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Buyers from eastern Europe are looking for bargains
Urman, 39, is a residential developer who has been riding a wave of post-communist capitalism that has infused huge sums of money into former Soviet states. Those clever enough to take advantage of the burgeoning free-market economies have made a killing.
He and his colleagues say they are now poised to invest a significant portion of that wealth in Southwest Florida's ailing real estate market.
"Me and my business partners think the real estate market is down in its cycle," Urman said by telephone recently from the Czech Republic. "We would like to take advantage of the down market and buy a residential building. We are looking not only for the rental income, but an appreciation in value in the next three years."
Urman's investment group is being assisted by Sarasota attorneys Alan Tannenbaum, who has specialized in real estate for three decades, and Ivo Travnicek, a lawyer in Tannenbaum's firm. Travnicek hails from a city outside Prague and is fluent in English and five eastern European languages.
With Ian Black, a commercial Realtor who has spent his career selling real estate first in Ireland and now in Southwest Florida, as a consultant, Tannenbaum has formed Florida Venture Partners to smooth over the myriad complications foreign buyers face when purchasing Florida property.
Southwest Florida could use the inflow from Eastern Europe like it could at no other time in recent history. There are more than three times the number of homes for sale than is normal. An already rampant foreclosure rate spiked again in September to a record. With the economy and stock market in dis even at today's depressed prices.
Foreign buyers like Urman and his partners have the potential to be game changers.
After four trips overseas to generate interest in Florida real estate from investors from Slovakia to Hungary to Russia, Florida Venture Partners is now bringing over the investors themselves -- an elite group whom Tannenbaum claims are poised to sink potentially billions of dollars into the Sunshine State.
"They have a lot of capital and staying power and they are not looking to turn a profit next year," said Tannenbaum, well-known in this region for his representation of loan holders from Bradenton's former Coast Bank. "We'll have the channel open so the rest of them will see us as the portal to investment over here. Florida as it exists now will be bought by the world."
Vulture funds
Florida far outpaced all other states in attracting foreign investment, with roughly 25 percent of all purchases made by international buyers done in the Sunshine State, according to a recent National Association of Realtors study.
Often grouped under the unsavory-sounding term "vulture funds," opportunistic investment groups like those being courted by Florida Venture Partners already are being pursued by others in the state.
Some are units of existing regional real estate firms, such as Prudential Palms Realty, Michael Saunders & Co. and Coldwell Banker Residential Real Estate.
Others, like Tannenbaum's group, have formed in the last few years with a laser focus on a specific type of investor seeking to profit from real estate prices that -- at least in terms of residential prices -- today equate with the pre-boom year of 2003.
While the investors may differ in where they are from, or in what segment of the real estate market they are interested in, they all share a common thread: pay as little as possible now; sell for much, much more later.
A Bal Harbour-based company does little to hide its scavenger-like mission. It is in their name: Condo Vultures Realty.
"Our best guesstimate is that 95 percent of the people who hear the term are disgusted," owner Peter Zalewski said. "But the five percent of the people who hear the term and know what it means are the people who have the money today. Everything we do is legal and ethical."
Since incorporating in the post-boom year of 2006, Zalewski said the business of selling off the bloated Miami-Dade County condominium inventory has been brisk.
"We have been rocking and rolling ever since," Zalewski said.
His company has grown to 29 agents in Southwest Florida and they are expanding into other deflated markets such as Las Vegas and San Diego.
There has been interest from more than 200 funds, including hedge funds and university endowments. About 70 percent of that interest has been from domestic sources and 30 percent from overseas, including locales such as Singapore, Canada, France and Germany.
"If you're a savvy buyer and you are trying to find product in the hot-button market at a bargain price, here we are," Zalewski said.
'A broad range of projects'
Warren Buffett, the legendary investor whom Forbes still ranks as the world's richest man despite a deflated stock market, has predicted that in 10 years the net ownership of U.S. assets by foreigners will amount to $11 trillion.
Tannenbaum also believes that is a possibility. He said a typical investor working with his firm might be a Czech who, flush with oil, mineral or development company money, could buy a $2.6 million Siesta Key home, 50 condo units with golf course privileges for friends and business partners and a commercial building to establish a U.S. base for his company.
Some of Tannenbaum's clients may, in fact, fit into the opportunistic world of "vultures," but others will actually help out the market by providing the cash to complete a half-built subdivision or commercial complex stalled by the credit crunch.
"It's a broad range of projects," he said. "Nobody has yet to come in and buy the huge inventory of overbuilt condo, homes and half-built subdivisions."
While some of the more traditional realty firms may work merely to entice a foreign buyer to Southwest Florida, Tannenbaum and Travnicek plan to offer year-round concierge services.
Tickets to the ballet, a day at the spa for relatives, a round of golf at the Ritz-Carlton Members Club or transportation to box seats at a Tampa Bay Buccaneers game are examples of what Florida Ventures Partners might choose to arrange when the investors are in town.
Yard service, house cleaning, maintenance and rental oversight would be some of the services the company would provide when the owners are away.
"There is hundreds of billions of dollars of Florida property that needs to move, and I believe much of it will be bought up in the next few years," Tannenbaum said. "They have the money to invest and we are going to get them to invest it in Florida."
Urman, the Prague developer, equates the $5 million to seed money: "Me and my partners are ready to make new investments if we are satisfied with the results of the pilot project."
Taking advantage
Jack McCabe, a Deerfield Beach-based real estate consultant, said Florida Venture Partners seems like the right idea at the right time.
"It's a smart strategy and they are reaching to where the buyers are now," McCabe said. "They were communists 20 years ago and since they have become a capitalist market, some of them have made tremendous fortunes."
McCabe, who pointed to a handful of similar ventures in South Florida, said the eastern European investors may do a good deed or two along they way -- such as helping that struggling builder finish his subdivision -- but make no mistake: They are opportunistic buyers.
"They didn't make these fortunes by making stupid decisions," he said. "They're looking at taking advantage of buying Florida properties at 30 or 40 cents on the dollar."
Part of the reason these buyers want to travel halfway around the world to invest in a second, third or even fourth home is the same thing that has drawn many others: Florida's climate.
But another draw is the very fact that the properties would be so far away from home, Travnicek said.
"They are big fish in a small pond there, but here they can go to Whole Foods and go golfing and nobody knows them," he said. "The Russian investment alone is going to be huge. They like America and they are coming."
Friday, November 28, 2008
Closings better than expected for new Miami high-rise condos
The number of closings at new downtown Miami condos has been better than many expected, a survey showed, but a big test still looms for the revitalizing urban center.
Miami's latest building boom is creating 22,000 condominium units in the city's urban core, more than double the number built in the last 40 years. But a long-standing question remains: How long will it take for all the condos to actually sell?
The answer: 70 percent have found a buyer, according to a new study by condovultures.com, a real estate consultancy. So far, 17,299 condos have been delivered with 12,169 closed at an average price of $405,966 per unit, according to the condovultures.com report. It amounts to a sales total of nearly $5 billion.
By year's end, 3,999 units are set to hit the market. Another 1,439 after that.
The sales have been better than many observers expected for a downtown area held out by some as ground zero for speculation and excess. And it underlines Miami's ongoing urban revitalization, fueled by people, builders and investors returning to the city center.
But it also comes with a big caveat: Nearly a quarter of new downtown condos produced by the boom are just being delivered and starting closings now, including many of the largest projects.
''South Florida developers have to be excited by the fact that more than two out of three downtown condo units have closed successfully,'' said Peter Zalewski, principal at condovultures.com in Bal Harbour. ``But the giants are coming.''
The massive projects include the three-tower, 1,800-unit Icon Brickell pinched between Biscayne Bay and Brickell Avenue, which starts closings this month. The 342-unit Epic, rising along the Miami River, is poised to start closings. So too, 530-unit Mint at Riverfront, 459-unit Infinity at Brickell and 346-unit Paramount Bay.
''We are bullish,'' said Miroslav Mladenovic, vice president of Cabi Development, which started closings Thursday on its 848-unit Everglades on the Bay project along Biscayne Boulevard. ``Comparable projects to ours have fared well, we don't see why we can't fare the same.''
The new batch of condos are hitting the market as credit remains tight, consumers are increasingly cash-strapped and existing home prices continue to fall due to an outsized inventory of unsold homes throughout South Florida. Sales, however, have picked up in recent months.
Zalewski's report, culled from a review of property records ending Sept. 30, covers the greater downtown area between the Julia Tuttle and Rickenbacker causeways and Interstate 95 to Biscayne Bay.
The swath of land -- which includes the Brickell, central business district and Midtown neighborhoods -- has seen more development than any corner in Florida. The area is closely watched due to its significant construction and its implications for the broader housing market, but also because policy makers and many builders view redevelopment in the urban core as a key element to the region's overall economic success.
Meanwhile, the overall downtown closings have been solid so far, Zalewski said.
''We're like in the sixth or seventh inning of this,'' said the Bal Harbour analyst. ``We had a good starting pitcher, and some decent middle relievers, now the question is if it's going to be a blown save.''
BY MATTHEW HAGGMAN
Miami's latest building boom is creating 22,000 condominium units in the city's urban core, more than double the number built in the last 40 years. But a long-standing question remains: How long will it take for all the condos to actually sell?
The answer: 70 percent have found a buyer, according to a new study by condovultures.com, a real estate consultancy. So far, 17,299 condos have been delivered with 12,169 closed at an average price of $405,966 per unit, according to the condovultures.com report. It amounts to a sales total of nearly $5 billion.
By year's end, 3,999 units are set to hit the market. Another 1,439 after that.
The sales have been better than many observers expected for a downtown area held out by some as ground zero for speculation and excess. And it underlines Miami's ongoing urban revitalization, fueled by people, builders and investors returning to the city center.
But it also comes with a big caveat: Nearly a quarter of new downtown condos produced by the boom are just being delivered and starting closings now, including many of the largest projects.
''South Florida developers have to be excited by the fact that more than two out of three downtown condo units have closed successfully,'' said Peter Zalewski, principal at condovultures.com in Bal Harbour. ``But the giants are coming.''
The massive projects include the three-tower, 1,800-unit Icon Brickell pinched between Biscayne Bay and Brickell Avenue, which starts closings this month. The 342-unit Epic, rising along the Miami River, is poised to start closings. So too, 530-unit Mint at Riverfront, 459-unit Infinity at Brickell and 346-unit Paramount Bay.
''We are bullish,'' said Miroslav Mladenovic, vice president of Cabi Development, which started closings Thursday on its 848-unit Everglades on the Bay project along Biscayne Boulevard. ``Comparable projects to ours have fared well, we don't see why we can't fare the same.''
The new batch of condos are hitting the market as credit remains tight, consumers are increasingly cash-strapped and existing home prices continue to fall due to an outsized inventory of unsold homes throughout South Florida. Sales, however, have picked up in recent months.
Zalewski's report, culled from a review of property records ending Sept. 30, covers the greater downtown area between the Julia Tuttle and Rickenbacker causeways and Interstate 95 to Biscayne Bay.
The swath of land -- which includes the Brickell, central business district and Midtown neighborhoods -- has seen more development than any corner in Florida. The area is closely watched due to its significant construction and its implications for the broader housing market, but also because policy makers and many builders view redevelopment in the urban core as a key element to the region's overall economic success.
Meanwhile, the overall downtown closings have been solid so far, Zalewski said.
''We're like in the sixth or seventh inning of this,'' said the Bal Harbour analyst. ``We had a good starting pitcher, and some decent middle relievers, now the question is if it's going to be a blown save.''
BY MATTHEW HAGGMAN
Tuesday, November 11, 2008
5 Real Estate Markets Most Likely to Rebound
Seattle tops the list of best places to invest in commercial property
If you're a homeowner seeing property values plummet, look to the commercial real estate market for solace. It might tell you which areas will recover fastest — and which will likely remain weak.
The Urban Land Institute recently asked 700 real estate professionals to name the best (and worst) places to invest in commercial real estate in the coming year. Those surveyed included private developers, Realtors and Real Estate Investment Trust executives. Their answers also apply to the residential market, since the single-family-home sector typically follows the economy. As wages go up and there are more jobs, more people can buy homes, pushing prices up.
The best cities in which to invest are those that are considered gateways to international investment, have vital downtowns where people can forgo cars, and don't have a glut of condos or office space.
These traits landed Seattle the No. 1 spot on the list. No city scored above a 6.15 on a scale of one to nine (one being an abysmal place to invest and nine being excellent).
Seattle is "a diversified market, has a good base of business and is becoming a 24-hour city," says Stephen Blank, senior resident fellow, finance, of the Urban Land Institute. "It's going to be in a good position to come back."
Although the city is suffering from the loss of Washington Mutual and the downsizing of Starbucks, Boeing and Microsoft are still relatively strong. Apartment vacancies are low and there aren't too many new buildings going up, meaning the market won't be oversupplied. The same is true in the retail space.
San Francisco comes in second with a 6.12. The City by the Bay learned from the tech crash of 2001 not to overbuild. There is a reasonable supply of office and apartment space, which should limit vacancies. San Francisco's port is also expected to help the city during the downturn as Americans continue to rely on Asian imports.
Washington, D.C., New York and Los Angeles round out the top five.
Of course, there's no guarantee that an improved commercial market will lead to an improved home market. However, investors have a better chance of seeing home prices rise in fundamentally strong markets like Seattle than in struggling cities like Detroit.
It landed at the bottom of the list, scoring a 2.24. Detroit has been reliant on the car industry, which is rapidly shrinking. Other businesses are unlikely to fill the void in the next few years, which means the city will be hit hard by further economic struggles.
New Orleans also lands near the bottom with a score of 3.33. The city has been losing businesses to Houston, Dallas and Atlanta since Hurricane Katrina hit in 2005.
The other cities at the bottom of the list — Columbus, Ohio, Milwaukee, Wis., and Cleveland — suffer from dying industries and lack of tourist appeal.
Recent attempts to turn downtown Milwaukee into a thriving 24-hour city haven't been enough to protect it from the coming downturn. Increasingly picky investors are expected to favor higher-quality port cities over Midwest towns.
And while Columbus has the potential to become a major shipping hub for goods traveling cross-country, that revitalization may have to wait for a stronger economy and a government focused on improving the nation's roads.
For now, prospects are dim.
By Dorothy Pomerantz, Forbes
Visit the Real Estate Open Networkers
If you're a homeowner seeing property values plummet, look to the commercial real estate market for solace. It might tell you which areas will recover fastest — and which will likely remain weak.
The Urban Land Institute recently asked 700 real estate professionals to name the best (and worst) places to invest in commercial real estate in the coming year. Those surveyed included private developers, Realtors and Real Estate Investment Trust executives. Their answers also apply to the residential market, since the single-family-home sector typically follows the economy. As wages go up and there are more jobs, more people can buy homes, pushing prices up.
The best cities in which to invest are those that are considered gateways to international investment, have vital downtowns where people can forgo cars, and don't have a glut of condos or office space.
These traits landed Seattle the No. 1 spot on the list. No city scored above a 6.15 on a scale of one to nine (one being an abysmal place to invest and nine being excellent).
Seattle is "a diversified market, has a good base of business and is becoming a 24-hour city," says Stephen Blank, senior resident fellow, finance, of the Urban Land Institute. "It's going to be in a good position to come back."
Although the city is suffering from the loss of Washington Mutual and the downsizing of Starbucks, Boeing and Microsoft are still relatively strong. Apartment vacancies are low and there aren't too many new buildings going up, meaning the market won't be oversupplied. The same is true in the retail space.
San Francisco comes in second with a 6.12. The City by the Bay learned from the tech crash of 2001 not to overbuild. There is a reasonable supply of office and apartment space, which should limit vacancies. San Francisco's port is also expected to help the city during the downturn as Americans continue to rely on Asian imports.
Washington, D.C., New York and Los Angeles round out the top five.
Of course, there's no guarantee that an improved commercial market will lead to an improved home market. However, investors have a better chance of seeing home prices rise in fundamentally strong markets like Seattle than in struggling cities like Detroit.
It landed at the bottom of the list, scoring a 2.24. Detroit has been reliant on the car industry, which is rapidly shrinking. Other businesses are unlikely to fill the void in the next few years, which means the city will be hit hard by further economic struggles.
New Orleans also lands near the bottom with a score of 3.33. The city has been losing businesses to Houston, Dallas and Atlanta since Hurricane Katrina hit in 2005.
The other cities at the bottom of the list — Columbus, Ohio, Milwaukee, Wis., and Cleveland — suffer from dying industries and lack of tourist appeal.
Recent attempts to turn downtown Milwaukee into a thriving 24-hour city haven't been enough to protect it from the coming downturn. Increasingly picky investors are expected to favor higher-quality port cities over Midwest towns.
And while Columbus has the potential to become a major shipping hub for goods traveling cross-country, that revitalization may have to wait for a stronger economy and a government focused on improving the nation's roads.
For now, prospects are dim.
By Dorothy Pomerantz, Forbes
Visit the Real Estate Open Networkers
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