Is bankrupt Channelside condo project really a bargain?

Talked today to a wealthy real estate developer who considered buying in The Place at Channelside, the insolvent Tampa condo complex up for auction Oct. 5 for a starting bid of $17.25-million.

His opinion? He won't touch it. The main reason? Property taxes. And the location isn't so hot, either.

A bankruptcy judge ordered the auction to dispense of 171 condos ranging from 596-square-foot studios to a 3,665-square-foot penthouse. The whole portfolio will be sold as one unit, and the average starting price of $100,000 per unit seemed attractive.

No so fast. My source pointed out that each unit comes with an undesired albatross: Hillsborough County and Tampa want about $5,000 a pop in taxes. That's a nearly $900,000 in annual carrying costs one may or may not be able to pass to renters.

The property appraiser considers the auction an emergency fix, and the sale doesn't qualify as an "arms length transaction" valid for taxing purposes.

The same developer also hates the location in a semi-industrial zone near the Port of Tampa. Waterfront is great, just not waterfront with an obvious oil slick.

Some history: Developer Fida Sirdar of Key Developers Group signed up buyers for The Place's two 8-story condo towers in 2005. It was to be 245 units in all.

But by 2007, buyers were suing by the dozens to back out of deals based on prices the market no longer could support. Denied sales, Sirdar sought refuge in bankruptcy. The judge ordered the auction to pay off debts.

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Another holy high roller charged in mortgage scam

From the office of Florida chief financial officer Alex Sink:

A Florida mortgage broker and her husband, a pastor and popular radio show host, are facing numerous felony charges stemming from a state investigation that found the couple allegedly scammed consumers in a real estate investment scheme.  Investigators said the couple has been enjoying expensive leased vehicles while sticking their “clients” with more than $1 million in mortgage debt.

Shalonda McGill and her husband Rodney McGill were arrested today on charges of Racketeering, first degree; Conspiracy to Commit Racketeering, first degree; Grand Theft, first degree; Grand Theft, third degree; and Obtaining a Mortgage by False Representation, third degree.  The Department of Financial Services’ (DFS) Division of Insurance Fraud and the Office of Financial Regulation (OFR) conducted the investigation.

“It appears that these individuals used their positions in the community to take advantage of people who trusted them,” said Florida Chief Financial Officer Alex Sink, who oversees DFS.  “The evidence our investigation uncovered indicates these two improved their own bottom line while financially devastating the Floridians they promised to help.”

The McGills are being held in the Martin County Jail, with bond set for each at $1.4 million.  Deputies with the Martin County Sheriff’s Department made the arrests during a traffic stop.

The McGills garnered clients through various programs including the Young Millionaire’s Group, Inc. (YMG); RSM Investment and Mortgage (RSM); and New Hope Outreach Center, Inc. (New Hope), all of which operated out of a facility in Jensen Beach.  Florida corporation documents identify Rodney McGill as president and Shalonda McGill as vice president of New Hope, which is incorporated as a non-profit church with the McGills listed as pastors. 

The investigation found that Rodney McGill, as president of YMG, solicited listeners through a daily local radio program on WJFP Radio.  He stated his purpose was to teach and mentor individuals on how to buy and sell real estate without any out-of-pocket expense, with the goal of earning $50,000 in 90 days.

In July 2006, investigators said, Rodney McGill solicited listeners of the radio show to call in and qualify, based on their credit, to become one of his “Fab 5.”  Callers allegedly were assured that they would learn McGill’s real estate investing “cash-out technique.” 

The McGills purchased real estate in Martin and St. Lucie counties, allegedly by preparing and submitting fraudulent loan applications, and then “flipped” the properties to the “Fab 5” for huge profits.  Based on the fraudulent loan applications, four mortgages were obtained in excess of the property’s actual worth, and the McGills allegedly skimmed off the profits leaving three members of the “Fab 5” with more than $1.115 million in mortgage payments they were unable to make.

Investigators said all of the properties are either in or are facing foreclosure. The buyers all believed they were part of the “Fab 5” and were learning the McGill’s real estate investing techniques. 


 

Hello Tampa: Developer's got about a billion to spend

Here's another 750 million reasons why Florida's not a has-been of the real estate world.

Palm Beach developer Kitson & Partners, backed by $750-million in pension fund money from a Chicago private equity firm, is going on a shopping spree in the Tampa Bay area.

Chief executive Syd Kitson's preference is to buy developed and undeveloped land large enough for 500 to 1,000 homes and medium-sized shopping centers anchored by supermarkets. He's looking at several Tampa deals worth tens of millions of dollars.

"We're looking for great locations that would be a good long-term investment," Kitson told the Times Tuesday. "We're patient. We're not out bargain hunting."

Kitson's name might sound familiar. The 6 foot-4-inch Wake Forest University graduate played offensive guard for the National Football League's Green Bay Packers and Dallas Cowboys from 1980-85.

In the business world, Kitson's best known for the massive Babcock Ranch project, approved for 19,000 homes and $6-million-square-feet of commercial development on 17,000 acres in Charlotte and Lee counties. He paid $700-million for the property 3 years ago and set aside most of the land for preservation.

"We're real bullish on Florida," Kitson said. "We're making a billion dollar investment in Florida in addition to the billion dollars we already have here."

Kitson said his company's latest injection of $750-million, courtesy of Chicago's Evergreen Real Estate Partners, allows him to pay cash and bypass the shaky credit market.

Unlike investors who will duck into and dive out of a market in a matter of a couple years, Kitson's views himself as a keeper. When it comes to residential lots, he wants to buy now and develop the land in time for an expected real estate turnaround in 2011.

"We're hoping to become the developer of choice for the builders when they'll need those lots again," he said.

 

Fed won't cut rates, home loans still cheap

The Federal Reserve on Tuesday declined to lower federal funds rate below 2 percent. That's what the government charges banks to borrow money.

The pressure was building on Bernanke & Co. to inject the economy with cheaper money to sooth Wall Street turmoil. But they held tight, realizing that the economy, thanks to volatile oil prices, has yet to slay the inflationary beast.

What's this mean for home loans? People with good credit can get a mortgage today for less than 6 percent. That's plenty good and historically extraordinary. We don't need an open monetary spigot at this point. You know where that got us in 2004-2005.

The Fed has been eager to buck up the dollar after its recent free fall, a plunge that's encouraged speculation in oil and gold. For all the talk of the dollar's demise as the world's currency, it's still needed as a stabilizing force.

Good for Bernanke.

Q&A: When Wall Street fails, we all suffer

The Times ran a Q&A addressing the Wall Street meltdown yesterday. The real estate market is far from immune. In fact, bad mortgages are directly responsible for the bankruptcies and mergers breaking out all over. A sample:

Didn't Lehman Brothers and Merrill Lynch get into trouble by investing in bad mortgages? Does their failure hurt my ability to buy and refinance a home?

It should be business as usual for people making their house payments on time. But home loans could get scarcer and refinancing options narrower. That's because banks, despite relatively low interest rates, are rationing credit. "As bad as the credit crunch was, it's going to get worse because any time banks see financial disarray, they're going to back off," said banking expert Ken Thomas in Miami. That could prolong the housing slump, and some economists like Thomas don't see a turnaround in Florida home prices until 2010.

Two Florida experts predict 2010-11 housing recovery

Florida housing was supposed to recover in 2007. Then everyone talked about 2008. Now 2009's looking a lot less bright and sunny if you believe a couple of economists I talked to yesterday.

Mark Vitner is an economist with Wachovia and an expert on the Florida market. He predicts Florida home sales will show improvement next year but that prices will likely not appreciate until 2010.

"We're at least half way or 2/3 through the correction,’’ Vitner told the Times. "We’re probably 2 years away from a solid recovery."

Vitner predicted a further tightening of housing credit with banks placing greater emphasis on a borrower's character. What's character? Well, remember when a guy put on his best suit to plead his case to the bank's loan officer? Expect more of that. If money is harder to come by, you have to compete for it. Leave the flip flops at home.

"We're moving into an era where relationships between a bank and its customers matter," Vitner said.

The other expert with a lot to say about housing was Ken Thomas, a banking wizard based in Miami who successfully called many of the state's bank failures like Coast Bank in Bradenton.

"I don’t see us hitting bottom till 2010,’’ Thomas opined this week. "And I don't see price appreciation until 2011. But Florida's still the fourth biggest state. We’ll be back.’’

Thomas compared the housing slump to a person who got a little cut on his leg, never got it treated, and watched it get infected.

He blames former Federal Reserve chairman Alan Greenspan for keeping interest rates too low for too long. Some of the pressure for keeping money cheap came from a White House hoping to pump up the economy post 9-11, Thomas said.

"When money is cheap strange things happen,’’ he said.

Local foreclosures high but down since last year

I'd call the news mixed from the foreclosure front: They were high in August -- 5,298 cases in the Tampa Bay area alone -- but that was down from 5,904 in August 2007 and 5,918 in July of this year.

The biggest improvement came in Pasco County, which had 37 percent fewer foreclosure cases this August than last. I live in Pasco and suspect the reason for the rosier scenario there is the huge price concessions you see. Banks are dumping lots of houses via short sale.

The Tampa Bay area ranked 34th in the nation in foreclosures, with such mortgage default affecting one in 244 households. We're pikers compared to Cape Coral-Fort Myers, which ranked sixth.

All these stats come from RealtyTrac. Most local foreclosure cases (3,676) were "lis pendens," which is when the bank first files suit against a homeowner after what is usually several months of missed payments.

Another 1,027 cases were sale notices, when banks announce they'll auction the property. Another 588 cases were homes confiscated by the bank. Not too pretty, but take heart that RealtyTrac counts each foreclosure filing on single properties as if they are different properties. So the numbers are exaggerated. I'd suggest the lis pendens are most telling, though a majority of these homes will not go full foreclosure.

Here's a spreadsheet with more details if your computer can read Microsoft Excel: Download realtytracaug.xls

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Swedish box: IKEA enters home building market

From Friday's St. Petersburg Times:

You've got to love Ikea's chutzpah, or whatever word they use to suggest presumptuousness on the 55th parallel.

After seducing millions of 20-somethings with its assemble-it-yourself white wood, stainless steel and plastic furnishings, the Swedish furniture giant is offering itself as a north-woods elixir for a real estate market gone mad.

Ikea's "BoKlok" subsidiary, a joint venture with Swedish construction giant Skanska, is ratcheting up sales of prefabricated, timber-frame homes starting at 500 square feet. In my book, that's barely large enough to set up Snoopy and Lassie in domestic doggy bliss. But thousands of Europeans swear by their chic, bleak boxes.

Ikea's selling point is affordability, but let's be clear that we're talking about a land-squeezed European's sense of affordability.

Realty company Coldwell Banker reminded us this week how much a typical-sized American suburban home costs Irishmen, Spaniards or Dutchmen. A 2,200-square-foot house costs well north of a million dollars in many major European cities. One of the most expensive markets was Bucharest, Romania. So when you hear a Swedish BoKlok home costs close to $200,000 for a one-bedroom or $325,000 for a three-bedroom, the reaction might just be "I'll take two, please."

We won't have to worry about Vikings dominating our housing market — yet. Ikea opens its Tampa superstore next year, but BoKlok is not yet part of the company's U.S. expansion plans.

I say let Ikea try its hand at the hammer. Sears used to sell "kit homes" from catalogs for a few hundred bucks a pop 100 years ago. Many of those homes still stand. Lowe's entered the same do-it-yourself market as part of the post-Hurricane Katrina reconstruction. The chain's "Katrina Cottages" are supposed to withstand 140 mph gusts.

Lowe's will sell you most of the materials to build a house for as little as $30,000. (But you'll have to supply labor, land, the slab, and heating and air conditioning. Try living without the blessings of Freon in the Louisiana bayous.)

Maybe in 10 years we'll stroll down Ligonberry Lane or Eric Bloodaxe Boulevard. You can only stomach so many Alhambra Terraces and Windemere Circles.

As a 40-something, I find IKEA overrated, its stuff fit mostly for kids furnishing their first apartments. But that pine end table I bought in 1991 is still standing, albeit covered with seed and guano from my daughter's bird cage.

Tampa home sales give a little back in August

After three straight months of year-over-year sales gains, the Tampa area housing market took a little dip in August.

The Greater Tampa Association of Realtors reported home sales of 1,327 in August, 4 percent below the 1,384 sales in August 2007.

Average sales prices continued to slide both month over month and year over year. The typical home price stood at $213,002 in August. A year earlier homes sold for an average of $262,629. That's a drop of 19 percent.

The last time homes sold for so little was February 2005.

August seemed to snip off a budding recovery. Sales were up year to year in May, June and July. But I wouldn't draw too many conclusions from 57 fewer sales. Hey, it was an awfully rainy August ...

An informative chart here: Download gtaraug.pdf

Centex, Pulte, Weekley dubbed top builders in Tampa

The top builders for customer satisfaction in the Tampa Bay area are Centex Homes, Pulte Homes and David Weekley Homes.

So say the hundreds of people who filled out J.D. Power and Associates 2008 builder customer satisfaction survey.

Here's the list

A few thoughts. Just because your builder targets the budget market doesn't mean it's hopeless with a hammer. Centex is hardly an upscale builder, but collected the highest score of "5" in eight of 10 categories having to do with workmanship, customer service, price and amenities.

The lowest ranked builders in the Tampa market were Beazer, KB, Mercedes, Ryland, D.R. Horton and Maronda. All scored 2 out of 5 in overall customer satisfaction, which J.D. Power considers below average.

Strangely enough, KB was one of the top ranked builders in the Jacksonville survey, which just goes to show that brand is no guaranteed badge of quality or ineptitude.

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