Friday, October 23, 2009

Anatomy of a Struggling Condominium

The condominium association that is the focus of the Oct. 22nd article Condo board tries new tactic to collect delinquent fees by Monica Hatcher is the Jade Brickell Condominium.  This project has been a poster child of the boom for many years.  For the sake of illustration, I have gone through Miami-Dade County Public Records to deconstruct just one of the many dubious chains of transactions that were the stock in trade for gaming the real estate bubble. 

In 2004 Nueva Dia Incorporated bought a developer unit $1,975,000 for Unit 3911 in the new construction Jade Brickell Condominium - 4/4 luxury condominium 3,415 square feet of living area - almost a house in the clouds . . . during the proceeding 2 years the apartment appreciated and was sold. 

Cellini, Limited Liability Company, purchased Unit 3911 for $2,200,000 on November 27th, 2006. This delivered a reasonable 5% compound rate of return to Nueva Dia Incorporated on its real estate investment. But Cellini, LLC - like the Renaissance sculptor of the same name - had plans in the works to sculpt a financial masterpiece. However, to put the finishings on this creation - a fool was required as the model, benefactor, buyer and borrower. Cellini LLC also had to add lender to their masterpiece - a fair and hearty soul, whose can do attitude would sweep away the stingy customs of conservative mortgage bankers.

Mr. Gilberto Lopez bought Unit 3911 of Jade Brickell Condominium from Cellini, LLC on November 30th, 2006 (just 3 days later for those who are counting) for a purchase price of: $3,350,000.  Mr. Lopez likely called his mortgage banker at (866) WAMU-YES and asked them to show him the "Power of Yes"- wherefore, he obtained a mortgage loan from Washington Mutual Bank, FA in the amount of $2,512,500 for his second home.   Perhaps he was a Mariachi Singer?   Alas, Mr. Lopez's motivations in delivering such solid returns to Cellini, LLC and/or any relations they may or may not have is not known, but the rest is public record.

The Management and Shareholders of Cellini, LLC must have rejoiced at their new masterpiece.  A 3 day gain of 35% on their investment filled their coffers with a 7 digit profit and for an annualized return on investment of 4265%!!  The masterpiece was complete!!  

Sadly, Mr. Lopez was unable to maintain his payments to the Jade Brickell Condominium Association and slightly 1 year after his purchase date, in December 2007, the HOA filed suit to foreclose on the Unit 3911 for unpaid dues.  Two months later, as the boom really lost steam, Washington Mutual also filed suit to reclaim Unit 3911 for unpaid mortgage payments as well.  Public record shows that in May of 2008, the Jade 3911, Incorporated company purchased the apartment for merely $1,600,000, likely a cash purchase, since there isn't a recorded mortgage. 

  • Nueva Dia - a good buy and reasonable profit on sale
  • Cellini, LLC - a million dollar gold plated statue by the original Cellini and no buyer's remorse
  • Local Government - $55,000+ in transfer taxes, mortgage taxes, recording fees and higher property tax assessments throughout the building 
  • Local Attorneys - they always win, huh?
  • WaMu - someone got paid for making the loan, underwriting the loan, closing the loan, servicing, etc. then, when the going got tough, they were Out!
  • Gilberto Lopez - his credit, his down payment, maybe his reputation as a financial individual, hopefully nothing more.  Sadly, Gilberto was likely a victim in this transaction at best - at worst, who knows.
  • Jade Brickell Condo - management expenses, attorneys fees, lost revenue, late bills, depreciated neighboring units, etc. etc. etc. 
  • JPM Chase - $900,000+ but who knows how much was cushioned by the FDIC's sugar to get them to take the WaMu Medicine
  • FDIC - probably holding the bag
  • US Taxpayers - certainly holding the bag

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