AP Real Estate Writer
Big-time cash investors are snapping up South Florida condo units in bulk. There have been at least seven purchases of 10 or more condos this year, including four since June, according to county records. Investors are re-selling the units or renting them until the market recovers.
Last month, Tom D. Sullivan and Jorge Arevalo shelled out $14.6 million for 51 oceanfront, condo-hotel units in the One Bal Harbour complex from developer WCI Communities, which is reorganizing under bankruptcy protection.
“It didn’t take 10 years of research to see it was a pretty good deal,” said Sullivan, founder of Lumber Liquidators Inc.
That’s because existing condo prices in Miami have fallen by half since the peak in December 2006, and investors think they see the bottom. There’s also plenty of selection. Miami has a two-year supply of condos for sale, at the current demand, according to the local Realtors associations.
Since 2003, nearly 23,000 units have been built or are still under construction in greater downtown Miami, said Peter Zalewski, a principal with Condo Vultures Realty. In June, developers were still holding about 9,400 units, he said. Banks own about 5,000 local homes and condos.
Desperate to get them off their books, banks and developers are auctioning off Miami condos by the dozen.
That’s where investor Ed Pascoe, an antiques dealer, snapped up 56 units for $4 million in a 135-unit building in February.
This month, he started offering the units for rent at $1,000 a month, or for sale from $99,000 to $299,000, according to his broker Brian Carter. Pascoe declined to comment.
By paying monthly fees on time, these new owners can be a financial relief for homeowners associations struggling to cover the costs of maintenance and insurance in a building dotted with empty units. While lenders and developers are obligated by law to keep up with association fees, it doesn’t always happen.
The cash for some of these deals is coming from groups of private investors. One multibillion-dollar firm, Contrarian Capital Management LLC in Greenwich, Conn., is looking closely at bulk purchases in Florida, according to Gil Tenzer, the firm’s real estate portfolio manager.
He’s not the only one.
“We’re getting much closer on several deals,” said Jay Massirman, managing partner of Rivergate Residential, a Miami-based real estate investment firm. Massirman said he has researched dozens of bulk purchases for investors.
Unlike the condo investors of the boom years, who borrowed recklessly with the intention on flipping the units within months, more investors today are using cash and thinking strategically.
“They have the money and the knowledge and wherewithal to hold them until the market turns around,” said Jennifer Drake, a real estate attorney with Becker & Poliakoff.
Talk of bulk condo purchases has reached San Diego, where “there’s some scurrying about in the local market on the part of investment groups who have explored the idea,” said Gary London, president of The London Group Realty Advisors.
And, if values stay depressed in troubled condo markets like Phoenix or Las Vegas, developers and banks could make bulk deals with cash investors at a discount to unload their unsold units. So, for now, Florida is the testing ground, and investors with deep pockets are watching.