September, 2010:

Las Olas

Savvy big-time investors are buying South Florida condo units by the dozens, attracted by plunging prices, in bulk deals valued in the tens of millions of dollars.

According to Condo Vultures, 63 sales have closed in Palm Beach, Broward and Miami-Dade counties since July 2008, representing 6,000 condo units worth $1.6 billion.  There were no such deals in 2006 or 2007.

Miami-Dade has been the site of most of the bulk sales, but available properties there are becoming scarce, leading investors to move north into Broward and Palm Beach counties.

The bulk sales are good for existing owners, who are desperate for a more vibrant lifestyle that doesn’t exist in these mostly dark developments.

One of the largest deals was engineered recently by the managing partner of Lionheart Capital, Ophir Sternberg.

His group paid $117.3 million for the remaining 146 oceanfront condos at 2700 North Ocean Drive on Singer Island in Riviera Beach. The cash-and-debt deal is the most expensive bulk sale in the three counties so far this year. Lionheart paid $803,483 a unit. According to Condo Vultures, the condos are valued at about $1.5 million. Sternberg states: “The South Florida market has been hit very hard, but it’s one that we think is going to bounce back and has great potential.”

Condo prices across the region have tumbled by about 60% since the peak of the housing boom in 2005. The foreclosure crisis could keep prices depressed for three more years, forcing bulk buyers to rent the units until they can sell them, said Mark Grant, a Fort Lauderdale real estate lawyer and shareholder at Ruden McClosky. He states: “Investors realize they have a holding time. They’ll be waiting a few years to get rid of this product.”

In June, an affiliate of Dizengoff-Trading Co. paid $8.2 million for 106 units at Bermuda Cay in Boynton Beach. It’s one of two bulk sales the Israeli-based firm has completed in South Florida. The other was a $6.5 million deal for 115 units at Courtney Park in Lake Worth.

Ronen Saban, Dizengoff’s U.S. region manager, said the firm plans to stabilize both complexes by renting the units. He claims: “It’s too early to plan for an exit in this market.”

Also this summer, The McKafka Development Group of Aventura bought 64 units at Las Olas by the River for $8.6 million. The deal remains the largest bulk sale in Fort Lauderdale. The 240-unit Las Olas by the River was built in 2005 at the height of the boom. The building was in foreclosure, and a short sale of the condos was approved by the lender, Bank of America, Fernando Levy-Hara, managing partner at McKafka, said at the time. So far, McKafka has sold 20 of the units individually to international investors from South America and Central and Eastern Europe.

The bulk sales could accelerate after a new condo reform bill took effect July 1 that limits the liability of bulk buyers, analysts say.

Florida law used to consider a developer anyone who bought more than seven units in a building of 70 units or more. Those buyers were forced to assume the same legal and financial responsibilities as developers who build condos. The new bill eliminated the title of developer for bulk buyers.

As a result, even more investors will be eager to buy, and sellers will be able to fetch more money, Grant said. Ultimately, that will help the condo market recover.

Lionheart, which bought the two-tower 2700 North Ocean condo from Catalfumo Construction in Palm Beach Gardens, plans to launch a marketing campaign this fall.

Fewer than half the units (96) were scooped up by individual buyers who paid roughly $900,000 to more than $3 million during the real estate run-up. Sternberg said he expects the 146 units to start selling at about $1 million.

A spokeswoman for Lionheart said the firm is talking to Ritz-Carlton about turning the condo into resort-style residences. Sternberg was vague about the project’s future. However, he concludes: “We’re going to wait for the right buyers and have a patient approach.”