Dozens of Empty Depressing Dark Condos - the future of downtown Miami?

[logybogy]

If Fort Lauderdale is any indication of what can happen in Miami, it does not look good.

http://www.newtimesbpb.com/Issues/20...news/news.html

Dark Tower

Las Olas River House was supposed to be the life of the party, not a hollow high-rise

By Trevor Aaronson and Sam Eifling

Published: Thursday, October 13, 2005


On a recent Tuesday afternoon, Philip Freedman steps out of an elevator on the 39th floor of Broward County's tallest building and into a condo fit for an episode of MTV Cribs.

A dapper and affable salesman, Freedman cues Frank Sinatra's "I've Got the World on a String," then walks his alligator-skin shoes along the dark wood floors. He passes the black granite countertops and the Sub-Zero appliances in the kitchen on his way to the 500-square-foot terrace that demonstrates why someone just might plunk down $1.95 million for this opulent, 3,400-square-foot pad at Las Olas River House.

"This unit gives you the terrace that wraps around," he says. Outside the glass doors is a view of Broward unmatched in any other building in South Florida. The city hums below as workmen tar the roof of the Fort Lauderdale Museum of Art, a marching band plays several blocks away, and a park fountain sprays. To the north are the hazy outlines of beach condos and the fetid ziggurat nine miles away better-known as the county landfill. To the west, 'burbs sprawl toward the Everglades. To the south, in the distance, a tiny bar graph shaped like downtown Miami breaks the horizon.

"There's a beautiful sunset view here, and at night, with the airport, all the lights twinkle," Freedman says. "It's very exciting."

But not nearly as exciting as the project's motto -- "Where Las Olas Meets Fifth Avenue" -- would imply. In fact, the building is surprisingly empty. During the day, the dual, 42-story, 452-foot-tall blue towers of the luxury condo are visible from all over. At night, though, its 287 units cast so few lights that the behemoth appears like a silhouette on the skyline, as sparsely lit as the commercial towers it dwarfs.

Why, fully 10 months after it opened, does the city's most conspicuous residence resemble a haunted house? Quite simply, because as much as you might like to live there, not many people actually do.

According to county property records, 68 of 287 units in River House remain unsold. What's more, records suggest that only about 25 percent of people who purchased a condo at River House live in the building. Meet the people who bought a piece of the American dream, Fort Lauderdale-style:

Of 219 owners, only 55 have registered a River House mailing address with the county.

Of those 55, only ten have registered homestead exemptions, a tax break for primary residences.

Of the owners, 63 registered addresses outside of Florida. They live in 20 different states, the U.S. Virgin Islands, and three foreign countries: Canada, Germany, and the Bahamas.

Corporations own 13 units.

Thirteen groups of people own more than one unit.

River House billboard great Dan Marino, who purchased unit 3302 for $1.35 million, lists his Weston home as his mailing address.

Even more telling, of the 219 units that have been sold, roughly 33 have been put back up for sale (some might say "flipped"), according to a recent review of records on the Multiple Listings Service, a widely used database of properties for sale. Many of these re-sellers are expecting lucrative, if unrealistic, returns:

James M. Domesek and April Hollis, both of Fort Lauderdale, purchased unit 2509 in January for $624,000 and unit 3307 for $874,000. They are now asking $995,000 and $1.7 million, respectively.

Ursa Investment Inc., a company controlled by Miami residents Oscar Chapa and Saul Uribe, bought unit 2006 in February for $815,000. It's now listed for sale at $930,000.

Gaetano and Frances Rizzo, of Clinton Township, Michigan, bought unit 2910 for $1.145 million in January. They listed it for sale at $2.095 million.

These numbers seem to bear out what many have been speculating at the water cooler: New condominiums in South Florida, particularly in Miami-Dade County, have come to represent commodities more than homes. "Just doing straw polls, it's been about 70 to 80 percent of the units bought by speculative investors planning on cashing in on the South Florida real estate pot of gold," says Jack McCabe, a real-estate industry analyst from Deerfield Beach.

With so much money in real estate these days, it's shocking that River House needed public assistance. But it did. Years before the housing boom sent South Florida real-estate prices skyrocketing, the Fort Lauderdale City Commission was trying desperately to encourage development in the city center. It found a partner in the Tribune Co., parent company of the Sun-Sentinel, which at the time owned a parcel of land next to its sand-colored skyscraper.

To make the land more attractive for potential developers, Tribune asked the Fort Lauderdale City Commission for a break on impact fees -- money that developers pay to compensate for increased traffic brought by any new project. The commission complied, agreeing to waive $1.6 million in fees.

That paved the way, literally, for Tarragon South Development Corp.'s Las Olas River House.

Fort Lauderdale Mayor Jim Naugle, an ardent critic of overdevelopment in the city, remains bitter about subsidizing such an extravagant housing project. "We forgave $1.6 million in impact fees," he says. "That's the price of a single condo at River House."

But the results are truly amazing. Sitting in a 16th-floor office in the Sun-Sentinel building, James R. Helman, Tarragon South's executive vice president, points out the window. His Las Olas River House rises next door, its sharp lines stretching so high that it reaches beyond the window's view.

"River House is the type of building you'd expect in Manhattan, but it's right here in South Florida," Helman says.

Asked why so little life is apparent in the building, the developer points out that the units, sold "designer-ready" (some might say "completely hollow"), require that owners spend months to design, permit, and finish the interiors. Some owners have opted not to move into their units while the construction is as thick as it has been. What's more, the developer has been selling units in small groups, holding on to certain condos to allow time for the market to drive up prices -- and profits.

"We have consistently moved the price, moved the market, at a nice, steady, increasing pace, and we've had sales every month," Helman says. According to Helman, public records haven't caught up with sales and fewer than 40 new units remain unsold.

But some of River House's residents allege that the situation isn't so rosy inside the building. In interviews with New Times, River House residents complained that the developer has been slow to finish many of the building's amenities. "Projects that were supposed to be complete by now still aren't finished," says Bill Dilodovico, who bought his unit in January for $760,000.

Even though the first residents began unpacking in December 2004, River House's pool, library, and bistro weren't finished until March. Mailboxes were finally installed last month. And even today, the health club, elevators, and many hallways are still under construction. Even the bike room, which the developer claimed would be finished in August, isn't ready, residents say.

Helman says minor delays are to be expected with such a large project. "We were under a lot of pressure from many of the buyers to close on their units as soon as possible," he says. "I don't think the common-area stuff has been a problem."

But some of those residents disagree. "What the hell does it take to finish a bike room -- a few metal racks?" says one resident who asked not to be named for fear of retribution. "The building is a total zoo."

That might explain why River House remains a dark tower. Its prices, starting now just shy of $1 million, are no doubt out of reach for most buyers in South Florida.

But save your nickels, because last month, Freddie Mac CEO Richard Syron predicted that such high-end real estate had reached its price peak and would likely decline. If prices drop nationwide, South Florida's market will likely lead the way.

Deerfield Beach's McCabe predicts a 10 to 30 percent correction (some might say "crash") in South Florida luxury condos in 2006. A glut of available units, coupled with a dearth of affordable housing, could precipitate a fall, the analyst says.

"The problem is that developers have been led to believe there's a much greater market for luxury condominiums -- particularly $700,000-and-above units," he says. "But the majority of people who were buying them were not true end users. What it's done is overinflate the true demand. So we've built this oversupply, because developers have had a lot of cheap money to do it with."

Even Helman, River House's developer, admits that some investors have irrational expectations. Asked specifically about unit 2910, purchased in January for $1.145 million and now on sale for $2.095 million, Helman smirks.

"He might have it on the market for that, but he won't get it," he says.

Real-estate attorney Howard Kurzweil remains optimistic about the building. He bought his unit for $1 million in December 2004, and although the constant flow of construction crews in the elevators is annoying, he has high hopes.

"I think it'll be the ultimate condominium in Fort Lauderdale," he says. "You just have to give it time."

Helman concurs: "The people who have been attracted to the River House, they wouldn't want to live anywhere else."

That goes for at least 55 of them, anyway.

[Roark]

True...that's a big "if".

If Fort Lauderdale is any indication of what can happen in Miami, it does not look good.

When has Ft. Lauderdale EVER been any indication of what can happen in Miami?!?!?!
Can you imagine the day when the VMA's pass over Miami for FTL? Or the largest collection of art in the WORLD, Art Basel, leaves Miami for FTL...or how about the WORLDS largest boat show leaving Miami for FTL...the list could go on and on and on...there is no comparison.
Don't believe what the newspapers are telling you...

[logybogy]

Maybe.

I guess we'll see in a few years, but this also happened in Miami with Cite on Biscayne Blvd. Basically the exact same story as Ft. Lauderdale. Too many investors. Not enough end users. Ghost buildings. They'll get filled eventually, but a lot of the marketing of virbant urban neighborhoods miraculously happening overnight is bullshit. It will take years even after these condos are built and then probably only during the winter season. We'll always have a huge percentage of people buying these units for only seasonal use. That's just a fact of life here in Miami.

I bet you roark that when it is all said and done the true amount of "homesteaded" properties in all these new condos in miami that will be built will be well under 50%. Maybe even under 25%. The rest will be rented out, or used seasonally as a second home or vacation home.

Regardless, the city of miami is vastly better off with all these buildings being built even if they are largely ghost buildings. Ghost residents still have to pay property taxes. And ghost residents don't use up as many city services as permanent residents so basically the city is getting free money.

[Roark]

Originally Posted by logybogy

Maybe.

I guess we'll see in a few years, but this also happened in Miami with Cite on Biscayne Blvd. Basically the exact same story as Ft. Lauderdale. Too many investors. Not enough end users. Ghost buildings. They'll get filled eventually, but a lot of the marketing of virbant urban neighborhoods miraculously happening overnight is bullshit. It will take years even after these condos are built and then probably only during the winter season. We'll always have a huge percentage of people buying these units for only seasonal use. That's just a fact of life here in Miami.

I bet you roark that when it is all said and done the true amount of "homesteaded" properties in all these new condos in miami that will be built will be well under 50%. Maybe even under 25%. The rest will be rented out, or used seasonally as a second home or vacation home.

Regardless, the city of miami is vastly better off with all these buildings being built even if they are largely ghost buildings. Ghost residents still have to pay property taxes. And ghost residents don't use up as many city services as permanent residents so basically the city is getting free money.

Sure...I'll give you that...but someone that posts here a lot has observed the the Cite building that you site is north of the "Metromover Bracket". That poster has predicted that the properties inside the DDA Zone, or the Metromover brackets will be fine...as for Blue, Cite and the other places where you have to drive to get to places are challenged (not doomed) but challenged.
Take a look at Jade at Brickell on any given evening...note that less than half the lights are on...that is the reality. It's not bad...
Jade started selling at $300 per sq ft and is now selling at $600. Do the math on a 20% down payment...thats about a 500% cash on cash return, do you think that anyone who owns a "dark apartment" is mad?

You are correct...when you move into a dead neighborhood, you can't expect it to rage overnight (read: Biscayne above the Metromover...Midtown Miami...Blue...etc.), but if you are buying in an area that is already happening like South Beach, Brickell, Miami River, CBD, then you are going to be fine.
From Brickell on River, you can walk to over a dozen restaurants...and many of them have been in business for 5 years or more. Smart money is there....no matter what the glossy ads in Ocean Drive tell you.

[miamicanes]

The big problem with Cite is simply the fact that there's just no sane reason why anyone would pay $360k for a tiny one bedroom condo there today. In Brickell, it would have been normal. Within a block of a Metromover station, or across the street from Dadeland, it would have been defensible. But right now, today, if you buy a 1-bedroom condo there for $360k, what exactly are you getting that makes it worth spending that kind of money there instead of for a unit in Coral Gables, or Brickell, Dadeland, or god forbid, maybe even some of the most recent round of condos sold at Midtown? Nothing, really. There are too many other condos on the market for the same price, in better locations. There's just no "value" there to justify the costs Cite's developers are demanding. And personally, I think anyone who pays that much for a condo there is positively insane unless they plan to hold on to it for at least a decade and wait for the rest of the neighborhood to grow up around it.

[JEmanuel56]

i think everyone has a valid point on this article .. true roark miami will never be compared to FTL, and miami canes i believe that u make a good point too. Let me ask you guys this when a building goes up, a budget is projected in advance for maintenance, salaries, and other expenses but when only half the buyers are end users does that mean that the HOA will have to increase the maintenance fees so the empty units that are still on the market will not effect the projected budget? if that were true then the end users who are living in a ghost building will be pretty upset at something, how does that work?

[Roark]

Originally Posted by JEmanuel56

Let me ask you guys this when a building goes up, a budget is projected in advance for maintenance, salaries, and other expenses but when only half the buyers are end users does that mean that the HOA will have to increase the maintenance fees so the empty units that are still on the market will not effect the projected budget?

No. It's a pretty simple calculation...They take the total budget and divide that by total number of saleable square feet. Most luxury buildings will have a maintenance per square ft. of .45 to .50 per square foot.
Once the condominium documents are drawn up and the building has a Temporary Certificate of Occupancy...all of the saleable square feet are owned by someone...whether the end users, flippers, or the developer.
That is one of the other reasons that developers would rather sell out their building before construction begins, and this is standard operating procedure these days.
In other words, if there are 100 thousand square foot apartments empty, the budget doesn't change dramatically (less valet parking attendants or maybe less maid service for the hallways) but not much...and the owners of the apts pay as much whether they live there or don't.

if that were true then the end users who are living in a ghost building will be pretty upset at something, how does that work?

End users that are living in a building that isn't always 100% full are usually very happy! Almost like having a roommate that pays the rent but is never home!! Speaking for my friends that live in Jade anyway...there is never a wait for machines in the gym...the massusse in the spa is always at the ready, no wait at the valet etc...and the maintenance is slightly less than if there were more people putting wear and tear on the common elements of the property.

[miamicanes]

The developer can't change the allocation of common maintenance fees, but it CAN shut down/eliminate building services to bring everyone's fees down (including its own), even if the amount per unit is reduced only a little and the eliminated/curtailed services are wanted by the actual residents. Little things, like deciding to drain the pool to do maintenance, and leaving it drained for 18 months (commercial pool maintenance services are fairly expensive), or radically increasing the fees for un-deeded parking space rental and guest parking.

[rider_of_rohan]

Doesnt suprise me a bit. Cant believe those people are trying to resell their units for twice the price they paid and there are new units at regular prices sitting open and for sale. Not a very good investment, or sales plan.

[ChuckScraperMiami#1]

Originally Posted by rider_of_rohan

Doesnt suprise me a bit. Cant believe those people are trying to resell their units for twice the price they paid and there are new units at regular prices sitting open and for sale. Not a very good investment, or sales plan.

Its true Rider of Rohan , more than half the condos are being resale for twice as much as they bought them for and not living in them at all, its a buying investment here in all of Miami-Dade County, including Sunny Isles Beach, Coral Gables, Downtown Dadeland, and Aventura.
The reason why most of these future condo towers are selling out before they even clear the way for future construction is an investment as far away as South America and China.

p,s, everyone , With the Interest rates still holding at around 5.67 % at www.interest.com All these condo towers listed now and planned ones in the next 3 yeares will be Built, I say , Go Cranes !!!

[Roark]

Originally Posted by rider_of_rohan

Doesnt suprise me a bit. Cant believe those people are trying to resell their units for twice the price they paid and there are new units at regular prices sitting open and for sale. Not a very good investment, or sales plan.

What's wrong with that? Let them try to sell it for whatever they feel like trying. If the market doesn't finds value, the property won't sell at that price.
I'm not sure what you are refering to when you say not a good investment or sales plan...but is it buying a condo and selling it for twice what you paid for it? If so, I think that is great! What is wrong with selling something for twice what you paid? Is there a better investment than that?
At any rate, I've yet to see someone buy a precon apt and sell it for twice as much as they paid before closing. Not one single buyer...let alone half or more than half.
Maybe bought for $325k and sold for $500K...that's $60k downpayment for a $175k gain...that's about a 171% gain...not a bad business plan.

[rider_of_rohan]

Originally Posted by Roark

What's wrong with that? Let them try to sell it for whatever they feel like trying. If the market doesn't finds value, the property won't sell at that price.
I'm not sure what you are refering to when you say not a good investment or sales plan...but is it buying a condo and selling it for twice what you paid for it? If so, I think that is great! What is wrong with selling something for twice what you paid? Is there a better investment than that?
At any rate, I've yet to see someone buy a precon apt and sell it for twice as much as they paid before closing. Not one single buyer...let alone half or more than half.
Maybe bought for $325k and sold for $500K...that's $60k downpayment for a $175k gain...that's about a 171% gain...not a bad business plan.

No, not selling for twice what you paid, being greedy and NOT selling it for twice what you paid. They arent able to sell them according to the article.

[Roark]

Originally Posted by rider_of_rohan

No, not selling for twice what you paid, being greedy and NOT selling it for twice what you paid. They arent able to sell them according to the article.

Your point isn't really clear...are you saying that NOT selling is greedy? Or selling for twice what you paid is greedy...or they are not selling...or...what?!?!?

[rider_of_rohan]

Originally Posted by Roark

Your point isn't really clear...are you saying that NOT selling is greedy? Or selling for twice what you paid is greedy...or they are not selling...or...what?!?!?

What I am saying is that trying to sell for twice what you paid for a unit in a building with unsold new units is bad business planing. What are the chances you are going to sell that unit? 0 I would think. I meant to say that selling for twice the amount is being greedy, and as you know from being a realitor that you have to assess the market and come to a price, these people are not doing that very well.

[Dale]

WE'RE DOOMED !

C'mon, you pessimists. This is just the old Las Olas Riverhouse half-full/half-empty thing. I hope I don't have to drive down there and slap some of you around a bit.

[dave8721]

It is kind of depressing though when driving to South Beach at say 8PM on a summer night and seeing about 90% of the lights on in the Floridian and the other "north of 5th" condos but maybe 5% to 10% (thats being generous) of the lights on in the South Pointe buildings. They look kind of creepy actually. During the peak winter season some nights you will actually see 30% to 40% of the lights on. So while the "unsold" phenomena may be unique to Ft.Lauderdale the vacant phenomena isn't, yes even inside of the metromover brackets (see 4 Seasons & Jade). Judging by the current buildings, the high end condos will be vacant most of the time, and the more moderately priced units will be occupied most of the time (assuming they are not in a bad location like Cite). The main reason is that while not that many of the moderately priced units are owner occupied either, they are more likely to be rented out (see Vue & the Club). As I see it the reason Cite is not occupied is that its unit owners have a hard time renting out its units since renters are concerned with how a neighborhood is NOW, and now there isn't a whole lot in that neighborhood to justify the asking prices.

[Roark]

Originally Posted by dave8721

It is kind of depressing though when driving to South Beach at say 8PM on a summer night and seeing about 90% of the lights on in the Floridian and the other "north of 5th" condos but maybe 5% to 10% (thats being generous) of the lights on in the South Pointe buildings.

Wow...they ought to come up with a pill for that!!! How can you be depressed driving through South Beach!!!
The Floridian people have walked out of their apartmenst and are walking on Lincoln Road, or walking on the beach! Something Cite people can't do...

So while the "unsold" phenomena may be unique to Ft.Lauderdale the vacant phenomena isn't, yes even inside of the metromover brackets (see 4 Seasons & Jade). Judging by the current buildings, the high end condos will be vacant most of the time, and the more moderately priced units will be occupied most of the time (assuming they are not in a bad location like Cite).

I don't think that just because someone is using a home a second/third/fourth home should be called vacant...this happens very often in places like Jade...Four Seasons is dark mostly dark at night for the same reason and becasue of the offices. Cite is not even in the same leaugue as either of these properties. In other words, there isn't a phenomenon known as the vacancy phenomenon, and the sky isn't falling.

The main reason is that while not that many of the moderately priced units are owner occupied either, they are more likely to be rented out (see Vue & the Club). As I see it the reason Cite is not occupied is that its unit owners have a hard time renting out its units since renters are concerned with how a neighborhood is NOW, and now there isn't a whole lot in that neighborhood to justify the asking prices.

You are exactly right....I have a friend that moved from the Waverly to Cite...he regrets the move...in an effort to save money, he drives to South Beach constantly...when he used to walk to everthing, he is now driving and paying parking (and tickets)...
The Vue, The Club, and Cite were all built as rental buildings...they are all roughly the same renter quality finishes (aluminum balcony rails, middle grade appliances, etc) the reason that Vue and Club are successful is that they have a geat location for the same price. You can walk to plenty of entertainment/food/drink venues.

[Dale]

Well, I keep hearing about the 30 to 40,000 that are moving to Miami each year. So where are the end-users ending up ? The cheaper stuff ? Single-family homes ?

[dave8721]

Originally Posted by Dale

Well, I keep hearing about the 30 to 40,000 that are moving to Miami each year. So where are the end-users ending up ? The cheaper stuff ? Single-family homes ?

The cheaper stuff. Keep in mind that what I was saying about high end units being vacant was only the really high end units like Four Seasons and Jade and the South Pointe towers (units at $1 million+). Also to single family houses, and to the many smaller scale buildings going up in other less transit friendly locations. The main reason being that no one in N.Y. or elsewhere buys a vacation condo in Kendall. For example, with all the new towers that went up on Miami Beach from 1990 to 2000, the population of the beach dropped by about 4,000 people.

[Dale]

Just got back from a three-day vacation in the FTL area. And I wonder if this boom will measure up to the boom of the sixties, given that goodly stretches of A1A still have that frozen-in-the-sixties look.

Also, between downtown WPB and roughly FTL Beach, I believe I saw more inactive (even abandoned ?) construction sites than active construction sites.

Hopefully we're still in the formative stages of the actual construction cycle, as I did read snippets here and there about projects being 'sold out' and such. Maybe it's standard procedure to throw up a chainlink fence and sign, see the sign become weathered - and the lot weed-strewn - before the digging actually starts.