Article Courtesy of South Florida Business Journal

By Brian Bandell

Published May 12, 2009 

The developer of the 28-story Onyx on the Bay in Miami faces foreclosure.

Corus Bank has filed a foreclosure action targeting 41 unsold units within the 118-unit condo tower, according to court records.

Developer Biscayne Bay Lofts and the principals of the development partners – Willy Bermello and Luis Ajamil, of Miami-based BAP Developers, and Gustavo Micuslitzki, of Argentina’s GGM Developers – are named in the lawsuit, which was filed April 29 in Miami-Dade Circuit Court.

Last month, the troubled Chicago-based Corus Bank warned that it was preparing to foreclose on three South Florida projects. Onyx appears to be the first to fall.

Miami attorney Paul Shelowitz, who represents Corus Bank in the lawsuit, did not immediately return a call or e-mail seeking comment.

The foreclosure is based on a construction mortgage from Corus Bank to Biscayne Bay Lofts that was last modified at $44.1 million in 2007. The Onyx closed its first sale in August 2007 and got off to a brisk start. However, it couldn’t sell out more than two-thirds of the units as South Florida’s economy faltered and obtaining a mortgage became difficult. Of the 77 units that were sold, only five were closed on since October 2008.

According to research by Condo Vultures Realty LLC, 47 of the closed units in Onyx were being rented.

On May 1, Corus Bank warned that its losses were so bad that federal regulators could place it into receivership. If that happens, the Federal Deposit Insurance Corp could auction off its distressed development loans and foreclosed properties in South Florida.

For Onyx residents, a foreclosure could take away the developer’s incentive to properly maintain the building, said Jack McCabe, CEO of Deerfield Beach-based McCabe Research & Consulting. Corus Bank is not exactly in great financial condition, either. The owners could face homeowner association assessments, which could scare away potential buyers and renters, he said.

“Only bulk or vulture investors would look at it,” McCabe said. “Because of the high cost of taxes and homeowner fees, it makes it hard to rent these units without a significant discount on the purchase price.”

Condo Vultures CEO Peter Zalewski said Onyx has not received much interest from bulk buyers because it doesn’t have enough available units to be managed efficiently in bulk. Plus, it’s in the Edgewater area just north of downtown Miami, in a condo market that has not matured.

Zalewski said distressed units in Onyx should sell for $100 to $125 a square foot. His firm listed a $389-a-square-foot average on Onyx’s completed closings.

That should place downward pricing pressure on nearby condo projects, particularly the 346-unit Paramount Bay, which is nearing completion five blocks from Onyx. Paramount Bay also is financed by Corus Bank, which has disclosed that Paramount Bay is among its South Florida projects with its mortgage in nonaccrual status.

“This isn’t real good news for sellers, but it’s fantastic news for buyers,” Zalewski said.

Onyx is one of 12 projects BAP Development has listed on its Web site. Among them is the 50-story, 128-unti Onyx 2. That was planned for the same site as the first phase, but it has not broken ground.

An affiliate of BAP Development has a $13.9 million mortgage note with Cyma Finance on its Opera Place project in West Palm Beach maturing on Sept. 30. That condo development has not broken ground, either.

Developer Bermello did not immediately return a call seeking comment. He and Ajamil also are principals of Miami-based architectural and engineering firm Bermello, Ajamil & Partners.