August 18, 2016

No One Can Escape The Chill

A report from Stowe Today in Vermont. “The market for homes between $1 million and $2 million hasn’t been robust, said McKee Macdonald of Coldwell Banker Carlson Real Estate in Stowe, meaning buyers interested in ‘entry-level luxury homes’ can get ‘a lot of house for their money’ right now. Stowe’s luxury market is considered to start at $1 million; the town has far more $1 million houses than any other town in Vermont. However, that niche has ’slowed down pretty considerably,’ Macdonald said. But add another million to the house price and there’s a lot of activity. Macdonald calls anything over $2 million the ‘ultra-luxury’ market, and he says it’s been ‘very active and quite busy. People are making decisions quickly’ on high-priced properties.”

“An example is Above the Clouds Estate on Upper Springs Road, a whopping 18,095 square feet on 15 acres; it was sold this quarter for $2.75 million, well below the asking price of $6.9 million.

“Were it not for projects such as Waterbury Commons at the bottom of Perry Hill, Cindy Lyons of Landmark Realty on North Main Street said she wouldn’t have been able to connect buyers with the homes and locations they want. Lyons thinks sellers have been reasonable this year about how much they think their homes are worth. ‘You don’t get multiple offers on an overpriced home,’ Lyons said.”

The Miami Herald in Florida. “No one can escape the chill creeping into Miami’s luxury real estate market. The Related Group, South Florida’s biggest condo developer, confirmed Wednesday it would delay construction on a 298-unit project called Auberge Residences & Spa Miami. ‘The market is slower,’ said Carlos Rosso, president of Related’s condo division. ‘The dollar has appreciated a lot against Latin American currencies.’”

“Groundbreaking was originally set for 2017. Rosso said he wasn’t sure yet how long the project would be delayed. ‘Do you have a crystal ball?’ he asked.”

“Land prices have escalated, leading to fights over prime properties. And a glut of inventory means existing condo prices in downtown Miami fell for the first time in five years. A cascade of foreign buyers pushed Miami real estate into overdrive after the recession but has since dried up. Slumping sales across the market should come as no surprise given the lack of foreign buyers, said analyst Tony Graziano, who authors regular reports on the condo market for Miami’s Downtown Development Authority. Other developers have put projects on hold, including Boulevard 57 in Miami’s Morningside neighborhood.”

“‘Bank financing for development in Miami right now is dicey,’ Graziano said. ‘It’s harder for banks to do their due diligence because there’s no way to accurately forecast how many foreign buyers will come.’”

“The federal government has also put pressure on buyers. Over the last year, it handed down new disclosure rules for certain kinds of cash home deals in Miami, along with other luxury markets around the country including New York, Los Angeles and San Francisco. Regulators suspect luxe properties are being used to launder money.”

From Bloomberg on New York. “Luxury builder Extell Development Co., trying to cobble together funds for a condo tower in Lower Manhattan, is finding out just how much time costs these days. Extell is hoping to complete a $463.2 million financing agreement with office landlord RXR Realty LLC to build One Manhattan Square on South Street, but that partnership was postponed for a fourth time Monday. The company still hasn’t secured a construction loan for the project, which is a condition of the deal, according to filings on the Tel Aviv Stock Exchange, where the New York-based developer sells debt.”

“With this delay, the value of the RXR agreement has decreased and the costs on the money have climbed. RXR will now commit $300 million toward the project, and choose within 120 days of the deal closing whether it wants to add the other $163.2 million, according to filings, written in Hebrew. The interest rate RXR will receive on its investment is now 8 percent, compared to the 7 percent agreed to in March.”

“Extell, which ushered in Manhattan’s luxury condo boom with the construction of the One57 skyscraper across from Carnegie Hall, is now getting caught up in its aftermath. The luxury market is showing signs of a slowdown as inventory swells and interest from ultra-wealthy buyers cools amid so much competition. That has made construction loans increasingly hard to get, as lenders are wary of adding more units to a market where they do not appear to be in demand.”

“Bondholders in Extell have become increasingly rattled by the company’s delays and financing structures. The developer announced a joint venture with China’s SMI USA last week that will allow SMI to jump in front of Israeli creditors in laying claim to the assets backing their bonds. Extell’s creditors in Israel requested an urgent meeting with the bond trustee to discuss their options in the event that Extell doesn’t get construction financing, newspaper Calcalist reported Tuesday.”

“Extell’s bonds due in 2019 fell 1.7 agorot to 83 agorot on the shekel in Tel Aviv Tuesday, the second day of declines. The yield climbed to 11.2 percent, a three-week high.”