Condo Terminators Completes Florida’s First Mass Short Sale

FOR IMMEDIATE RELEASE

Grant Stern, founder of Condo Terminators in Bay Harbor Islands, Florida is pleased to announce Florida’s first Optional Condo Termination proceedings.

Miami - Condo Terminators, a specialty consulting group of Morningside Mortgage Corporation, in Bay Harbor Islands, Florida, has completed the filing process for Florida’s first mass short-sale of a failed condominium conversion on June 9 at the Sunset Lake Villas Condominium in Margate, Florida. 

This project is expected to lead a wave of Condominium Terminations, resulting in mass short-sales of failed condominium conversions, reversion to apartment buildings, and the debut of a new legal instrument, the Plan of Termination.

Sunset Lake Villas is majority owned by Anthony Galeotafiore, Managing Member of AJG Realty LLC development group of Bethpage, New York. Sree Reddy, Esq., LLM, of the Miami law firm Roth, Reddy PA, drafted the Plan of Termination and represented the Developer at today’s proceedings. 

Condo Termination was “the only way out” said Galeotafiore, “after all of the units we sold fell into foreclosure, all of the unit owners moved away or rented units without paying HOA dues.  Nobody is financing condos, but apartment buildings are bankable”

Condo Terminators provided specialty business advice to the Developer and transactional advisory services to his council and accepts projects for these services throughout the state of Florida.

“Condo Termination transactions are the only way to resolve Florida’s real-estate slump and protect the rights of home-owners, banks and the value of our tax base,” says Condo Terminators President, Grant Stern, “The Condo Termination law is meant to cut through the tangle of lawsuits and provide fair resolution to the parties of interest, outside of court.”

For questions and further information, please visit www.condoterminators.com or contact Grant Stern directly at 305.219.0326 or info@condoterminators.com or Anthony Gaelotafiore, President of AJG Capital of Bethpage, NY at 516-933-3507 or agallo@ajgcapitalresources.com

CondoTerminators.com Launches Today!

The CondoTerminators.com website is officially ready for prime time! 

It includes news articles from this blog and specific information for condo owners, renters and investors.  (free registration required, can use your GMAIL, AOL or YAHOO accounts)

South Florida Tax Base Absorbing 90% Drop in Condo Values

Condo Termination can remove the weakest sales from the condo market and restore value to our eroding tax base.  Failed condo conversions are seeing enormous drops in tax assessed values.  Today's Miami Herald article highlighting the property tax appraised value updates showed another mid-teens double digit percentage drop from the year prior for South Florida's market taxable assessments.  The new, larger homestead exemption passed when property values and taxes skyrocketed in the boom years is creating unintended consequences.   When combined with dirt cheap apartments in failed condos, these developments promise to create new problems and iniquities in the tax base if left unaddressed.

The Miami Herald reports that the Broward County tax base shrunk by 12.1% last year and Miami-Dade by 13.4%.  Some neighborhoods saw mild price increases or declines, while others dropped by up to 30%!  This shrinkage means that while values drop, millage rates will have to be raised to provide the same services as the prior year, services get cut or create some tough choices for local politicians.  Even worse, this could force tax bills to rise when homeowners were expecting tax relief in line with their new, lower property values.

Last week, CondoTerminators.com posted the Notice of Termination to the owners of a Margate, Fl. complex, which was tax assessed at $159,000 for 2009.  The owner of the majority of the units challenged the 2009 appraisal and had it dropped to $117,000 per unit, saving $298 per unit.  This week's released 2010 assessed values were for $15,500 per unit, an over 90% drop in valuation from one year to the next!  

Florida's Homestead Exemption provides strong protection for homeowners against their creditors, as well as a discount in the assessed value of the home for property tax determination.  In January 2008, it was sensible to extend tax exemptions to provide relief to new homebuyers whose value assessments were an order of magnitude higher than longtime owners who were capped at 3% annual increases with low purchase prices in the early 90s and prior.   

 The old inequalities where longtime homesteaders underpaid and new buyers overpaid will suddenly reverse, permanently if these failed condos are the basis for ongoing tax rates.  The $50,000 Homestead Tax exemption combined with the 3% cap on increases means that a $20,000 condo purchased today, and homesteaded will take approximately 36 years to return those units to the tax base! 

Non-Condo property owners are facing rising millage rates and tax bills.  Condo prices are depressed due to the complete lack of financing options.  Short of passing new legislation to force bankers to loan into condos, this will remain the norm for several years to come - and leave open a window of opportunity to permanently depress property tax bases.   Condo termination will remove these underpriced units from the market and return their taxable values to higher, commercial income values based on cash flows.

Fannie Mae Requires Pre-Closing Credit Checks

Home applicants must freeze credit activity or face scrutiny when they go to close on new home purchase loans.  These Gap reports will raise the cost of consumer credit, while ultimately not affecting consumers' need to increase credit lines after home buying.  Traditionally, housing is the driver of American consumer activity, with new homes requiring furnishings, appliances and general improvements in re-sales of existing homes.

Second Credit Checks For Home Buyers: Be Prepared

Megan Mollman, HousingWatch Contributor

 (excerpted below)

Starting June 1, Fannie Mae has a new rule going into effect which requires the lender to check for additional lines of credit, such as a new credit card or a car lease, that a borrower may have obtained that have not been reflected on the credit report over the course of the loan process. 

Tip No. 1: Get the house before the car 

Across the board, mortgage brokers say that opening new lines of credit is the easiest thing to trigger the lender's attention, especially with the news of Fannie Mae's mandate. For example, this means opening up a store card at Lowe's to get a head start on buying some new appliances or paint or leasing a car to have something shiny to park in your new garage. 

Grant Stern, president of Morningside Mortgage Corporation in Miami, Fla., believes car loans are "the No. 1 culprit" in lenders turning down a prospective buyer's home loan. "We always tell people as mortgage brokers, 'Get the house first, then they will give you the car," he says.

Tip No. 2: Don't switch professions (or tax brackets)

Brokers say its not earth-shattering to change jobs in the same field, especially if you are making more money at the new place of employment, but it's complicated when a professional is moving job classifications, for instance, from employed to self-employed, or from a salaried-position to a commission job. "Moving from an employee to a contract basis is a dagger," says Stern, as two years of federal tax returns need to be included with a loan application. "[In this case], it could take three years to get approved for a mortgage."

Today It Begins

This afternoon, my firm initiated the first Condo Termination in the State of Florida since the 2007 legal requirements revisions at a 44 unit multi-family condominium complex in Margate, Florida.

The waiting period before a condo can ratify a Plan of Termination through a Special Meeting is two weeks.  Our vote is going to be held at the Trustees office on June 9th at 9 am.  After the Plan is ratified, and recorded, the Condo Association will continue to exist, but building will be deeded to a Condo Termination Trust managed as a special purpose entity by Condo Terminators and Howard W. Mazloff, Esq. an experienced real estate attorney.

Condo Termination Benefits Everyone

The Florida condominium statute provides an orderly process to terminate failed condos and revert them into apartment buildings with single owners. Condo Termination has the potential to produce positive outcomes for local governments and the Florida Condo market as a whole. Local governments are facing eroding tax bases due to mass cascading failure of the Florida condo market. The market for condominiums in Florida is oversupplied with liquidation priced condo units. Removal of failing condos from the housing stock will ultimately speed the recovery process in the Florida condominium market. Communities face a wave of decaying multi-family housing projects and "investor hotel" condos without adequate cash reserves and looming deferred maintenance. Condo associations all over the state lacking insurance, reserves with high levels of negative equity should be removed through Condo Termination, soon.

Local governments, school boards rely on property taxes for their operating budgets and to pay debt service. The Florida Constitution requires that this local tax money is set aside for the exclusive use of counties. With the implosion of thousands of condominium unit values, local tax bases are shrinking faster than budget predictions. When a few units inside the project sell at liquidation prices, and financing is frozen, local tax assessors have little choice but to write down values for the entire project. The net effect is raising property tax millage rates across the board. Single family homeowners with lower absolute value depreciation will feel the squeeze, while condo investors get the tax break from lower assessments. County governments will still be forced to cut back on services due tax base erosion, while homeowners will feel the squeeze of higher proportional taxation on their depreciated homes. Condo Termination will allow multi-family housing to be assessed at the leased income value, which is higher than market value where condo prices have crashed.

There's no mechanism to transfer distressed units to new end users without abundant financing. Agency and Government lending authorities place financing restrictions on projects that are largely investor held. Financing for fractured condos still poses tremendous challenges for developers with inventory and investors alike. Investors are weary of lending into or buying into condos due to the potential for sharply rising HOA dues or potential Special Assessments. Condo bulk buyers face the potential of developer's liability buying as few as 7 units. Condo Termination will reduce inventory quickly without requiring thousands of loan workouts and new loans in a tight credit market.

Local economies benefit by the maintenance and repair cycles in multi-family housing. The Florida condo market has a vast supply of Class B and C condominium units where rentals once existed. Healthy condo associations set aside hundreds of thousands of dollars over the course of years for the purpose of replacing roofs, aging plumbing, and improving electrical and/or fire systems. Like apartment buildings, condos require regular maintenance and periodic replacement of major components. Many projects near the end of their economically useful lives were sold to condominium converters and sold to end users with a few engineering reports, limited reserves and abundant financing. Lacking sufficient operating funds, these condos have limited or depleted reserves. Deferring maintenance will further reinforce the negative cycle condos are experiencing. Condo Termination will invite value seeking investors to purchase failed condos in need of repair, creating jobs and helping local economies.

Many new communities were launched with unsound footing and inadequate reserves during the recent real estate boom. Condo Termination will reverse eroding tax bases in the Florida condo market by removing liquidation priced units. It will reduce inventory quickly, without thousands of bank transactions when negative equity is drowning communities. The recovery process will accelerate with lower inventories and establishing criteria for communities that are failed. Apartment house maintenance will be performed by value seeking investors after Condo Termination, which will stimulate local economies and maintain high quality of housing stock. Ultimately, I believe that up to 15% of the post 2003 condominiums developed statewide in Florida could be legitimate candidates for Condo Termination in the course of the next 5 years.

Miami Condo Developer Kicked Around by Northern Trust

Often banks cause the very problems they seek to avoid by their pre-emptive strikes against developers who borrow to build. Northern Trust bank is not your typical real estate lender, but made a special exception to lend money to a long time client, Developer Mario Egozi.

After the project's completion, the bank spent over a year refusing to allow changes to the developer's business plan, nor support his efforts to obtain condo certification from Fannie Mae, nor the FHA.

Developer alleges Helms-Burton Act violation - South Florida Business Journal by Paul Brinkmann

excerpts from story published in the South Florida Business Journal on May 8th, 2010

Mario Egozi, the Cuban-born developer of a $24 million luxury condominium in North Bay Village, is citing the controversial Helms-Burton Act in a legal battle to fend off a foreclosure lawsuit by a development group with past connections to a resort in Cayo Coco, Cuba.

Egozi, 52, worked primarily as an architect rehabbing upscale homes in New York until 2005, when he convinced his longtime family bank, Northern Trust Bank, to provide a $16.9 million construction loan for his dream project, the 16-story Cielo on the Bay. But Northern Trust sold the loan last year to a company called 7835 NBV LLC, some of whose principals are affiliated with French-Canadian real estate firm Thibault Messier Savard & Associates. At least one member of that firm, professional hockey legend Serge Savard, was also involved in tourism development in Cuba several years ago.

That connection with Castro’s government should disqualify the new owner from doing business in the U.S., Egozi alleges. An attorney for 7835 NBV disputes Egozi’s allegations; the case is now before a bankruptcy judge in Miami. Egozi is stung by Northern Trust’s decision to sell the loan. In an e-mailed statement, attorneys for 7935 NBV denied that the company was in violation of the Helms-Burton Act. “Neither 7935 NBV nor its members have conducted business with the government of Cuba,” said Jose Casal, a litigation partner with Holland & Knight. “A separate foreign entity indirectly related to one of the investors of 7935 NBV’s owner held an interest in a joint venture with other foreign investors who invested in a hotel project in Cuba.”

Egozi has alleged that Northern Trust breached its fiduciary duty to him by suggesting midway through the project that he pledge $3.5 million to cover his personal guarantee, then walking away from the project. Cielo on the Bay includes 35 units originally priced from $750,000 to $1.8 million.

The building is considered a top-flight luxury condo with incredible views, said Grant Stern, a mortgage broker at Morningside Mortgage. “Northern Trust didn’t work with Mario, they just kicked him around,” Stern said. “Northern Trust Bank was always such a chi-chi service-oriented bank that took care of long-term customers,” Percal said. “But the bank was very aggressive and self-centered here.” On a recent balmy day, Egozi glanced up at the building, and said: “I was prepared to walk away with the loss of equity, but there was this pledged collateral also. What I am hoping for now is that they will leave me alone and let me do my project."