Developer Victor
Ballestas recounted his experience with condo/co-op
terminations of aging properties. His firm, Integra
Investments, has been successful on just one since its
inception in the late 2000s.
“We’ve made offers on 20, taken 10 through the contract
stage, and we haven’t been able to close on any,” he said
Thursday at the fourth annual Bilzin Sumberg Development
Conference in Miami. Ballestas spoke on a panel about the
“aging condo conundrum” alongside Mast Capital developer
Camilo Miguel Jr., broker and developer Arden Karson,
attorney Anthony De Yurre of Bilzin and moderator and
attorney Carter McDowell, also with Bilzin.
Condo terminations aren’t new, but the deadly condo collapse
in Surfside in June 2021 put attention on older condo
communities. And during the pandemic, when the real estate
market was hot, it became more difficult for developers and
condo owners to reach agreements on price.
“Everyone thought their $500,000 condo was worth $2
million,” Ballestas said. “It’s been really hard to get to a
bid-ask price.”
Miguel, CEO of Coconut Grove-based Mast Capital, called the
deals “incredibly challenging,” given that they can be held
up if 5 percent of owners block the deals. Florida law
requires 95 percent of owners plus 1 to terminate a condo or
co-op association.
In many cases, especially since the collapse of Champlain
Towers South, associations and unit owners are dealing with
costly repairs, as well as rising insurance premiums and
other inflationary cost increases. Many owners in the most
vulnerable buildings are on fixed incomes and can’t afford
such bills, creating a “perfect storm” McDowell said.
“There’s a multitude of things going to put pressure on
these unit owners,” Miguel said. “The question always asked
by unit owners is, ‘Where am I going to go?’”
McDowell pointed to expensive special assessments that
owners face, as well as deadlines to comply with new state
law requiring associations to complete financial reserve
studies, fund their reserves, and make necessary repairs to
complete the required building recertification.
“This ranges across the whole economic gamut,” he said,
including the least expensive condos whose owners are unable
to fund expensive repairs. “Some of these things are
literally going to put people on the street. … I think there
is going to be a real affordability crisis.”
Developers use a variety of approaches for buyouts.
Ballestas jokingly compared Mast Capital’s strategy to
something more akin to a “hostile takeover.”
“Once you start buying units and you start taking that risk,
you really have a seat at the table,” Ballestas said.
Miguel countered. His acquisition of the property at 5333
Collins Avenue, an oceanfront building that is being
redeveloped into a boutique luxury condo project called the
Perigon, took about three years, he said.
“Contrary to what Victor [Ballestas] said, you have to play
nice.” Otherwise, “you’re going to create a lot of enemies.”
In some cases, buyouts will pit developers targeting the
same building against each other. McDowell, without naming
the specific property, said his client ended up in a joint
venture with another developer on a buyout in Bal Harbour.
He was likely referring to Related Group and Two Roads
Development’s roughly $130 million buyout of the former
Carlton Terrace property. Related, Two Roads and Rockpoint
Group are developing the luxury condominium Rivage Bal
Harbour on the site.
In other situations, residential brokers will approach
potential sellers one by one, Karson said. Or, commercial
brokers will be hired by an association to solicit bids from
developers.
No one size fits all, the panelists said. And nearly all
cases will have owners “who really don’t want to sell,”
McDowell said.
“It’s a great market to sell into. It’s a lousy market to
buy back into,” he added. “How do we address those folks?”