Mothballing Lenders, Take A Hit
Miami condos getting liquidated may signal beginning of the end in Florida RE market.
Banks that were reluctant to take real estate-related writedowns may be forced by regulators to sell homes that sit empty and mortgage notes that aren't being paid.
Michael Klinger, managing member of Saber Real Estate Advisors: "Banks are at the point where they have to take a hit.
A lot of them were avoiding the problem because they don't know what to do with the real estate and they don't want to admit and deal with their problems.
They figured time would make things better."
Kenneth Thomas, an independent bank consultant and economist:
"Banks may be reluctant to make a deal because they want to preserve cash. If they don't make the deal they don't have to write down their capital."
Jack McCabe, founder of McCabe Research & Consulting: "There's a purging going on.
It's my belief that the vulture buyers would form the bottom of the real estate market, and we're almost there.
That bottom may last for three years as foreclosure sales go on."
The Nattering One muses... Mr. Klinger and Thomas refer to the banks mothballing and reluctance to discount...
and move these properties in a timely fashion, which is now backfiring on them.
As our readers know our Naybobism: this trainwreck cannot be stopped, its a fait accompli and as they say: You can pay me now, or pay me later...
As a result, Mr Mc Cabe echoes our sentiments, i.e. its going to be a long and painful death by paper cuts.
Hattip to Bloomberg.
Banks that were reluctant to take real estate-related writedowns may be forced by regulators to sell homes that sit empty and mortgage notes that aren't being paid.
Michael Klinger, managing member of Saber Real Estate Advisors: "Banks are at the point where they have to take a hit.
A lot of them were avoiding the problem because they don't know what to do with the real estate and they don't want to admit and deal with their problems.
They figured time would make things better."
Kenneth Thomas, an independent bank consultant and economist:
"Banks may be reluctant to make a deal because they want to preserve cash. If they don't make the deal they don't have to write down their capital."
Jack McCabe, founder of McCabe Research & Consulting: "There's a purging going on.
It's my belief that the vulture buyers would form the bottom of the real estate market, and we're almost there.
That bottom may last for three years as foreclosure sales go on."
The Nattering One muses... Mr. Klinger and Thomas refer to the banks mothballing and reluctance to discount...
and move these properties in a timely fashion, which is now backfiring on them.
As our readers know our Naybobism: this trainwreck cannot be stopped, its a fait accompli and as they say: You can pay me now, or pay me later...
As a result, Mr Mc Cabe echoes our sentiments, i.e. its going to be a long and painful death by paper cuts.
Hattip to Bloomberg.
Comments
I read that article in Bloomberg yesterday. There's another very interesting and frustrating wrinkle to what's going on having to do with developers buying back their units. George Perez and the Related Group have bought back over 146 units at 50 Biscayne under different corporate entities at half the price of what buyers were paying for these units just one year ago in order to sidestep a possible foreclosure or bankruptcy:
"Perez's partnership bought the condos from his own development company and a partner, Atlanta-based Cousins Properties Inc., which built the 54-story tower.
In an earlier bulk purchase at 50 Biscayne, Perez and Cousins sold 26 units in May to 50 Biscayne Suites LLC for $6.1 million. Perez and Cousins paid off their construction loan with LaSalle Bank with the proceeds, according to Zalewski of Condo Vultures.
Paying off the loan allowed Perez to do the recent 120-unit bulk transaction at below-market prices, said Bruce B. Baldwin, a partner with the Miami-based Mase & Lara PA law firm who was not involved in the deal.
Construction lenders require developers to sell condos at a minimum price, he said. Once the developer's debt to the bank is paid, the developer can discount the units, he said."
I may be way off here, but I find this sleight of hand to border on fraud. I'd like to know your opinion on the matter.
Additionally, this will only serve to prolong the charade of price manipulation going in Miami (a la the banks refusing to unload their properties). They are creating an imaginary floor on prices. Even at $235/SF, these units are overvalued for an area where the median household income is around $40K and "official" unemployment has gone from 4.2% to 5.8% since January of this year (and will surely rise much further and faster in the months ahead).