Mark Zilbert’s Blog

Tue Nov 13, 2007 8:34 AM EST

By Tom Brown

MIAMI (Reuters) - At first glance, the 43-story building in Miami’s international banking district seems little different from other high-rise condominiums overlooking the turquoise waters of Biscayne Bay.

But the 643-unit condo known as the Club at Brickell is a leader in mortgage foreclosures and it appears also to stand at ground zero in a blizzard of fraud that may lie behind many of the failed loans threatening to bury the U.S. property market.

America’s subprime mortgage crisis is partly due to predatory, or aggressive, lenders, hard-sell tactics by mortgage brokers and an easing of underwriting standards in the $10 trillion home-loan industry.

But fraud accounts for a sizable share of the bad bets on mortgages, according to many industry experts, and lenders may have been victimized as much as anyone else.

“The lenders are holding the bag now, that’s what we’re finding out,” said Glenn Theobald, head of a mortgage fraud task force formed in south Florida’s Miami-Dade County in September.

Mortgage scams involve a cartel of inside players — colluding property appraisers, real-estate brokers and accountants willing to draw up fake income statements and tax returns — who recruit people with good credit histories to serve as a decoy or “straw buyer” in a real-estate deal.

The conspirators inflate the price of the property, to get the biggest loan possible, pay the sellers the original price and then pocket the excess loan money as “cash back” at the closing of the deal.

The decoy buyer is paid off — often with just $5,000 — and the property is quickly abandoned to foreclosure, said Theobald, a senior official with the Miami-Dade Police Department.

‘EPIDEMIC’

“It’s an epidemic,” said Nancy Hogan, a veteran realtor and former head of the Florida Real Estate Commission.

“The cash back, the fraud for profit, is what has been so rampant,” she said.

The Club at Brickell has the highest current number of foreclosure proceedings involving any single south Florida property.

There may be other properties in the United States that hold the distinction of being riddled with more cases of apparent mortgage fraud than the Club.

But Doug Dewitt, a real estate broker contracted to work with several lenders on the valuation and disposal of foreclosed properties, said nearly 70 percent of the sales or closings at the Club over the last 18 months were questionable.

That works out to more than 200 possibly shady deals in a single building, he said.

The dubious transactions all fit a pattern that Theobald said should trigger “bells and whistles” for law enforcement anywhere — time and time again properties that failed to sell for months when listed at around $450,000 were pulled from the market and then suddenly sold for more than $800,000.

Florida leads the nation when it comes to mortgage fraud, according to the Virginia-based Mortgage Asset Research Institute, a group that works closely with the U.S. Mortgage Bankers Association.

Many apartments could wind up being sold at auctions like one held last month for bank-owned properties in Fort Lauderdale, further depressing prices in a market suffering its biggest condo glut in decades.

“You’ve seen some of it already. They are actually having auctions to try and sell units,” said Theobald, when asked about discount sales involving recently foreclosed properties.

“I don’t know where it’s going to end up,” Theobald said. “I don’t know when the bottom is going to be.”

Ken Thomas, a Miami-based banking expert and lecturer at the Wharton School at the University of Pennsylvania in Philadelphia, said there was little surprise Florida led the country in mortgage fraud.

It stems, at least in part, in the way lenders plowed “easy money” into the local condo market before Florida’s recent housing boom turned to bust, Thomas told Reuters.

“We’re going to see a lot more of this fraud being exposed, especially as these units go into foreclosure,” Thomas said.

“We were the poster child of the housing bubble … maybe we should have expected more of this.”

(Editing by Michael Christie and Eddie Evans)

By LINDA RAWLS

Palm Beach Post Staff Writer - Thursday, November 29, 2007

Condominium sellers blinked first.

Prices of existing condos in Palm Beach County plunged 30 percent in October - the sharpest annual decline since the Florida Association of Realtors started tracking them in January 2006.

The median price of an existing condo in Palm Beach County was $158,900 in October, the association said Wednesday, down from $225,500 in the same month last year.

“Individual sellers are becoming more realistic and lowering prices,” said Jack McCabe, a Deerfield Beach real estate consultant specializing in the condo market. Seller incentives have failed, he said, and appraisers have “returned to fundamentals.”

Palm Beach County has a 35-month supply of existing condo units, McCabe noted.

On the Treasure Coast, prices of existing condos remained unchanged from a year ago at $225,000, the association said.

Despite falling condo prices, sales continued to decline.

In Palm Beach County, sales of existing condos fell 12 percent, and on the Treasure Coast they fell 13 percent.

Statewide, condo sales fell 20 percent, with 16 of 20 markets posting declines compared with a year ago. The markets that increased were: Lakeland (9 percent), Miami (7 percent), Tampa (8 percent) and Tallahassee (17 percent).

In the single-family home market, the Treasure Coast had a 41 percent plunge in sales compared with October 2006, the Florida Association of Realtors said.

Single-family home prices on the Treasure Coast also fell, to a median of $201,000 from $242,400. The 17 percent price drop was the highest-percentage decline in sales in the state.

Palm Beach County single-family home sales fell 27 percent, while the median price of an existing single-family home in Palm Beach County fell 5 percent, to $348,300 from $365,600 a year ago.

There’s a record four-year supply of condos and single-family homes for sale in Palm Beach County, according to Illustrated Properties Real Estate.

“The high inventory shows that there is still a gap between buyer and seller expectations regarding price,” said Mike Pappas, chief executive of The Keyes Co. In a normal market, six months is the standard supply of homes for sale.

Statewide, single-family home sales plunged 29 percent from a year ago, while median prices fell 8 percent, to $222,100 from $242,700.

Not all single-family markets had falling prices.

Pensacola prices rose 3 percent to a median of $161,900, the Florida Association of Realtors said. Miami prices remained basically unchanged at $354,800, and Fort Lauderdale prices rose 1 percent to a median of $354,000.

Sales of existing single-family homes nationwide fell 21 percent to a seasonally adjusted annual rate of 4.4 million, the National Association of Realtors said.

The median price fell 6 percent to $205,700 from $219,600.

Condo sales nationwide fell 20 percent in October to a seasonally adjusted annual rate of 600,000 from 752,000 in October 2006.

The median price of an existing condo nationwide fell 5 percent to $223,500 from $213,100.

by Sharon Harvey Rosenberg 

A battle over a luxury condominium development in Coconut Grove has caught the attention of developers, philanthropic activists, public officials and even hospital executives. With big money on all sides, the proposed development — 300 Grove Bay Residences — has generated controversy, court motions and neighborhood complaints because it will sit almost in the back yard of the Vizcaya Museum & Gardens, a national historic landmark just miles south of downtown Miami that’s the darling of local historians, society players and tourists.

The project involves three proposed high-rise buildings on waterfront property owned by Mercy Hospital near Vizcaya. The development team includes Related Group and Ocean Land Investments.

“From a legal standpoint, you have plenty of fire power,” says James Murley, director of the Joint Center for Environmental and Urban Problems at Florida Atlantic University/Florida International University. “These parties seemed locked in one classic legal battle.”

Those against the development have challenged Miami’s previous decision to rezone the property from “government institutional” to “multifamily high density.” They argue that the project opens the door to future encroachment on national landmarks.

Backers of the project argue that the development team has scaled back the buildings and agreed to make concessions. What’s more, they argue, Mercy Hospital will use its share of the proceeds to improve the quality of medical treatment.

Mercy CEO John Matuska says, “The project that was developed was the least intrusive on the community in terms of density and impact,” adding that the hospital could have used the land to build a medical office building, an assisted living facility or other healthcare offices that would have generated four to five times the traffic of the proposed project.

Ironically, the battle is being played out as the condo market has stalled, a fact not lost on opponents of the deal.

“We kept saying slow down,” says Becky Maltov of the Dade Heritage Trust, one of the leading preservationist organizations for historical landmarks in Miami. “We’re going to be stuck with all of those condo projects that people can’t sell or live in.”

SOURCE:  Florida Trend

By GERALDINE FABRIKANT - New York Times

FORT LAUDERDALE, Fla., Oct. 20 — Despite a record number of foreclosures and a raft of public auctions of unwanted houses, the upper tier of the real estate market in Florida remains relatively immune to the spreading disaster.

Houses and condominiums with price tags of $1 million or more are still changing hands robustly in some of the most exclusive areas, though at a pace less brisk than a year ago. The glistening waterfront glass towers on Miami Beach, the sprawling estates set in manicured gardens in Palm Beach and the clustered mansions in Naples are attracting buyers, both domestic and foreign.

As in other once-booming regions, in Florida the housing market seems to be not one market, but two. The lower end is littered with vacant houses and unfinished developments, and homeowners are struggling to meet their monthly payments as rates adjust upward. The luxury end has its unsold new condos and mansions lingering on the market, too, but as in New York, where the demand in pricey Manhattan is still strong, sales have fallen less. And Miami and other parts of Florida are continuing to attract interest among the wealthy.

Both markets have been buoyed by foreign buyers attracted to the United States because the weak dollar makes American homes comparative bargains. Florida has the added demand from affluent retirees across the country and second-home buyers, particularly from the Northeast.

“The very, very high end of the markets in communities such as the Bay Area, Los Angeles, Manhattan and Miami and to a lesser degree Chicago, Seattle and Washington that have global appeal have held up much better than the rest of the housing market,” said Mark Zandi, chief economist at Moody’s Economy.com. “A recession would certainly not help the high end, but it would not undermine it. And much of their buying is done with cash and not affected by the global financial turmoil and its impact on the availability of mortgages.”

Take the greater Miami area. Over all, home prices have fallen 7.3 percent from their peak in December 2006, according to the Standard & Poor’s/Case-Shiller index that tracks repeat sales of specific homes. But because of a shift upward in the value of the homes that have traded hands, the median price for condos sold so far this year for over $1 million is holding steady at $1.5 million, according to the Realtor Association of Greater Miami and the Beaches.

The median price for single-family homes sold is even reported to be up slightly, to $1.51 million from $1.46 million in the 2006 period. In Miami Beach, two brokers recently represented a buyer from the Midwest who paid $7 million for a beachfront triplex. The sellers, a group of wealthy Mexicans, had bought the apartment for $6.13 million in April 2005, near the height of the market. They put it up for sale in early 2006 for $9.5 million and finally sold it for a 14 percent gain.

“When people are realistic about prices, they can sell,” said a broker with EWM Realty, an affiliate of Christie’s.

Based on the number of sales, the Florida real estate market as a whole has taken a huge hit this year. Unit sales of homes and condominiums worth less than $1 million in Miami-Dade County, for example, fell 37.2 percent through Oct. 23 compared with the period a year earlier. So far in 2007, 7,078 homes have been sold.

But even the high end is cooling off. In the greater Miami area, the number of condos and single-family homes that sold for more than $1 million through Oct. 23 fell 18 percent, to 958 units from 1,166 units in the comparable period a year earlier.

At the very high end of the market in Naples on Florida’s west coast, there have been about 40 sales so far this year, compared with 46 sales for all of 2006, according to Thomas L. Campbell Jr., sales associate at Premier Properties.

In Palm Beach, the number of units sold has fallen 15 percent, to 223 properties.

“There is more inventory in all price ranges,” said Deborah Boza Valledor, the chief operating officer of the Realtor Association of Greater Miami and the Beaches. But even as more homes linger on the market, some areas remain particularly popular with potential buyers. “They are waterfront properties that are exclusive,” she said, “and people are willing to pay the price.”

Indeed, more than 78,000 homes were for sale in the Miami area in August, up from 51,000 a year before, according to ZipRealty, the real estate brokerage firm.

The overhang of unsold homes helps explain why reported selling prices do not tell the whole story. Sellers “are making concessions,” Ms. Boza Valledor said. “They will offer a year’s worth of paid maintenance fees to the buyer, or they will pay for the parking space or they will throw in country club fees that might be part of the expense of buying a home in a gated community.”

Just a year ago, when buyers were bidding against one another for properties, such deals would have been unusual. And in another sign that the feeding frenzy has ended, the highest price paid for a Miami-area condo this year was $13.9 million, down from the top price of $16.9 million last year.

The Christie’s broker, suggests that sellers are starting to be more realistic. “They are coming off their 2005 prices and are more in today’s market,” he said. “Two years ago, if you sold something at $3.5 million, the next listing in that building came at $4.2 million. Now it is more reasonable.”

Across the state through the end of September, the real estate company Coldwell Banker has sold 1,222 condos worth a million dollars or more, said Clark W. Toole, who runs the company’s operations in Florida. The average sale price is down less than half a percent from last year.

To the degree that the market has held up, it has been helped by eager foreigners, checkbooks in hand, who are still showing up and often paying cash. A survey last year by the National Association of Realtors found that the number of foreign buyers in Florida had dropped significantly from 2005. But of those who bought, 29 percent paid cash. Only 8 percent of domestic purchasers did. More than 10 percent of the foreigners bought homes for over $1 million.

The pattern of sales remains uneven, with evidence that some of the most exclusive places are having a harder time. On Fisher Island, the private island just off Miami Beach that has its own golf course, tennis courts and spa, business has slowed sharply, said Lars Ekdahl, who has worked as a real estate agent on the island for 13 years.

Right now, the island, which boasts Andre Agassi as a frequent visitor and where Oprah Winfrey once owned a home, has 96 of its 700 housing units for sale. At one point, the number offered was just 39.

“I didn’t think it would affect us so much at Fisher Island,” Mr. Ekdahl said, “with the dollar so weak and the euro so strong.” Only about half the island’s residents are Americans. The cost of living on the island has risen because of dues and other expenses, and in a market in which buyers have more choice, they may be pickier.

Perhaps the starkest sign of a two-tier housing market is in Palm Beach. The island of Palm Beach itself has about 8,000 housing units. Leslie Evans, a local real estate lawyer, said that about 80 percent of sales there are cash deals and that most buyers are American. But just across the bridge in West Palm Beach, “there are buildings with 200 units and 80 of them are for sale, and others where the building is nearing completion and sales will never close.”

BY DOUGLAS HANKS

Rosewood, one of the top hotel brands in Sunny Isles Beach, plans to exit the market after only a year and a half amid a falling out with the owner of the Acqualina condo-hotel resort, company officials said.Rosewood has run Acqualina’s 96-room hotel since its May 2006 opening. But on Wednesday, the developer, Aventura’s Trump Group, announced it would manage the oceanfront property itself and that Rosewood would leave Oct. 31.

Neither side would offer details on the abrupt change. A Rosewood spokesman said the Trump Group’s plans for Acqualina are ”not in lockstep with the Rosewood mission.” The Trump Group stated it wanted to run the Acqualina as an independent resort and that it may try to expand the Acqualina brand.

Trump said it notified Rosewood last month of its plans to dismiss the company as the resort’s operator.

Rosewood’s scheduled departure comes about a month after the Regent South Beach switched to a Vincci after the developer of the condo-hotel soured on the operator’s performance.

Victor Lopez, a former Hyatt executive now helping Kor Group launch condo-hotel projects in South Florida and elsewhere, said the switch is bound to anger buyers at the Acqualina, where condo units started in the $400,000 range and ran as high as $5 million.

”Rosewood’s an excellent brand,” Lopez said. “Obviously people buy because they’re going to receive premium hotel services, from a very reputable, high-end operator.”

But Mark Zilbert, a condo broker negotiating sales on some Acqualina units, said he thought Rosewood always took a back seat to Acqualina anyway. Unlike Key Biscayne’s Ritz-Carlton, the Trump Group made the hotel operator a secondary element at the hotel property, calling it ‘Acqualina, a Rosewood Resort.’ ”

”Acqualina is the brand, no question,” Zilbert said.

Well:

50 Biscayne has finally opened its doors!  The 500+ luxury condo complex in Downtown Miami has been under construction since 2003, and it has turned out beautifully.

Buyers at 50 Biscayne are now making final preparations for their closings, and there are a handful of buyers who are keenly-interesting in flipping thier condos prior to closing.

We have some of those deals, and you can see them here:  http://www.zilbert.com/sell_preconstruction_condo_summary.asp

To learn more about 50 Biscayne, visit our website:
http://www.zilbert.com/50_biscayne/50_biscayne.asp

If you are interested in seeing the building in person, just let me know.  We can give you a personal tour of the building and its amenities.

- Mark Zilbert

The following content comes from the South-of-Fifth Neighbors Association.  This is an organization made up of condo owners from this part of South Beach. 

Earlier today, Gerald Posner, SOFNA President, his wife Trisha, Bryant Kirkland, SOFNA’s Treasurer, and Miami Beach Commissioner Michael Gongora, met with Jeff and Michael Berkowitz, the President and Vice-President of the development company for the 185,000 square foot vertical retail complex planned for 5th and Alton. Also present, for the two-hour meeting, was Wayne Pathman, the Berkowtiz’s attorney.

The Miami Beach Design Review Board and the Historic Preservation Board approved the Fifth and Alton project, after extensive hearings, in August 2004, long before SOFNA existed. The artwork, to be done by Romero Britto, was also approved after several Art in Public Places committee hearings.

As a result, the 5th and Alton project is proceeding.  Ground was broken in June without having to consult with SOFNA. But at our request, and that of Commissioner Gongora, the Berkowitzs were more than willing to meet.

Many of you had expressed concerns about the quality of the retail tenants, especially since this imposing complex would be the first site greeting every visitor to South Beach.

The city gave the green light to the project with the requirement that a needed neighborhood grocery store be built. The Berkowitzs tried to land Whole Foods, who passed in favor of downtown Miami. Publix will now take the entire ground floor. Small retail shops at the street level will also include a cellular company, Panera bread, and others to still be determined.

There is space for approximately 1,000 parking spaces (the city actually paid over $500,000 for the extra parking, in the hope it would relieve parking congestion on Ocean and Washington for weekend beach visitors).

The area of our focus, however, were the third and fourth floors, where there are spaces for 4 big box stores. The Berkowitzs methodically, and convincingly, showed us that for several years, they tried to attract premier retail tenants. Owning other such complexes (such as Dadeland) they know the decision makers at each of the major retailers. And it was to their benefit to have the very best names, since it only added allure to the project.

Barnes & Noble was heavily courted, but passed every time, including recently. If they ever open on the Beach, it will be Lincoln (despite 5th and AltonÕs rents being substantially less than Lincoln). Borders Books said no. As did Crate & Barrel, The Container Store, CB2, Abercrombie and Fitch, and all of the department stores. On the clothing front, Zara has already opened on Collins at Fifth. The Berkowitzs made a special presentation to the hip, young clothing retailer, H&M, which has been looking for a Beach location. They offered them the corner space, where their logo would greet everybody coming into South Beach.  H&M instead wants Lincoln. Even Sports Authority passed. As did Bed Bath & Beyond and
Linens and Things. Target and West Elm were persistently courted, but both decided instead to open in Midtown.

Most of these national retailers stubbornly believe that South BeachÕs demographics include too many part time owners and that tourists wonÕt use 5th and Alton as a shopping center. They want a location with substantial foot traffic. SOFNA, Commissioner Gongora, and the Berkowitzs are convinced the retailers are wrong, but cannot convince them otherwise.

As of this time, although all the contracts have not been finalized, the third floor will include a large Best Buy, and a smaller Staples, and the fourth floor will have a large Ross Dress for Less, and a smaller TJ Max. Sure, all of us South of Fifth would prefer a Barnes & Noble and a Container Store, but, unfortunately, it is almost certain not to happen.

The Berkowtizs agreed to keep us informed of retail developments, and they are willing to meet again. If we bring them a higher quality tenant, they are more than willing to welcome them into the complex.

Commissioner Gongora generously spent nearly another two hours talking to the SOFNA reps. As he emphasized, only by being involved early in the approval process, could we have ever had an effect on the outcome. Since SOFNA’s formation this spring, we have done precisely that on a broad range of projects planned for our neighborhood. And we
will continue to do so. In the case of 5th & Alton, all we can do at this stage is to ask for what we want, but we have no way of forcing the issue. And realistically, from what we learned today, the developer tried, but failed, to accomplish the very same thing we wanted.

Gerald Posner, on behalf of the SOFNA Board of Directors