Developer Faces Boca Raton Mortgage Foreclosure
In the clearest sign yet that the South Florida housing market boom has ended, a Miami mortgage lender confirms it filed a $50 million foreclosure action against the developers of a Boca Raton condo conversion.
The foreclosure may be the largest filed in Palm Beach County since the red-hot residential real estate market began cooling early last year.
Analysts say it’s a precursor of things to come as the lenders who fueled the frenzy with easy-to-get Florida home mortgage loans continue to tighten up.
“It’s probably just the tip of the iceberg, the first of many more to come over the next couple of years,” said Jack McCabe of McCabe Research and Consulting in Deerfield Beach.
Ocean Bank said NRW Development LLC, a South Florida real estate firm, and six individuals owe $50 million on a condo conversion known as Villa Mare Beach & Yacht Club Residences, a 40-year-old complex formerly known as Oceanview or Lakeview apartments.
In the lawsuit, filed June 1 in Palm Beach County Circuit Court, Ocean Bank seeks the property and personal guarantees from the six investors.
“We have filed a foreclosure action against NRW Development … to protect the bank’s interests in two Boca Raton properties,” Terry J. Curry, chief credit officer of Ocean Bank, said in a statement.
“Of the $60 million which Ocean Bank lent to NRW, $50 million remains outstanding. We anticipate resolving this matter.”
The bank would not comment further. None of the borrowers named in the action could be reached for comment Wednesday.
Ocean Bank is Florida’s largest independent commercial real estate lender with $5.9 billion in assets. It lent millions on condo projects in South Florida - which now has a glut of condos hitting the market.
Ocean Bank does not have Palm Beach County offices.
In March, the FDOC issued a cease-and-desist order in which Ocean Bank agreed to reduce and monitor loans to condo conversions and land development.
The bank also agreed to review the collateral backing commercial loans of more than $10 million, and to limit the level of credit to any borrower granted without bank board approval.
The enforcement action came too late for the NRW loan, however, and Ocean Bank now seeks to recoup the money from this Florida real estate deal.
The Ocean Bank lawsuit says NRW and six other borrowers stopped paying on the Florida home loan in December.
That’s only seven months after NRW borrowed a massive $60 million to pay $57 million for the property.
NRW had planned to create Villa Mare out of the two aging 80-unit, five-story buildings, the last major piece of Boca Raton real estate on the waterfront to be used as an apartment complex.
The apartments sit on a side street known as Sweetwater Lane that runs from the Intracoastal Waterway to the ocean, south of Spanish River Boulevard.
Units were to be priced between $311,000 and $1.2 million.
But even that sweet location wasn’t enough to guarantee success, especially in this tumultuous Florida mortgage market, and seeing that NRW plunked down so much to buy the two-building complex.
It’s tough to make it work when you’re paying $356,250 per unit, according to McCabe. Even when the sale took place, “we questioned that deal,” he said. “The price may have been too high.”
Now Ocean Bank has a giant hole in its $4.5 billion loan portfolio, bad news for a bank with past-due loans creeping past the $208 million mark.
Ken Thomas, a Miami banking analyst, called the bad NRW loan “a big issue” for Ocean Bank, especially given the rare enforcement action by the FDIC.
But Thomas said that the Florida mortgage lender can handle the hit. Ocean Bank posted a profit of $19.1 million for the quarter ended March 31.
SOURCE: Palm Beach Post
