about Infinity etc. That is a big question. And Epic and Paramount and Marquis too. 900 Biscayne also to some extent is in trouble with its low closing rate.

So to answer jcrime,
The bulk sale in MB will not affect the prices in MB. However if a bank takes over 900 or Marquis and auctions off the flats there, that might have an impact on MB prices. That is a big If. No one knows what will happen to 900 or Marquis. So I do not wish to overly speculate here and wait and see. But this particular sale in MB will actually strengthen the building and its finances.

MB,
I hope I answered you Q. You don’t have to sue anyone. Your investment is not going anywhere. Just chill.

you guys are nuts! what makes you think you know what will happen in these buildings in the next 3 years? To say $300/sf is the min you will see in any building is nothing but a wild guess. Someone buying 60 units at $200/sf may help stabilize MB short term but it can’t be good for the general miami condo market because the big money will use that as a benchmark when considering other bulk sales. How can it be good for the poor slob that paid $400+/sf? What exactly do you think will happen to those 60 units? If I was an investor in that building w/ negative monthly cashflow that would be my que to cut losses. What hopes do I have of ever making good on that investment now that someone is controlling such a large block and his cost basis is less than half of mine. That means he can sell those units at a substantial profit before I can even think of breaking even. MB sorry but, you out the game man!

For the record, listed rental rates are meaningless. I pay 23% less than the listed rate. Could have driven it down a bit more too I suspect….

Rt,
I rented my unit outside of the MLS system for more than the average list price. It won’t show on the compiled list either. So cases like mine neutralizes cases like yours.

Makes me think,
you said “How can it be good for the poor slob that paid $400+/sf? “.
It is great for him. Now he bought into a stable building.

Tell me something. The guy who bought stocks when the Dow was 12000 was better off than the guy who bought it at 14000. Similarly the guys who bought at Dow 10,000 or 8,000 is better off than the guy who bought it at 12,000. So friggin what? That’s life. If you knew when the Dow would be 8K or 10K or 12K , you wouldn’t be on this blog anyway, you would be sipping champagne on board your private yacht off Cote D’Azure . In any case the guy who bought it at 10000 saw his stocks decline to 8000 but eventually they will go back up to where it was and more.

When it comes to condos in Miami, stability is the name of the game. Get in a building with stable finances and ride over the next two years and you will be OK. In fact I wrote a letter to the board of my SOBE building urging them to take very strict action on maintenance defaulters. I wrote ” Initiate foreclosure action and sell off the properties to half price if necessary to solid individuals. I would rather see the flats owned by fiscally able individuals rather than worry that someone is going to buy a flat for half price than what I paid. I am not worried about a notional property value. It will go back up to where it is when things settle down. But the need of the hour is to have a stable building with good finances”

So any and all the owners of the new buildings who have hit a 2/3rd closing rate but not 100% yet, should enthusiastically cheer and encourage bulk sales to put your building just over the stability edge. It is a matter to celebrate, not be sad about. If the bulk buyer got it for half price than what you paid, so what? He has the money power and muscle to negotiate. You don’t. Walmart can negotiate with an entire corporation or even a country to their advantage. Lesser mortals can’t. So don’t even compare.

After adding commissions, administrative costs, all and sundry, the welcome bay price must be at least $225/sf. I will bet, you will not see any of these back on the market for one red cent less than $300/sf. If Welcome Bay has the financial wherewithal to stay the course for the next 2 years, I will not be surprised if they will sell these flats for $400/sf in 2011-2012 and beyond. That in fact maybe their strategy. Not bad, 100% return on investment in 3-4 years. Go back and refer to my older posts. Come 2013, there will be no new flats left to buy. Any new buildings will take 4-5 years to come on line. 2008-2009 meltdown will be a long forgotten distant memory.

AJ
the problem with your stock analogy is that you fail to realize i can liquidate instantaneously and more importantly, don’t have to pay several hundred dollars a month in hoa and taxes. thus, my breakeven point is far easier to reach.

I don’t care what anyone says, if you paid $400/sq. foot, and now units are going for $200/sq. foot (bulk sale or not), that’s gotta be a shitty feeling.

Realist Bob,
You sound exactly like Renter Tom, including the moniker!

No, AJ, I am not Renter Tom. Notice that I did not rail against Obama because of the bk law changes that are sure to come under an Obama administration… changes which will allow judges to modify mortgage contracts to the detriment of lenders. I believe such changes are necessary because they will help the market reach bottom sooner.

Those who have been paying attention will have observed that Citi now says they support changes to the bk laws to allow mortgage cramdowns. I suspect Citi looking for legal cover that will allow them to modify mortgages originated by their toxic acquisition (Countrywide Mortgage) thereby screwing RMBS holders and avoiding potential blowback (lawsuits) in the future. Jcrimes will probably have an opinion on this.

Sorry Citi did not acquire Countrywide; the smarties at Bank of America did.

AJ,
from what I’ve read on this forum about you, I think you are one of the good guys. Please don’t take it as a personal attack when I tell you that you have no f***king clue what you are talking about when it comes to investing and financial matters. You are probably one of those stock market investors who bought all those high flying nasdaq stocks in 2001 still waiting for them to come back. Didn’t you say you are eating $3oo/mo on one of your condo investment an investment that by the way is rapidly depreciating. At this point you are not investing you are speculating. I invest in housing and I’m not buying anything unless it can return 10-15%. Most RE investors will tell you don’t mess with rentals unless it bring you at least $300+ a month. The hassle of dealing with renters aren’t worth less than that. Your problem is you fell in love with your investments and can’t see you bought into a market bubble. Here is a best case scenerio for you. Lets say the banks remaining after this fallout goes back to lending like it was 2005 with no doc loans and the market for those condos go back up to bubble levels again in another 5 years. Where does that leave you and your invesgment ? how much money would you have lost by then?

You seem to live in a theoretical world. In real world Investing there are a few principles that investors use which you may want to familiarize yourself with. Princibles such as “ROI (return on investment)”, “risk/reward pofile” , “diversification”,”don’t throw good money afrer bad money “, “cut your losses quickly so you can live to fight another day”, “investors sentiment”. “don’t figh the market, let the market be your friend”,”speculators” and “stop loss” ,”haircut” and “never fall in love with an investment” and oh yeah one of the main ones “murhpy’s law”

Just face it AJ , you made a tipical neophite investor mistake. You don’t know when to get out of a bad investment and you are making it worst by doubling down and buying more of a bad thing. Look at the risk/ reward profile of your investments , if it is possible the risk is financial ruin then the reward however great is not worth it because you have to remember you allways want to live to fight another day. Also all your money can’t be in any one or two type of investments because of murphy’s law.

get educated man, read a couple of books. There is on need to be clueless in this day and age especially since you have so much money invested.

AJ, regarding your post #33….man oh man oh man. I don’t even know if a response is necessary since your post speaks for itself….nuts! Or should we start calling you “AJ the Shill”?

You simply can not compare buying real estate to buying stocks….they are two different animals. Why not compare it to buying pickles? A condo is “consumed” through remodeling, repairs, replacements, taxes, HOA fees, etc. It can’t really change, expand its income, grow, etc. At most it can make a small profit in rents each year and maybe appreciate at or around inflation in an attempt to preserve wealth (that is, if you didn’t over pay….that is KEY in real estate, what you put in up front since that affects your rate of return and the price appreciation if there is one). Note, the income tax code causes a capital allocation distortion causing an over investment in real estate eventually causing an over supply and less appreciation and lower rents in the medium to long term…even more so if the short term tax benefits end.

Needless to say, your fantasy rents….with no records in the mls are kinda funny…

By the way, I am absolutely against having the fed govt or courts take down principal. It is a private contract so they should stay out, period. The most the fed govt can do is allow people to refin into something like 5% 30-40 year mortgages by offering these mortgage rates on the open market…..and that is it, period. No cram downs! Don’t you realize that if cram downs are allowed, mortgage interest rates will have to rise in response to this new uncertainty and risk?

Equity markets around the world have fallen 40%, give or take. These are very liquid markets-at least in the US. Newspapers report that the US RE market has fallen anywhere from 10% to 20% from peak, across the country. Local areas such as Miami RE have been reported to drop 40% to 50% from peak. Similar drop to the equity markets.

Difference is, the RE market is quite illiquid. Foreclosures and bulk buyers are actually buying at these discounts. But there is a false hope that individual buyers will be unable to capitalize on these discounts-citing the MLS listing for nondistressed units. If a unit must go on the market today, it will sell at the discounted price, no matter who is holding the property. As stated previously, the major reason so many nondistressed properties are listed at a high level is because the sellers cannot afford to sell the property at a loss. It was bought on leverage. Stocks typically are not bought with the same leverage, and that is why the equity market has corrected so fast. It is able to.

The big question is what happens to the overleveraged condo holder over the next couple of years. Will the government allow principal to be written down? Will banks foreclose, or continue to stall the foreclosure process and avoid taking back the property and all of its pitfalls? Units are selling at the 40% discount-in large volume. Units are not selling at preconstruction prices-or very few. You judge where we will equilibrate at.