Tuesday, December 29, 2009

Miami Condo Project Acts as Test Case

MIAMI—The three-tower Icon Brickell condominium project is turning into a test case for how lenders should deal with distressed real estate.

As they acquire control of more condo towers in Miami and other cities, banks face a dilemma: Should they sell whole buildings or large blocks of condos to big investors looking to acquire property on the cheap? Or sell condos one by one to individuals?

Bloomberg News

DISTRESS TEST: Lenders for the Icon Brickell condominium towers in Miami are selling single units one by one, instead of using large block sales to big investors, often at steep discounts, Will their strategy pay off?

Selling in bulk brings cash in quickly and avoids the risk that prices will keep falling. But investors interested in bulk purchases insist on steep discounts from the prices buyers of single units would be expected to pay.

In the case of Icon Brickell, which features a 100-yard-long pool on a deck with Japanese blueberry trees and whose early residents include the singer Jennifer Lopez, lenders led by HSBC Holdings PLC, which effectively control the project since the developer ran into trouble over debt payments, have opted to sell more than 1,600 remaining condo units one by one. They are counting on lots of demand from Latin Americans able to pay cash and eager for a prestigious address in Miami. And they believe they can get a better price selling "retail" to end users rather than "wholesale" to investors, even if it means they must hold and manage the properties longer.

"The distress opportunities may not be as great as we all expected" because banks aren't being forced to sell huge quantities of condos in a hurry, said Manuel de Zárraga, executive managing director at Holliday Fenoglio Fowler LP, which advises real-estate developers and investors.

That is partly because federal regulators have given banks some slack: In October, regulators issued guidelines that let banks keep loans on their books as "performing" even if the values of the underlying properties have fallen below the loan amount.

The Icon Brickell will be competing for buyers with a group of investors led by Starwood Capital Group that has become the largest player in the Miami condo market. That group in October bought control of 14 condo buildings in Miami, Fort Lauderdale and Palm Beach, among other real estate, in a $2.77 billion purchase of construction loans made by Corus Bank of Chicago before regulators shut it down in September.

Reuters

The Icon Brickell in Miami. Lenders have opted to sell more than 1,600 remaining condo units one by one.

Starwood Capital has indicated that it isn't planning to dump its property back on the market.

"In many cases, the best option will indeed be to be a long-term hold as there were many attractive properties in the Corus portfolio," a Starwood spokesman said.

But the slow-sell strategy could backfire if prices keep falling.

Peter Zalewski, the owner of Condo Vultures Realty LLC in Miami, said lenders would be better off arranging a sale of one or two of the three Icon Brickell towers to investors. He believes that it will take too long, perhaps several years, to sell the units to individual buyers. Meanwhile, the lenders will have to cover tax and maintenance costs.

Condo supply remains in a glut. In Miami-Dade County, 16,665 units were listed for sale at the end of November, or enough to last 18 months at the recent sales rate, according to Esslinger-Wooten-Maxwell Inc., or EWM, a real-estate brokerage in Miami. Still, that is down from a peak of 24,905 listings in May 2008. About a quarter of the condo listings are priced at $100,000 or less, a price category that barely existed three years ago.

"Miami is 50% off," said Ron Shuffield, president of EWM. "It's just like having a sale at Macy's."

If priced low enough, properties can move. Units at the 46-story building called Brickell on the River South sold out quickly after the developer, Groupe Pacific, cut prices last spring to a range of $175 to $225 per square foot from $325 a square foot in 2008, said Scott Wadler, an analyst at Holliday Fenoglio Fowler.

But whether sales will go quickly at more expensive buildings, such as the Icon Brickell, remains unclear. The Icon Brickell is the marquee project of Related Group, a Miami condo developer. Related has invested about $1 billion in the three towers, including $15 million for giant statues of heads that resemble those on Easter Island, according to the closely held company's chairman, Jorge Perez. In a recent interview, Mr. Perez said loans secured by the three buildings total about $700 million.

Most of the Icon Brickell was completed in 2008 and 2009. So far, 117 purchases have been completed. The average price was cut in October to $419 per square foot from a peak of about $650. A typical two-bedroom unit now would cost about $550,000.

Mr. Zalewski, of Condo Vultures, said prices at Icon Brickell will have to come down further if the units are to be sold quickly. He said the typical market price in the neighborhood is now $200 to $215 per square foot, and Icon's cachet can't support more than a 35% premium to that.

Write to James R. Hagerty at bob.hagerty@wsj.com

Tuesday, December 1, 2009

Icon Brickell Releases Condos at 30% Discount


Icon Brickell Releases Tower I & II Condos at 30% Discount

ULTRA LUXURY FOR SALE

Icon Brickell Releases Tower I & II Condos at 30% Discount

· 30% price reduction now available to you

· Seller financing available to qualified buyers

· Units priced from $220,000

· Easy to show, Call me today!

Check out: http://www.christupper.com/html/IconBrickell.htm

Ultra-contemporary three tower community that redefines and exemplifies the essence of city living at the highest level, situated adjacent to the Miami Circle and Brickell Park on 530 up to 1000 linear feet of the Bay frontage. Philippe Starck has created an exceptional concept that will take your mind and your senses through an amazing journey.

Living at Icon Brickell means living life to the fullest, in style!

Icon Brickell Amenities

• Philippe Starck Inspired Club Room
• Complete Free Weight System
• Weight Training Equipment
• State of the Art Cardio-Equipment and Cardio-Theater
• Aerobic Studio
• Treatment Room
• His and Hers LOunge Areas
• Jacuzzi
• Cold Plunge Pool
• Eucalyptus Steam Room
• Redwood Saunas
• Relaxation Areas
• Sun Deck
• Movie Theater
• 3 Table Billiard Room

Icon Brickell Pool Deck
• 2+ Acre Pool Deck and Recreation Area Designed by Philippe Starck

• Juice Bar and Outdoor Grill

• Outdoor Dining Area With FireplaceOverlooking The Park

• 300 Foot Long Pool Including a Shallow Lounging Area, Thermal Hot Pool and a Heated Olympic Length Lap Pool

Icon Brickell Lobby and Other Features
• Architecture Design by World Renowned Arquitectonica

• Magnificent Lobby Design by Philippe Starck

• Concierge Services

• Valet Services

• Conference Room

• Exercise Room

• TV Lounge

Icon Brickell Unit Features
• Floor to Ceiling Glass Windows

• 9 Foot Ceiling Height

• Philippe Starck Designed Bathrooms and Kitchens

Call today, Icon Brickell Releases Tower I & II Condos at 30% Discount, 786-351-3342