According to the Wall Street Journal, a group of lenders led by HSBC Holdings and Bank of America are probably going to become the new owners of the Icon Brickell condo and hotel complex in downtown Miami.
“The negotiations are almost finished,” Mr. Pérez said in an interview Wednesday. He said he hoped the agreement would allow Related Group to remain the manager of the three-tower complex near downtown Miami, featuring décor and sculptures designed by Philippe Starck. Representatives of HSBC and Bank of America declined to comment on the talks. (WSJ)
The loans secured by the complex, which entails 3 buildings and 1,800 units, totals around $700 million. When the units came on the market in 2006, apparently nearly all of the units had been sold, many to Latin American buyers/investors. To date though, only 117 purchasers actually closed.
Why? With prices down at least 30% most buyers saw their equity wiped out. They were so far underwater that it simply didn’t make sense to close. And with only 117 occupied units (who knows if they’re all actually occupied), who the hell is going to pay the building’s maintenance costs, estimated at $12 million a year not including property taxes? If you’re one of those 117 owners, you’re basically throwing your money into a bottomless pit.
In these situations, when the lender forecloses on an effectively empty building, many have elected to do bulk sales at significant discounts. However, apparently in this case the lenders have chosen to sell off the units one by one. How long will it take? This will give you an idea regarding supply in the Miami marketplace:
“In the downtown Miami and neighboring Brickell areas, more than 22,000 condos have been built in the past four years, or more than twice the number added over the previous four decades, says Holliday Fenoglio Fowler LP, which advises real-estate developers and investors.” (WSJ)
Image: Flickr
