`Shadow market' clouds housing recovery

For every home sold in Miami-Dade, lenders took back almost four through foreclosure auction, according to LPS data. In Broward, for every sale, banks took back six properties, according to LPS' analysis, which uses sales information from the public record, not Realtor data that captures only sales through agents.

``This foreclosure hangover is going to prevent any substantial price recovery and could even lead general market statistics downward,'' said Adam Cappel, a market analyst and principal of Miami-based CondoReports.com.

While the number of homes on the market in Miami-Dade has shrunk 36 percent since last year to 26,296 homes, the number of loans 90 days or more past due or in the foreclosure process stood at 122,800 in September, according to LPS. In Broward, listings fell by 41 percent to 18,919, yet 88,863 homes were being queued up for the market.

Turnaround Maneuver

“A lot of people aren’t really interested in buying up the blocks of inventory unless they can get control in a large percentage of the building,” says Adam Cappel , president of Miami-based market intelligence firm CondoReports.com . “If it sold 150 units and you can buy the other 150 in block, you have to assemble the rest of the units. It’s kind of a nightmare.”

But they may look at deals where a smaller percentage of the units have sold. “It’s happening in select deals where a smaller percentage [of units] was sold to individuals,” Cappel says. “You have to buy the block of units that are under bulk ownership. It’s hard to make that work.”

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2. The number of owners unwilling to sell. “Owners that bought may want to live in that unit, even though the developer is way underwater,” says Adam Cappel, president of CondoReports.com, a Miami-based market intelligence firm. “They might not care, and they might have bought all cash.”

RealShare South Florida Highlights

Here are a few more notes and quotes from last week’s RealShare South Florida conference in Miami, which was attended by 275 people and deemed a solid success. In case you missed it, or even if you were there, you can read more about it here and here, but here are some other highlights: 

A combination of foreclosure and financial issues will be the major headwinds that we will face to get back to a normal market,” observed Adam Cappel, president of CondoReports.com.

Fate of Corus’ Assets Remains Up in the Air

RealShare South Florida

Property tax appeals flood in from condo associations

With the deadline to appeal property taxes a week away, local appeals firms are hard at work, with many more cases coming  from condo associations seeking appeals on behalf of unit owners. With condo values dropping steeply, many condo associations are filing class appeals on behalf of those unit owners seeking a review of their assessments.

A state law allows condo associations to seek such group appeals, and the cost is less in bulk.

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Another  recently-formed  partnershi, that of Brickell-based CondoReports.com, a web site that offers information and analysis on local condominiums, with Miami-based Property Tax Adjusters Inc. is showing results.

Bankruptcy

Several real estate experts noted that it is common for developers to file for bankruptcy after a lender moves to foreclose on a property. Often it is a strategy developers use to pressure the lender to work out a solution.

“It is a tool in their arsenal when negotiating with banks,” said Adam Cappel, president of CondoReports.com, a Miami research firm.

“What usually prompts [developers to] rush to the bankruptcy court is the pressure they are receiving from their lenders,” added attorney Craig Rasile, co-chair of the bankruptcy, restructuring and creditors’ rights practice group for Hunton & Williams in Miami.

Two firms team up to handle tax appeal flood

With another flood of tax appeals expected for 2009 in the weakened residential market, a condo data analyzing firm and a longtime property tax appeal company are teaming up to handle appeals on behalf of homeowner and condo associations.
   Brickell-based CondoReports.com, a Web site that offers information and analysis on condominium buildings and markets in Miami-Dade, finalized a partnership with Miami-based Property Tax Adjusters Inc. last week.
   Using data and analysis compiled by CondoReports.com is to help the tax adjuster group "pinpoint over-assessment and make a case for why the assessed market value is higher than the actual market value" of the property, said Adam Cappel, CondoReports.com president.
   Gary Appel, principal of Property Tax Adjusters, who has handled appeals for 15 years on behalf of condo associations in areas such as Fisher Island and Williams Island, said he was impressed with CondoReports.com's expertise and data and analysis capabilities.

South Florida condo conversions collapse

At the beginning of the craze, developers were buying new apartment buildings for roughly $80,000 to $85,000 a unit, said Adam Cappel, president of Miami-based CondoReports .com, a condo consultancy. As the boom progressed, unit prices skyrocketed to $165,000.

As the best properties were snapped up, developers eventually began turning to older complexes. ``Generally, converters were looking for 15 percent [or higher return] on their total development budget. So if the complex cost $40 million to buy and they needed to put in another $10 million in costs, then they would want to project a $7.5 million to $10 million profit beyond those costs,'' Cappel said.

As Prices Plummet, Condo Sales in Miami Perk Up

Despite a vast oversupply of new condos in downtown Miami, sales have been brisk lately at 1060 Brickell Avenue, a twin-tower development with 570 units in the heart of the upscale Brickell neighborhood. The reason? Prices have been cut in half, to about $200 a square foot.

“We reset the prices at a sharp discount, and the units are flying off the shelves,” said Gary Barnett, the president of the Extell Development Company, the New York-based developer of 1060 Brickell, which was completed last year. More than 200 units have closed since the discount program began in April, he said.

Mr. Barnett, who has developed several new condominium projects in Manhattan, including 535 West End Avenue and the Rushmore, acknowledged that he and his backers lost their entire investment in 1060 Brickell, which is situated at Southeast First Avenue. He said some, but not all, of the mezzanine financing was also wiped out. But because more than 40 percent of the units sold at full price, Mr. Barnett was able to repay his $153 million first mortgage from TD Bank and iStar, a troubled finance company that bet heavily on the South Florida condo market.

Since 2003, nearly 23,000 new condo units have been added to the downtown skyline, from Brickell Avenue up through the more modest Biscayne Corridor — far more than this city of 400,000 people could absorb. About 9,400 remained unsold at the end of June, according to Peter Zalewski, the owner of Condo Vultures Realty, a local brokerage.

But Miami real estate brokers, lawyers and developers say the overbuilt condo market has entered a new phase. “Things are starting to move through the system,” said Adam Cappel, the president of CondoReports.com, a Miami research service.

Until recently, many real estate professionals expected investment funds seeking opportunities in distressed real estate to swoop down on Miami and buy condo units by the hundreds at wholesale prices and then rent them out until the market recovered.

A few bulk purchases have occurred — in the dozens rather than the hundreds — but most buyers have paid the current market price, not a wholesale price. For example, an investor from Colombia recently bought 31 units at 1060 Brickell for an average of $203 a square foot, according to Mr. Zalewski. Last week, however, a private equity group paid only $63 a square foot for 51 oceanfront condo-hotel units at the Regent Hotel in Miami Beach, he said. Previous units there had sold for $1,100 a square foot. But condo-hotel units are considered riskier and harder to finance than traditional condos.

New Index Provides Information on Condo Building Health in Miami

Miami—CondoReports.com recently launched a BuildingHealth Index, the first measure of condominium building health county-wide throughout Miami Dade County. The index will provide ratings on nearly 2,000 condominium and townhome communities.

“It is vitally important for buyers to know the stability and potential risk of the buildings they are buying into. Just because a unit appears to be cheap, doesn’t mean it may not drop in price further,” says Adam Cappel, president of CondoReports.com and creator of the index. “Beyond pricing dynamics, lower-rated buildings are more prone to special assessment or higher maintenance simply because of the dynamics of the building.”

The index, based on a measure developed by CondoReports.com using its condominium and market data and calculated from variables such as foreclosures, owner occupancy percentage, number of units for sale and original unit purchase price versus current market price, indicates likely condominium association stability and historical pricing trends within a condominium community. 

The BuildingHealth Index was developed as a way to quantify and understand potential financial problems in associations and previous price trend on a county-wide basis. One of its uses, for example, is to provide a proxy for those trying to better understand potential exposure to higher maintenance fees or special assessment.

A rating of 50 is the median rating and indicates that half the buildings in the county are healthier and half are less healthy than that building.

Report shows hardest-hit South Florida condos

CondoReports.com ranked the best- and worst-performing condominium and town-home complexes in Miami-Dade County based on sale prices in the first quarter.

There's no question that South Florida's condo market is on the ropes, but some complexes are faring much, much worse than others.

Prices in the most battered complexes have fallen by at least 75 percent since peaking, bringing huge financial losses for owners and lenders.

In a ranking of the 10 worst-performing projects, Keystone Towers in North Miami topped the list, with unit prices dropping 81 percent since peaking in 2007, according to a new analysis of first-quarter sales from Miami-based condo research firm CondoReports.com

Sales in Keystone Towers, an apartment complex converted to condominiums during the boom, peaked in 2007 with 20 units selling for an average of $334 per square foot. At the end of March, the price had fallen to $62 per square foot.

That means an owner who bought a 1,000-square-foot unit for $334,000 would have seen a similar unit go for $62,000. The loss in value: $272,000.

Not every building saw similar bloodshed, though. Three projects located in what generally are considered desirable submarkets actually saw sale prices increase, supporting analysts' claims that the recovery of the housing market will be submarket specific and even building specific.

Seven of the top 10 best performers still saw erosions in value.

The analysis looked at closed sales in 2,000 condominium and town-home complexes in Miami-Dade County built before 2008. Projects making the list had at least three sales in the first quarter.

''The fact that a fraction of 1 percent of the buildings in the study experienced increased pricing is indicative of a market where prices have decreased nearly across the board with few exceptions. The major difference, of course, is the degree of the price declines,'' Adam Cappel, president of CondoReports.com, said in a statement.

Report: Foreclosures are top sellers

Condominium projects from Miami’s Brickell area to Homestead with the most foreclosures are seeing the greatest sales activity in Miami-Dade County, according to a new study.

CondoReports.com said banks that are willing to deal on foreclosed units are driving the first quarter activity. For example, Shoma at Keys Cove in south Miami-Dade County sold the most, with 50 units closing in the first quarter. The Vue at Brickell sold 25 condos, ranking it seventh on CondoReports.com’s top-10 list.

“Many banks have taken ownership of units in these buildings and are looking to get out,” said Adam Cappel, president of CondoReports.com. “Banks, either through short sales or units they own as a result of foreclosures, are the most active sellers in today’s market as they are willing to accept market prices.”

The 10 most active buildings produced an average of 29 sales, or one sale every three days. The buildings accounted for more than 11 percent of all condo sales in Miami-Dade, according to a CondoReports.com news release.

Most of the activity is tied to individual unit sales, and not bulk buys, Cappel said.

“These buildings are moving toward stability as speculative investors and thinly capitalized owners are being replaced with either owner-occupant or well-capitalized, patient investors buying in at a much lower cost,” Cappel said in the statement. “Most are individual unit sales.”

Homes in foreclosure-ridden Miami-Dade projects are top sellers

Transactions in the top 10 selling projects accounted for more than 11 percent of the 2,600 condo and town home sales tracked by the firm in Miami-Dade County. The projects, however, represent only 0.5 percent of the 2,000 projects followed during the first quarter.

Adam Cappel, CondoReports.com president, said it was notable that such a large percentage of sales activity was concentrated in only a small number of projects.

''The people in control of most of these units are banks and they are obviously the most motivated market participants to move the product -- rather than individuals who might be holding out for higher prices or a price they could get a year or two years ago,'' Cappel said.

In compiling the list, CondoReports. com looked at closed sales in projects with 50 or more units, excluding newly constructed projects from 2008 and 2009. Developers in many of those buildings are still closing preconstruction contracts, which, Cappel said, do not generally reflect the current market prices.

Distressed Assets Flood the Web

Now, regional sites are also emerging. In late February, a start-up site that zeros in on the struggling condo market in South Florida was launched. Condoreports.com provides detailed reports that include historical sales and listing activity, recent sales by unit types, foreclosures and bank-owned units on nearly 2,000 condo communities in Miami-Dade County.

The Web site has seen a lot of traffic from institutional investors looking for discounted acquisitions, as well as lenders looking for clarity on underwriting criteria, according to the site’s founder, Adam Cappel.

CondoReports.com released its Miami Bulk Buyer report March 25, which identifies more than 140 condo and townhouse projects with large blocks of inventory under a single owner, usually the original developer or lender. While the overwhelming majority of those projects are fractured deals, where only a few units were sold, many are failed condo deals without any sales, which “will certainly become rental projects,” Cappel says.

Miami-Dade / Monroe Yearbook 2009

As of the end of last year, 356 of the Miami-Dade residential condo buildings in CondoReports.com’s database were down 50% or more from their peak per-square-foot value. On the other hand, 7% of the buildings in its database actually increased in value during 2008. “Certain neighborhoods and certain buildings are going to stabilize and experience appreciation much faster than others,” Cappel says.

While real estate was the first sector to slump, tourism — the county’s top industry —was perhaps the last. December occupancy was down 8.5% from a year earlier, and room rates fell 6.6%. Both occupancy and room rates are likely to decline further as both leisure and business travel continue to fall. And, although the county’s visitor numbers have often been buffered from declines because of its international appeal, “I think the fact that this recession is global is going to hit at tourism,” Kozloski Hart says.

Information is Power

To Adam Cappel, information and numbers matter. And as president of CondoReports.com, he has access to lots of both.

Web entrepreneur and former commercial real estate financier Adam Cappel hopes to profit from the current troubled real estate market where others haven’t yet been able to – by providing customers with information.

With a new twist on the real estate information business, Cappel recently launched CondoReports.com, an innovative website with information on nearly 2,000 condominium and townhome projects in Miami-Dade County.

“I don’t know of any other place you can go, on the Internet or otherwise, where you can see so much information on condo communities in Miami-Dade County,” says Cappel. In addition to the more standard information available on some other sites, the website includes details on recent market activity, charts of pricing trends and sales activity over the past five years for every residential building it covers – all free of charge.

Over 200 Condo/Townhome Projects in Miami-Dade County are Available for Bulk Acquisition

Miami--More than 200 condominium and townhome projects with blocks of 20 units or more are currently presenting investors with potential acquisition opportunities in Miami-Dade County according to CondoReport.com’s 1Q09 Miami Bulk Buyer Report. 
 
The report differs from previous studies of unclosed inventory as it is both countywide and includes recent construction and conversions projects of 50 units or more. The report draws a distinction between the 2007 and prior projects and the more recent 2008 and 2009 projects.

“As 2008 and 2009 projects are still closing out existing sales contracts, the exact number of units in the block is more of a moving target,” explains Adam Cappel, President of CondoReports.com. “Although, you can safely assume that nearly every building that started closing in 2008 or 2009 will have a meaningful block of inventory left.”

In the 146 projects that started unit closings in 2007 and before, block ownership exceeds 14,000 units with an average block size of 87 units. The 146 projects identified were almost evenly split with recent construction projects accounting for 55 percent of the sample and conversion projects representing the remaining 45 percent. 

Condo.com adds past sales, rental data

Florida-based Condo.com, which advertises condos for sale and for rent in the United States and internationally, announced site upgrades that add past sales and rental data on more than 3,500 buildings in the South Florida, Orlando and Tampa areas.

The upgrades follow a partnership with www.condoreports.com to provide users with more detailed information on the South Florida market.

Condo.com has an inventory of about 800,000 listings valued in excess of $200 billion, according to a company announcement, and the site receives about 1 million visitors per month.

Condo Meltdown

Since Groupe Pacific lowered prices at Brickell on the River South Tower in mid-January, all the sales have been cash, said Marian Alberto, the project’s sales director.

Alberto said executives of Groupe Pacific were not available for comment.

Alberto, who attributed a jump in sales in February to the price reduction, said one-bedroom units are now priced at $180,000, down from $199,000, which was already below the pre-construction price. Groupe Pacific had a first price cut in May 2008, Alberto said.

Groupe Pacific still owns 155 units in the 334-unit Brickell on the River South, according to Adam Cappel, president of CondoReports.com. The project opened in 2006.

A Promising Miami Revitalization Project Is Stalled

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Like condo projects everywhere, Midtown has experienced a sharp decline in values. In 2007, 248 condos at 2 Midtown sold for an average of $404 a square foot, according to CondoReports.com, a Miami research service. By the first quarter of this year, the price had slipped to $275 a square foot.

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Cash-backed buyers chase cheap properties

Bidding wars aren’t new to South Florida. During the run-up in prices a few years ago, speculators often bid against each other, paying above market price and further inflating home values.

DeWitt recently listed a one-bedroom, bank-owned condo at the Club at Brickell Bay for $114,000 and received 11 offers, mostly cash bids, he said. Last year, the Club at Brickell had the highest number of foreclosures in a single building in Miami-Dade, according to CondoReports.com.

CondoReports.com to Provide Pricing, Sales, Foreclosure Information on Condo Market

Miami--CondoReports.com has recently launched its Web site, which utilizes proprietary technology to offer free reports and information on nearly 2,000 condominium and townhouse communities in Miami-Dade County in Florida.

The Web site provides market information, pricing, sales, listings, foreclosures and ownership for each building.
 
“Whether you’re a buyer, seller, owner, realtor, lender, investor, appraiser or institution—CondoReports will change the way you research and evaluate condominium ownership, lending and transaction decisions,” Adam Cappel, president of CondoReports.com says. CondoReports.com does not provide general market statistics, instead producing reports specific to the building a client is interested in.

Lawmakers look for ways to aid condo associations

At The Venetia, Dodge said lenders themselves are responsible for many of the nonpaying units -- even after a foreclosure is finished and they own the units outright. As a result, her association has resorted to foreclosing on bank-owned units, further costing residents. Associations have the legal right to force the sale of a property through foreclosure proceedings to recover unpaid maintenance fees.

While there is no complete count of condominium foreclosure filings, at the end of 2008, lenders owned more than 3,725 units in 2,000 projects built before 2007 in Miami-Dade County, according to an analysis by CondoReports.com. The company does not track buildings with fewer than 50 units and does not compile data for Broward County.