The Kool Aid They’re Drinking In Florida
The Charlotte Sun reports from Florida. “The annual Fishkind Report released Tuesday by Attorneys’ Title Insurance Fund projects Florida’s economy to rally last among all states, and possibly not until 2011. All Florida housing markets will be down through 2009, according to the report. First published by economist Hank Fishkind of Orlando in 1975, the report uses deed data for more than 30 Florida counties. No other report he’s done has been quite so grim, Fishkind said.”
“‘This is the worst recession our area has seen since at least 1975-76,’ Fishkind said. ‘As we look back on it, it will probably be the worst in post-World War II history.’”
‘Florida lost more than 150,000 jobs last year — the worst job performance in the nation, according to Fishkind. People without jobs can’t pay their mortgages, which ignited the state’s crippling foreclosure problem and throttled housing starts and prices. Florida’s west coast will recover only as quickly as it can wipe out home inventory and add jobs, Fishkind said.”
The St Petersburg Times. “Fishkind places little faith in the Baby Boomer retiree wave that’s supposed to re-energize housing sales. While a national economic recovery is possible by the end of 2009, many retirees won’t have the means to afford a big move. He joked that baby boomers’ 401Ks have become 101Ks.”
“Fishkind’s yearly forecast, sponsored by Attorneys’ Title Insurance Fund, flopped in 2008. Last year’s report predicted Florida home sales of 320,608, 42 percent higher than the 225,810 that actually sold. Fishkind said he learned from that mistake.”
“‘As I told my wife, I’m one of the only ones stupid enough to publish my predictions,’ he said. ‘I failed to anticipate the financial panic. I’m not trying to make excuses, but I think it’s a failure of my profession.’”
From CBS 4. “President of Watermark Valuation Services which offers property appraisals, said in South Florida we’re seeing prices back to the 2003 levels at times. Biber pointed to a nearly complete 6 thousand square foot mini-mansion on the water in Lighthouse Point as an example. The builder bought the lot for $800 thousand and the original asking price was nearly 3 million. Now it’s being offered for $1.3 million and Biber said a buyer could probably negotiate that down to $800 - $900 thousand.”
“‘That’s what’s going on. There’s desperation. We’re reaching a point where you can start thinking of buying something and covering your expenses with the expectation you will make money in the longrun,’ he said.”
From Bloomberg. “As the U.S. housing recession enters its fourth year, there’s no sign of a recovery because speculators account for most of the rise in sales. While the purchases are trimming the inventory of unsold properties, most of those bought by speculators will likely return to the market when prices rise again, hampering any recovery, said Nobel laureate economist Joseph Stiglitz and Yale University Professor Robert Shiller in interviews.”
“‘We’re creating a shadow inventory of homes that will be right back on the market as soon as the economy and the housing market begin to improve,” said Stiglitz. ‘We could see a double-dip in the housing recession if that happens.’”
“‘You don’t have it in strong hands, you have flippers,’ said Shiller. ‘These speculators are preventing the market from crashing now, and when they get out it could fall again.’”
“Robert Arnold, a real estate investor who rents out a dozen homes near Orlando, Florida, says he’s ready to sell when demand rebounds. Arnold bought an Orlando foreclosure in June for $60,000, about a third of its appraised value, and spent $20,000 repairing it. Four months ago he rented it for $950 a month. In November he bought a three-bedroom house for $25,000 in Longwood, Florida, and hopes to rent it for $900 a month, about six times his $150 mortgage payment.”
“‘Most of the houses I buy are junkers, but with a little work they become cash cows,’ Arnold said.”
The South Florida Business Journal. “A Singer Island-based group has paid nearly $13 million for 60 units at the Marina Blue high-rise across from American Airlines Arena in Miami. 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.”
“During preconstruction, units at Marina Blue were selling for about $400 a square foot.”
“Kevin Tomlinson, a…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.’”
The Palm Beach Post. “In a sign that bargain hunters are taking advantage of West Palm Beach’s condo glut, the head of a large Pennsylvania-based roofing company has snapped up 26 units at The Edge. Ed Dunlap, chairman of CentiMark of Canonsburg, Pa., paid $5 million for condos at The Edge, according to a deed recorded this week.”
“Dunlap paid $165 per square foot for the 26 units. To understand how cheap that is, consider that…the buyers who closed on 155 units at The Edge in 2007 paid an average of $368 a square foot, and as much as $475 a square foot.”
“The Edge isn’t the only West Palm Beach condo tower struggling to sell units. Jay Jacobson, South Florida director for Wood Partners, said drastic price cuts are the only way to move units in a moribund market. ‘Anybody that thinks they can close units in West Palm Beach without discounting prices, I’d like to get my hands on the Kool Aid they’re drinking,’ Jacobson said.”
The Daily Business Review. “The Related Group of Florida has often been at the forefront of trends, including helping launch the glut of high-rise condo buildings in downtown Miami. Now one of the nation’s largest condo developers is taking the lead in the selloff of excess units through discounted bulk deals.”
“In its most recent liquidation, Related’s TRG-Harbour House affiliate sold 101 units for $27 million in Bal Harbour’s New Harbour House. The 457-condo, 16-story New Harbour House is at 10275 Collins Ave. Related still owns about 100 unsold units there.”
“The New Harbour House buyer is HH Condominium Investments, led by Thomas Daly and Christina Cuervo. Daly is an investor in the Related Group, and Cuervo is a former Miami Beach assistant city manager. HH Condominium Investments paid prices ranging from about $285 to $260 per square foot, with some units discounted of up to 60 percent compared with sales to individual buyers that closed in the last two years.”
“In one example of the cut-rate prices, HH Condominium paid $297,073, or $281 per square foot, for Unit 1206, which has 1,056 square feet of air conditioned space, according to Miami-Dade County property records. An individual buyer paid $737,000, or $698 per square foot, for a similar unit one floor below in May 2007. In the bulk sale, the price dropped 60 percent.”
“In another sale, HH Condominium paid $239,057, or $267 per square foot, for Unit 528, which has 896 square feet. In September 2007, an individual buyer paid $476,900, or $532 per square foot, for Unit 428, a similar unit on the floor below.”
“Related lent HH Condominium $7.27 million through a purchase money first mortgage, according to public records. ‘This was an end-of-year strategic sale to pay off remaining debt on our project and end-of-the-year tax planning,’ according to a statement from Related chairman Jorge Perez and executive vice president and chief operating officer Matthew Allen. ‘We, along with our new buyer, are looking to hold on to the remaining inventory for the long term asset appreciation at Harbour House.’”
The Naples News. “In November — and in several other months this year — Fort Myers-Cape Coral took the top spot in the nation for foreclosure activity in a ranking of 230 metros by RealtyTrac. Lee County had 5,813 foreclosure-related filings, or one for every 59 households, in November. That was up 35 percent from October and up 201 percent from a year ago, according to RealtyTrac.”
“Though numbers aren’t finalized yet, on Friday it looked like there might be around 700 new filings in Collier County for December, Clerk of the Courts Dwight Brock said. ‘Collier County during my tenure has never seen that type of filings and foreclosure rates,’ he said. ‘That will bring us up to somewhere in the neighborhood of 8,000,’ for 2008.”
“In Lee County, hit hardest by the market slump, it was a near-record year for existing home sales. In the Naples area, the median home price dropped more than 40 percent to $194,000 in November. In Lee, the median price for existing single-family homes was $106,100 in November, down more than 50 percent from 2007.”
“‘We now have affordable homes again. I know people experienced what they think is a loss in value. But we really had gotten beyond the means of most of the people wanting to buy in the area,’ said Wes Brodersen, a broker with Exit Gulder Real Estate on Bonita Beach Road.”
“Developers of two neighboring well-to-do private golf course communities, Palmira and Quail West, found themselves in financial trouble. In September, The Ronto Group suddenly suspended club operations at Palmira in Bonita Springs, saying it could no longer afford to keep the doors open.”
“Residents united to get the club back open. Instead of regular dues, golf members were asked to pay $3,000, and sports members were asked to pay $1,500 by Oct. 15. They were to make a second round of payments in the same amounts by Jan. 1. Meanwhile, residents are in negotiations to buy the club from the lender, GMAC.”
“Bonita Springs-based developer WCI Communities in August began an effort to reorganize and restructure its debt under Chapter 11 bankruptcy protection. The struggling home builder, which saw its losses grow and demand plummet, faced about $2 billion in debt.”
“‘Like so many other builders, they overleveraged and tried to rapidly grow, placing all their eggs in the luxury condominium segment,’ said Jack McCabe, CEO at Deerfield Beach-based McCabe Research and Consulting.”
The News Press. “Day three of Samir Cabrera’s real estate fraud trial ended around 5 p.m., after Cabrera Capital’s chief operating officer testified for nearly five hours. The government’s questioning of Tom Pence focused on his interaction with Chicago attorney Mitch Goldsmith, who drafted operating agreement documents to investors on behalf of Cabrera’s company. Pence said Cabrera never told him to tell Goldsmith that the company planned on flipping Fiddlesticks properties to make a profit.”
“Six investors from Pennsylvania, Minnesota and Ohio testified this morning that they didn’t know Samir Cabrera flipped properties he owned at a higher price. Cabrera, 32, is charged with 12 federal counts of fraud and money laundering in connection with two companies he organized that owned land on Fiddlesticks Boulevard near Daniels Parkway. He faces as many as 190 years in prison if convicted.”
“Georgia Ann Bohar, an Ohio truck stop waitress, testified that she invested nearly two years of her salary in one of Cabrera’s failed investment deals. She said she never would have sent the $25,000 she invested if she had known what was happening.”
“‘No I didn’t know that,’ she said, referring to Cabrera flipping a property. ‘Definitely not.’”
“‘Definitively no,’ investor James Andersen - a Naples property manager and broker - said when asked by Assistant U.S. Attorney Jeff Michelland if he knew the property at 13701 Fiddlesticks Blvd. in south Lee County had been flipped. Andersen invested $50,000 in the project on Feb. 6, 2006, seven weeks before one company controlled by Cabrera purchased the land for $3.9 million from the original owner. Then Cabrera’s firm sold the land again the same day to a company in which Andersen and other investors had put their money.”
“By the summer of 2007 the project was largely defunct and Andersen said he had a heated conversation with Cabrera, asking him ‘How could you be out of money the first year of a three-year project?’”
“Cabrera never gave him specific answers and he, Andersen, never got back his money, Andersen said.”
“Another investor, Wall Street derivatives broker Mark Stanley Perkins, testified he invested $150,000 in the same project and also lost it all. Asked by Michelland if he was told anything about the flip, he replied, ‘No, nothing.’”
“The Fiddlesticks deals and other Cabrera projects were financed in part by Frank D’Alessandro Equity Funding, a lending company owned by Cabrera’s broker at the time, the late Frank D’Alessandro. D’Alessandro died in September 2007 while kayaking off the coast of New Jersey.”
“Cabrera’s father-in-law, Lee County Manager Don Stilwell, also was mentioned in court testimony Tuesday as someone involved in the collapse of Cabrera’s companies. Don Turner, who along with Cabrera worked for the D’Alessandro & Woodyard real estate brokerage, said he became concerned the balance sheets were ‘desperately’ low for Fiddlesticks and Cabrera’s other projects. Turner said he first told D’Alessandro of his concerns about Cabrera at an event at Harborside Event Center and D’Alessandro told him to approach Stilwell.”
“Don (Stilwell) asked if we could have a meeting at his house” and subsequently Stilwell, D’Alessandro and Cabrera met with him at Stilwell’s house to discuss the companies’ finances, said Turner - who laid out the figures at the meeting. The reaction of Stilwell and D’Alessandro was ’shock’ at the news, said Turner, who brought some of the investors into the Fiddlesticks projects.”
“Then, Turner said, ‘Frank told us at the meeting, pardon my candor, we were all screwed, the projects were going down.’”
From WBBH TV. “Some people would call Lehigh Acres ground zero for the Southwest Florida foreclosure crisis as hundreds of homes there sit vacant. Still, Lee County Commissioners approved a 500-plus home development and the builder is excited about the prospect. Tuesday, Lee County Commissioners gave their final approval for almost 600 homes to be built and more than 200 of those will be affordable housing units.”
“Lee County Commissioner Frank Mann was the only commissioner to vote against the development and called the decision foolish. ‘It’s at the wrong place at the wrong time and it’s counter productive to try to turn this economy around and fill up those homes that are empty today,’ said Lee County Commissioner Frank Mann. ‘It just bordered on insanity in the face of the economy!’”
“The developers say they’ll wait to break ground until the timing is right with the housing market. ‘The best time to have the final paint on the walls is right when everybody is showing up to buy new exciting affordable housing,’ said the developer’s attorney Richard Pringle. ‘There are going to be folks interested in this property that might not be interested in all of the other residential units out there on the market today.’”
“Commissioner Mann says this project will only slow down the housing market’s recovery. ‘Surplus housing is what’s killing us right now. We need to eat this inventory up and get people into those homes instead of approving a whole lot more empty homes, right next door,’ he said.”
