The World Turned Upside Down
The Palm Beach Post reports from Florida. “Miami’s skyline at dusk tells the story of the condo crisis in stark relief: Some of the luminous towers beam with life, others flicker half-full, and still others are completely dark, mired in legal disputes over past-due loans and stalled sales. In many cases, the frequent bad news of bankruptcies, foreclosures and further price drops came with a silver lining that prompted turnarounds. At the 628-unit Residences at the Falls condos, for instance, Mamie Attar, a condo board member, said the best thing to happen to the struggling community was the bankruptcy of the developer.”
“A trustee took over and quickly turned around the property in south Miami-Dade, making repairs and paying the bills with rents collected directly from tenants living in units still owned by the developer. Still, Attar worries that her relief will be short-lived. She recently learned that the bank holding the loan on the Residences at the Falls, had itself succumbed to the housing crisis undertow and was seized by the FDIC two weeks ago.”
“‘I don’t have any idea what is going to happen now. The [new owner] can decide to keep the property . . . or they can say to hell with it and let’s sell it at whatever price and get rid of it,’ Attar said.”
“As far as the value of her unit goes: ‘I’d rather not know, to tell you the truth.”’
The Sun Sentinel. “Sales are brisk for South Florida homes hawked by the federal government in the wake of the Great Recession. Uncle Sam and two government-sponsored companies are unloading property, from waterside mansions to burned-out shells, often at prices 10 percent to 20 percent below market value. The wave of foreclosed property in distressed regions like South Florida has forced the government, along with Freddie Mac and Fannie Mae, to become a major mover of real estate to clear a growing inventory of empty homes.”
“‘They sell pretty quickly if they are priced right,’ said Raoul Lopez, an agent in Miami who sells FDIC houses and other foreclosed property in Broward and Palm Beach counties. He said many houses were left in sad shape by former owners — full of junk with peeling paint and bad odors. The houses are cleaned up for sale, but buyers must accept them ‘as is.”’
“‘I sold a single-family house for $6,500 in Hallandale that was burnt and had tax liens on it,’ Lopez said. ‘I just sold another place, a waterfront home on a canal in Pompano, for about $400,000. Most places are more like $100,000 or $150,000.”’
The Naples News. “On Thursday, Naples-based London Bay Homes closed on a multimillion-dollar purchase of 50 single-family and villa home sites in Mediterra, a luxury golf community in North Naples. The seller was the Bonita Bay Group, which has been unloading golf clubs and other real estate assets to avoid bankruptcy. London Bay paid cash for the land. The builder now owns 100 lots in Mediterra and has taken over sales and marketing operations for the community.”
“Sales in Mediterra have been especially slow this year. As members fought to take over their golf and beach clubs from Bonita Bay Group, potential buyers stepped back to see how it would all unfold. Now that members have purchased their clubs it has brought back more certainty at Mediterra. Scott Curvey and his wife, Rebecca, are having a custom home built by London Bay in Cortile. The couple has actually owned a home in Mediterra since early 2006. It’s a smaller, 3,000-square-foot villa they bought from another builder.”
“Their new home will span 4,400 square feet and include four bedrooms, a game room and a den, along with four bathrooms and a three-car garage. They wanted to buy now because homes are heavily discounted, he said. There’s an old saying, ‘The best time to get a deal on a straw hat is in the winter,’ Curvey said. ‘That’s when you’ll find a deal, when it’s out of demand.’”
From Ocala.com. “Home sales might be up around Marion County, but county officials expect property values to continue to slide during 2010. The median price of a home sold in Marion County continued to dip, as the cost shown for October fell to $92,100. That was down from September’s $96,300, the lowest amount in almost six years.”
“County Property Appraiser Villie Smith was reluctant to say how concrete the figures were. Smith’s reluctance was rooted in the high volume of foreclosures sales. ‘We have a lot of (housing) inventory sitting vacant. Until that’s bought up, you’re not going to see any drastic changes’ in values, Smith said.”
The St Petersburg Times. “Picking up a line of attack begun months ago by the Florida Republican Party, Bill McCollum is accusing his Democratic rival for governor, Alex Sink, of ‘deceptive loan practices’ while she was a top banker. It’s a risky political strategy, considering McCollum’s history with the mortgage industry. As a member of Congress from 1980 to 2000, McCollum served on the committee overseeing financial services and co-sponsored 1999 legislation that tore down the Depression-era firewall between investment banks and commercial banks.”
“After he left Congress, McCollum lobbied for the Mortgage Bankers Association of America and for a nonprofit with a downpayment assistance program that was later outlawed by Congress after the Internal Revenue Service dubbed it a ’scam.’”
“Both McCollum and Sink parted ways with the banking industry years before the economic meltdown in 2008, but the finger-pointing is likely to continue as Florida leads the nation in foreclosures. McCollum’s campaign sought the spotlight Monday, striking for the first time directly at Sink’s banking record. “ALEX SINK STILL DUCKING QUESTIONS ON HER ROLE IN ISSUING PREDATORY SUBPRIME MORTGAGE LOANS TO FLORIDIANS,” blared the news release, which portrayed Sink as reaping millions of dollars on the backs of laid-off workers and scammed homeowners.”
“Sink has said she led the commercial, small-business and retail banking operations, while a separate corporation handled home loans. ‘McCollum’s attacks on Alex Sink have already been proved baseless and false, and are just an attempt to cover up his record as one of the most anti-consumer, anti-homeowner politicians Washington’s seen in a long, long time,’ said Sink’s campaign manager, Paul Dunn.”
The New Times. “Developers Bruce and Shawn Chait were charged last week with bribing former Broward County Commissioner Joe Eggelletion with $25,000, including a golf club membership, in exchange for his vote to support their unpopular housing development on two golf courses in Tamarac. The Chaits, who own Prestige Homes, also figure deeply into the investigation of Broward County School Board Member Stephanie Kraft.”
“They hired Kraft’s husband, Mitch, to help Prestige get a $500,000 break on mitigation fees the company owed the School Board. School Board records show that Stephanie Kraft used the power of her office to help Prestige get that break.”
“Now we learn that the Chaits also hired Sunrise City Attorney Stuart Michelson, husband of Broward County Commissioner Ilene Lieberman. Michelson represented the firm in a code enforcement action regarding the Prestige project in Tamarac last year, according to sources. Michelson’s wife, Lieberman, also voted to support the Prestige project in 2006, saying that ‘the community came to expect green space, but… if not this developer, someone is going to come in and eventually develop it.’”
“Yes, with this commission in power, I’m sure Lieberman was telling the truth.”
From Bloomberg. “Rob Speyer, now co-chief executive officer of Tishman Speyer, is getting another lesson, one on enduring the global commercial property rout. Tishman Speyer and BlackRock Realty LP’s $5.4 billion purchase of New York’s Stuyvesant Town and Peter Cooper Village apartments is unraveling, testing the young Speyer and his father, a 30-year real estate veteran. ‘A default is expected’ on the complex, according to Fitch Ratings, which has estimated the property’s value at $1.8 billion.”
“The company is facing default on…Manhattan’s biggest apartment complex. The property is a World War II-era, 80-acre development housing about 25,000 people. When Tishman Speyer and BlackRock Realty bought the 11,200- unit property in 2006, they planned to raise rents, evict illegal occupants and upgrade the complex with amenities.”
“Average rents for a two- bedroom Manhattan apartment fell 16 percent after peaking in May 2007 at $3,907, according to Gary Malin, president of property broker Citi-Habitats Inc. Tishman Speyer has ceased signing new leases at the complex, a company spokesman, said. It reached a temporary agreement with tenants this month that will reduce some rents starting in January. Investors including the Florida State Board of Administration, the California Public Employees’ Retirement System and the Church of England put money into the Stuyvesant Town deal. U.S. government-owned mortgage finance companies Fannie Mae and Freddie Mac own the biggest portion of the debt.”
“Florida anticipated a return of almost 14 percent on its investment, according to the memo. Calpers, the California state pension fund, projected a 13.5 percent rate of return on its $500 million investment, according to a document. Stuyvesant Town may hurt Tishman Speyer’s efforts to raise money in the future, said said Lawrence Longua, director of the REIT Center at New York University.”
“‘They’re going to have a lot of ‘I’m sorrys’ to deal with,’ he said.”
“Florida and BlackRock have written down their stakes to zero, according to Dennis MacKee, a spokesman for the Florida State Board, and Brian Beades, a BlackRock spokesman. Jonathan Mechanic, chairman of the real estate practice at Fried Frank Harris Shriver & Jacobson LLP, said Rob Speyer shouldn’t be blamed for deals that have lost value.”
“‘The world turned upside down,’ said Mechanic, who has represented Tishman Speyer.”
“The tenants of the development are now waiting to see how their landlord resolves the debt restructuring. The tenants group that bid against Tishman Speyer to buy the complexes in 2006 also learned a lesson about real estate. ‘I’m glad we didn’t win,’ said life-long tenant Jim Roth. ‘We probably would have overpaid.’”
“Sustainable growth and development comes from job creation, not new houses, one Bonita Springs official said at Wednesday’s City Council meeting. For this reason, City Manager Gary Price suggested Bonita shift its focus in east Bonita’s Density Reduction Groundwater Resource to include commercial development opportunities.”
“Price said developers who have tried to create artificial downtown centers, such as The Mercato in Naples, have missed the mark. ‘I think the continuing initiative to develop residential in there doesn’t match with the economy,’ Price said. ‘People aren’t living in those units. It’s a great idea but I think the way it’s being approached … is not working.’”
“‘I think the development mistake we’ve made in Florida is really letting residential development come first and then trying to figure how retail follows and jobs follow that,’ Councilman John Spear said. ‘I suspect how cities have evolved is just the opposite. You start with the jobs, you start with the opportunities.’”
The News Press. “Besieged by a 13.9 percent unemployment rate and myriad foreclosures, Lee County residents are declaring bankruptcy in record numbers. About 6,720 individuals and businesses filed for protection from creditors in Fort Myers in the fiscal year that ended in September, according to statistics. That’s a 67 percent increase from last year and a 36 percent jump from 2005, a year that saw a record number of debtors race to file for protection before a strict bankruptcy law went into effect.”
“‘The people of Lee County are hurting bad. I see it every day in my office and it’s horrifying,’ Fort Myers bankruptcy attorney Carmen Dellutri said. ‘I’ve had (clients) on the brink of suicide because they think filing for bankruptcy is the worst thing in the world.’”
“David Denslow, a University of Florida economics professor, attributes the high bankruptcy rate to Lee’s heavy dependence on the housing industry and the housing boom that eventually crashed. ‘So when the bubble burst, it burst loudest there,’ Denslow said.”
“Lee has consistently ranked among the nation’s leaders in foreclosures. Communities such as Cape Coral and Lehigh Acres were hit especially hard. Many debtors now in bankruptcy aimed to flip properties for a quick profit but were hurt when prices began to fall. ‘When the first wave of defaults started to come in in 2006, I would look at the mortgage documents and ask people, ‘Do you know what you signed?’ Dellutri said. ‘Most people had no idea what they were getting themselves into.’”
“Pam Leslie of Cape Coral filed for Chapter 7 no-asset bankruptcy this year. Leslie said she filed after suffering two hardships: She was laid off by a computer software company and then had to undergo a medical procedure. Leslie couldn’t make the payments on her three-bedroom home and lost it after declaring bankruptcy. She said she wasn’t able to do a foreclosure sale because she had high debt.”
“‘If you can pay off your debts, that’s the best way to go, but when you have predatory lenders, it’s hard,’ said Leslie, who lives in a friend’s home and now works at Manatee Park in east Lee County. ‘Filing for bankruptcy gave me a fresh start, but it’s still disheartening when you lose your home.’”
“We all can agree that 2009 has been a very challenging year. We all know the problems our community faced with unemployment, housing and tourism. It is a year most of us would like to just forget about and move on to 2010. As we look to the future, what lessons have we learned in the past? Or are we destined to repeat all this again some other time?”
“We didn’t learn from tough times in the ’80s and again in the ’90s. The inherent problems that caused those declines were still there in 2009. Almost 20 years ago, The News-Press reported on the economic demise. We urged then that we must get away from the three-legged economic stool we all depend on. We were dependent then on real estate, construction and tourism -the same three things that drove the boom times a few years ago and now has come crashing around us.”
“We brought in 25 business leaders to talk about 2009, but also about 2010, 2015 and even 2020. Some could not agree that we must depend solely on retirees and tourism. Investors and house flippers are back. They all agreed that we won’t see sustainable growth until people who buy the homes live in them.”
“All wanted the governments - local, state and federal - to get out of the way and let us fix the problems. And all agreed we no longer have an affordable housing problem.”
“Let’s not forget. Let’s always remember the pain. And let’s not repeat this ever again. Happy holidays.”
