Article Courtesy of The Miami
Herald
By MONICA HATCHER
Published January 9, 2007
It was about 8 a.m. in
June, two months after Arnold Kovelman moved into his rented condo at Club
at Brickell Bay in Miami, when he heard the knock on the door.
''I was kind of like sleep
walking and this woman is there with a badge. She's saying
she's the sheriff and she's there to serve my landlord a
foreclosure,'' said Kovelman, 27, a senior account executive
for a New York-based Web development company.
Kovelman's rental was one of 80 in the
luxury condominium at 1200 Brickell Bay Dr. that dropped
into foreclosure in 2007. The Club at Brickell Bay ranked
first among condominiums in Miami-Dade and Broward counties
with the most units in foreclosure. Borrowers owe lenders
more than $42 million.
As the region's housing market
sputters into the new year, a collection of largely
unoccupied new towers are straining under hundreds of
millions of dollars in |
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Arnold
Kovelman looks in the direction of his new apartment after a condo
he was renting at the Club on Brickell Bay was placed under
foreclosure.
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defaulted
mortgages. In the 20 buildings in Miami-Dade and Broward counties with the
largest numbers of units in foreclosure, loans in default totaled more than
$271.8 million, according to an analysis by Condo Vultures, a Bal Harbour
real estate consulting firm and brokerage.
The epicenter: Miami's financial district along
Brickell Avenue, where three of the top five buildings are located. Condo
Vultures' principal Peter Zalewski jokingly refers to that area as Miami's
``foreclosure district.''
Among the 20 buildings ranked, the percentage of units
in foreclosure varied widely. For some large complexes, a high number of
units in foreclosure still represents a small portion of the overall
building. But for the 36-story Vue at Brickell, its 65 units in foreclosure
represented 20 percent of the complex. Two blocks away, the deluxe Jade
Residences at Brickell Bay topped the list with highest dollar value of
mortgage defaults of $60.7 million.
''It reflects the speculators that were coming in and
coming in hard. They all had expectations of how spectacular Brickell was
going to be from an investment perspective,'' with its new vibe, retail and
night life, Zalewski said.
Others said widespread mortgage fraud, involving
inflated appraisals and faux buyers, also led to the dizzying rise in
defaults.
''These buildings are notorious because the fraud was
so prevalent,'' said Lucas Lechuga, a real estate broker with EWM, who
authors a local real estate blog called Miami Condo Investments.
Broward has seen fewer new -- and luxury --
condominiums than Miami-Dade, which probably explains the smaller overall
number of foreclosed units and total delinquent loan values. But many of
them, such as Sailboat Pointe in Oakland Park, which has a 9 percent
foreclosure rate, are condo conversions. Those numbers, Zalewski said,
reflect more "real people who are losing their real homes rather than
speculators who bet wrong.''
Zalewski, who scouts properties for investors, said
the climate in Miami-Dade County, at least, was finally turning favorable
for bargain-hunters and would only get better as the construction of some
10,000 units is finished, contributing to the glut.
''This is a tell-tale sign for buyers. If I were a
seller, I'd be scrambling for alternatives,'' Zalewski said. "As we go
forward, foreclosure rates will be even higher with the new product.''
Generally, buildings are considered ''healthy'' when
roughly 10 percent of the units are up for sale. Any less, it's a sellers'
market; any more, it's a buyer's. When more than 10 percent of units are in
foreclosure, the prognosis could be grim.
The Club at Brickell Bay had 128 units listed for sale
in the South Florida Multiple Listing Service on Monday. Thirty of those
were listed as short sales, meaning they were discounted because of
foreclosure or possible delinquency. An 818 square-foot unit, which sold in
June of 2006 for $430,000, was listed Monday for $220,000, according to
Lechuga.
The good deals weren't good enough for renter Kovelman,
a New York transplant who said he was considering buying in the Brickell
area before he unexpectedly got the boot from his landlord's lender. In
November, he bought a $300,000 condo on South Beach, which he considered a
safer bet.
''Hopefully, Brickell will come back and prosper and
grow, but I think it's going to take some time,'' Kovelman said.
In the meantime, residents of condo buildings with
high foreclosure rates are living with the burden of vacant units. Some face
special assessments and hikes in maintenance fees from community
associations facing budget shortfalls.
Lisa Magill, a lawyer with Becker & Poliakoff,
which represents community associations, said she knew of associations
struggling to cover expenses because more than 10 percent of their residents
were behind on fees. Unkept grounds and disruptions in services could
result, she said.
''In September, we started recommending associations
include a line item in their budgets to account for anticipated bad debt
from noncontributing residents,'' Magill said.
Earlier this year, the Club at Brickell Bay lost its
cable and Internet service because the condo association fell behind on
payments.
That doesn't worry Alex Fornet, who has lived at The
Club for two years. He said he's there for the long haul. Besides the short
cable outage, he hasn't noticed any effects of the foreclosures and said he
enjoys the building.
''Hopefully, when we get all these issues with the
foreclosures we'll prosper in the end and profit from our investments,''
Fornet said. "This is Manhattan, it's the future Manhattan, so we're
all sitting real good.''
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