Miami Condo Investors Successfully Resell 400 Condo Foreclosures, Make $83 Per Foot Profit

Miami Condo Investors Successfully Resell 400 Condo Foreclosures, Make $83 Per Foot Profit

Residential News » Residential Real Estate Edition | By Michael Gerrity | March 22, 2010 8:30 AM ET

(MIAMI, FL) -- According to a new report by Condo Vultures, nearly 400 South Florida new condo units purchased in bulk by investment groups have been turned around and resold for more than $164 million, representing an average return of $83 per square foot in re-sales profits.

Of the 42 bulk transactions for 3,300 units to occur since July 2008, at least 16 of the bulk buyers have successfully retraded more than 21 percent of their newly acquired condos - some 1,800 units - at an average price of $388 per square foot, according to the report based on the Condo Vultures report and Government records in Miami-Dade, Broward, and Palm Beach counties.
These bulk buyers, who are now reselling their units, paid an average of $305 per square foot, which translates into a 27 percent return in what typically takes a matter of months, according to the report.

"A small but growing number of bulk buyers are purchasing blocks of condos at wholesale prices from developers or lenders, slapping a spread on, and then reselling the units on a retail basis to individual buyers," said Peter Zalewski, a principal with the Bal Harbour, Fla.-based Condo Vultures, LLC. "Not all bulk buyers are looking for a quick exit immediately but some clearly are trying to capitalize on the strong demand for new units by all-cash investors. A pair of bulk buyers in unrelated deals went as far as flipping their new units - albeit only 24 condos combined - the same afternoon of their transaction to other buyers, and in the process earned an average of $10,000 per minute.

"This is not the norm but it has happened twice since August 2009."

Bulk buyers from around the world have descended on South Florida attempting to purchase new condominium units in large blocks at price far below the replacement costs in a market that is flooded with product. To date, the bulk transactions that have closed represent combined 3.8 million square feet that have sold for more than $930 million, according to the Condo Vultures.

Foreign national groups have accounted for 18 bulk deal transactions with 1,500 units and 1.8 million square feet at a combined price of more than $350 million. The U.S. investors have acquired the other 1,800 units with two million square feet of saleable space for $580 million, according to the report.

Of the 16 bulk buyers who are reselling their block of units, a dozen of the buyers are based in the United States. The other four buyers come from Canada, the Caribbean, and two from Western Europe, according to the report.

Nearly one-third of the bulk buyers retrading units are doing so with condos in the Greater Downtown Miami area where nearly 23,000 new units were constructed between 2003 and 2010. Only 11,500 units were built in that same 60-block stretch of Greater Downtown Miami, which encompasses the Brickell Avenue Area, Downtown, and the Biscayne Boulevard Corridor, according to the Condo Vultures.

Bulk units being traded in Greater Downtown Miami are selling for an average premium of 74 percent, or $142 per square foot. Bulk buyers in Greater Downtown Miami have retraded 169 units out of 464 units for $64.3 million. This works out to an average spread of $121,300 per unit, according to the report.

Miami Beach is the second most active market for bulk buyers who are retrading product, with three sales campaigns in place and two more planned.

West Palm Beach is the third most active market for bulk buyers who are retrading product, with three sales campaigns in place at this time.

"Bulk buyers who are not retrading their newly acquired units are taking a lease-and-hold strategy that typically has a three to five year schedule," Zalewski said. "The more patient bulk buyers are betting that the spreads will be even greater once the South Florida condo market stabilizes and financing is eventually restored for qualified individual buyers."

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