What condo glut? (more…)

The new Marina Grande condominium seems like the dream residence for the Florida lifestyle: serene water views from the base of the Blue Heron Bridge, luxury interior finishes and even a marina next door. (more…)

Columnist Lew Sichelman addressed the following question in his recent mailbag: if a person has a condo for sale with no Florida mortgage, and anticipate selling within the next 12-24 months, should he/she opt for an interest-only mortgage?

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Condos For Sale.

The loud signs flaunted from street corners across the Bay area are meant to grab the attention of potential Florida mortgage borrowers.

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Two bills floating around Tallahassee could make it more difficult for condominium investors to back out of contracts with developers, a process builders say has been a big contributor to increased construction costs.

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More than 400 building professionals from around the country attended this week’s National Association of Home Builders conference on multi-family homes entitled “Welcome to the Next Step.”

But according to the Palm Beach Post, the next step for multi-family housing in the Florida housing market is really a step back.

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A weak South Florida real estate market may prove a boon to rum rummers in Islamorada, the Miami Herald noted yesterday.

The owners of Holiday Isle announced Monday they were scrapping plans to finance a new luxury resort there with condo sales and will seek a traditional commercial mortgage loan to build the project instead.

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A few years ago, condo-hotels practically sold themselves.

With Florida real estate prices marching upward, the idea of owning a condo unit on the beach and covering some of the expenses through hotel rental payments seemed irresistible.

“We weren’t salespeople, we were order takers,” recalled Joel Greene, president of North Miami-based Condo Hotel Center. “I was averaging a sale every third day and I didn’t even meet many of my customers.”

Today, the market has sobered up. Condos aren’t selling and condo-hotels are caught in the same downdraft.

In West Palm Beach, plans for The Harrick, a 138-unit condo-hotel at Lakeview Avenue and South Dixie Highway are on hold. “We’re redesigning it as a hotel,” said developer David Gostfand. “The condo market is a little quiet at the moment.”

For tourism, the downshift could signify that some buildings financed by condo-hotel speculation weren’t necessarily good ideas. It could also delay the construction of new hotels announced but not yet started.

About 1,250 condo-hotel units have been opened in the past two years in Broward and Palm Beach counties, with another 2,500 units approved or under construction. That’s a small number compared with the 15,500 units proposed for the Orlando housing market or the 32,800 going up in Las Vegas. But if condo prices continue to cool, buyers could walk away.

That hasn’t happened yet, said Peter Hall, a broker at the W Hotel in Fort Lauderdale. But Hall said he knows of one partnership that had deposits on seven condo units in Fort Lauderdale. Faced with closing on all seven, plus maintenance fees and taxes, the partners balked. They unloaded the units to secondary market buyers, but at “fire-sale prices,” Hall said. “They got out for pretty much what they put in,” he said.

Condo-hotels arose out of the tough financing environment for hotels in the late 1990s. Cyclical overbuilding had left lenders leery of lodging, especially the full-service hotels that had kitchens, restaurants and meeting rooms.

While Florida mortgage lenders today will loan 70 percent of a hotel project, then they were offering to finance only 50 to 65 percent. To generate some upfront cash, developers began selling some rooms as condos. Since part of the building would be a hotel, owners could put their units in a rental pool when not using them, generating income.

The idea caught on and spread to developments in which the entire building operated as a condo-hotel.

At about the same time, the Federal Reserve cut Florida home loan rates to historically low levels, sparking a real estate boom. Condo-hotel units that sold for $650 a square foot in the late 1990s are offered at $1,200 to $1,400 a square foot now.

“The big question is with all these projects coming along at one time, are there enough luxury buyers?” said Jack McCabe, president of McCabe Research and Consulting, a Deerfield Beach real estate firm.

Florida home mortgage applicants typically deposit 10 percent of the unit price when they sign a contract, and put in another 10 percent when construction starts. The balance doesn’t come due until the building is finished and the sale closes.

McCabe said that the pace of presales has slowed dramatically over the past six months. Builders that haven’t gotten out of the ground yet will find it much harder than in the past to sell enough units to qualify for a loan.

“Some of these buildings aren’t going to be completed in the time frame they had originally projected,” McCabe said.

While a separate breakout of condo-hotel prices isn’t available, condo prices in Broward County fell 6 percent in January compared with the same month a year earlier. In Palm Beach County, condo prices were 2 percent above January 2006.

The slowdown has given pause to many condo-hotel buyers, said Hall. “The general public is sitting on the sidelines, waiting to see what’s going to happen with the residential market and interest rates,” he said.

Some developers have dodged the long and risky task of building from scratch by converting existing hotels to condo-hotel ownership. At Fort Lauderdale’s Pelican Beach Resort, which was bought last year by Condominium Ventures of America, about 60 of the 159 units have been sold at prices from $540,000 to $890,000.

“It’s an existing property with an existing track record,” said Ken Harris, president of Atlanta-based Condominium Ventures. “We wanted to sell what you could touch and see and feel.”

Many developers are starting to scrounge for Florida mortgage borrowers in distant locations, especially Europe, where a favorable exchange rate makes buying a U.S. condo less daunting. Others emphasize that coastal real estate isn’t being made anymore.

“The market for oceanfront, particularly on the sand, is going to continue to be strong,” said Debbie Orshefsky, attorney for a partnership that plans a 28-story building with 226 condo-hotel units where Ireland’s Inn now stands.

But some developers concede that buyers must get a low price per square foot to have any hope of a return on their investment.

Jim Clarke plans to begin construction on Clarkes Hotel, a 92-unit condo hotel in downtown West Palm Beach, within 60 days. “We’re virtually sold out, but our prices are low,” said Clarke, who estimated an average unit costs $375,000.

Clarke cites a rule of thumb among hotel developers that to be profitable rooms should rent for a tenth of 1 percent of their building cost. If a buyer acquires a unit for $500,000, that translates to room rates of $500 a night.

“That’s kind of hard to sustain down here,” Clarke said.

SOURCE: The Sun-Sentinel

Condo buyers are getting a warm welcome these days with 2,246 condos actively listed for sale in the Manatee County housing market.

A caveat might be: If you’re selling Florida condos, you’d better have them competitively priced or they won’t sell, according to developers and real estate sales agents.

“Builders are putting the brakes on, not pushing forward with more to be built, working hard to get rid of their inventory,” said Patrick McGuire, sales manager and broker associate at Buccaneer Realty, based in Bradenton. “Some are not willing to do new contracts until they’ve sold all those in the pipeline.”

Some are offering hefty incentives, such as larger commissions for sales agents, decreased interest rates for buyers and even closing costs thrown in, he said.

But whether condos are selling or not also depends on the project.

“It’s really location-specific. There’s some complexes that seem to be doing well, others seem to be somewhat stagnant,” McGuire explained.

At Palma Sola Bay Club, developer Evelyn Treworgy said sales are “looking very promising.” Her firm has sold three or four over the last five weeks or so. The 201 units, which sell for $429,000 and up, are set to go up at 3400 75th St. W.

“We’re really happy with our price points and our product,” Treworgy said.

Although potential Florida mortgage borrowers are not looking in droves, the ones that do turn up are highly-qualified people who have done their homework, she said. “We’re looking for an incredible April,” she added.

Conversely, a Florida home loan broker who sells waterfront condos and single- family homes on Anna Maria Island and Longboat Key was unenthused Monday about the market.

“All of the listings are coming down in price. They’re not even moving even though they’re coming down,” said Phillip Saadi, a broker for First in Real Estate, based in New Tampa. “Why? I don’t know.”

The 2,246 condos actively listed for sale in Manatee County represent a dollar volume of $806 million based on numbers McGuire pulled from the Manatee Association of Realtors’ Multiple Listing Service.

The average number of days a condo remained on the market was 131 days, with the median price at $258,150, he said. The least expensive condo was selling for $49,500 and the most expensive was listed at $3.49 million, McGuire said.

One of the more high-profile condo projects in Bradenton is the Riverpark Grande Condominiums, 309 10th St. W. The project involves 40 units, part of a $15 million renovation of the historic 1920s-era former Riverpark Hotel.

A sales launch event March 8 drew more than 200 brokers and Realtors, according to Valentina Pippen,  broker associate of Sky Sotheby’s International Realty.

“They’re very excited about the project, it’s really a one-of-a-kind,” she said. However, because the developer is still putting together the finishing details, she has not yet begun to sell any of the condos, she said.

“It’s up to the developer,” Pippen said. “I imagine it will be the beginning part of April.”

SOURCE: The Bradenton Herald

According to the Sarasota Herald-Tribune, Warren Hickernell looked like the boldest contrarian in the Southwest Florida housing market last year.

He spent millions changing motels and apartment buildings into condominiums long after the condo conversion trend seemed spent.

But with banks filing for foreclosure on six of his 18 condo conversion projects - demanding repayment of more than $17 million - Hickernell now looks like a gambler whose luck ran out after he kept letting it ride on red.

In December 2005, Hickernell purchased the 46-unit Bermuda Apartments in Sarasota for $10.23 million, court records show. The seller had paid just $5 million nine months earlier.

“Hickernell had to have a lot of courage to pay that much at that time,” said Kent Davis, a former Anna Maria Island motel owner.

“Everyone knew the market was dead in late 2005. No one expected a happy ending at that point. It was game over.”

But like so many other real estate investors during the recent housing market boom, Hickernell believed prices would keep climbing on a massive wave of retiring baby boomers.

Hickernell thought that by continuing condo conversions of motels and apartments, he would have the cheapest product available in the most expensive areas of the region - the barrier islands and the city of Sarasota.

“Warren is a very sharp guy,” said Richard Dear, a Siesta Key vacation resort owner and friend of Hickernell’s.

“He just had too many partners and too many projects. It’s hard to be successful when you have so much on your plate, especially when your projects are spread out over a wide geographical area.”

Hickernell was not always careful about his Florida mortgage choices or with whom he did business with, however.

Though an associate, Daniel Prewett, was recently arrested on drug-related money laundering charges and is being sued by six investors for misappropriating money, Hickernell has continued to do business with him.

Sarasota County court records show that Hickernell launched his first motel conversion in June 2003. That is when he and a team of investors took out a Florida home mortgage of $900,000 from Sarasota’s Bank of Commerce to buy the 12-unit Tiki on the Bay Resort in Englewood for $1.1 million.

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