WEST PALM BEACH, FL - Business and civic leaders hoped a condo boom would complete the renaissance of downtown West Palm Beach, but the real estate bust has swallowed more than two-thirds of the projects. Of the 32 downtown multifamily residential projects on the city's active list, three are under construction, seven are completed and 22 are either stalled or have expired site plans. Four projects have faced foreclosure lawsuits from lenders. One more is marketing a bulk sale of its remaining units at a 47 percent discount, which is expected to further depress prices.
Some buildings that sold out a year ago are still about 70 percent occupied, with investors trying to rent out their empty units, said Roy Assad, a board member of the West Palm Beach Downtown Development Authority and chairman of the Palm Beach County Convention and Visitors Bureau. But Assad said business at his Leila restaurant and others downtown is good. "Downtown West Palm Beach is in a resurgence it hasn't seen in a long time," he said. "Restaurants are filled. We have created a destination downtown not just for people who live here, but for those who surround us."
Jack McCabe, the CEO of Deerfield Beach-based McCabe Research & Consulting, said businesses that expected to offer basic services to downtown residents will suffer as condo developers struggle to fill units. He noted meager population growth and difficulty getting mortgages on condos at high preconstruction prices as major barriers to selling those projects. At one point, more than 5,200 units were in various stages of development in the city's downtown area, but only 1,581 have been built and 331 are unsold, according to a recent check of court records.
The Whitney closed on 67 of its 210 units before $2.8 million in contractor liens stalled sales in November, said Enrique Dillon, president of Miami-based developer Evernia Properties. He is now trying to resolve a foreclosure lawsuit brought by iStar FM Loans, which has $37.3 million outstanding on its $52 million mortgage.
Dillon said iStar increased the amount of the loan to pay the contractors so closings can resume. He did not know whether the $370-a-square-foot preconstruction prices will continue. Dillon said his company faced contractor liens because the project was delayed for a year. "Of all the markets in South Florida, when the markets come back, this will come back faster and stronger because there's not a lot of inventory," Dillon said of downtown West Palm Beach.
While that city doesn't have tens of thousands of condos in the works like Miami-Dade County, recently completed buildings in West Palm Beach have run into slow closings. Since it started closings for its 307-unit tower on Aug. 1, The Edge filed deeds for 150 units through March 20, according to court records. Another 261-unit tower has been stalled, city records indicate.
A package prepared in January by CB Richard Ellis in Miami is marketing the remaining unsold units in the completed tower in bulk for $200 a square foot. The document said the 141 units that had closed up to that point sold for $376 a square foot or $50.5 million gross.
If the bulk sale goes through, developer Edge Investors, a subsidiary of Boca Raton-based Wood Partners, would gross $85.1 million from selling out the first tower, instead of the $115 million it had budgeted prior to construction, according to the CBRE document.
Edge Investors has a $117.2 million mortgage with Corus Bank on the project. That sounds like a desperate move forced on the developer by a lender that wants faster repayment, said Neil Merin, chairman of NAI/Merin Hunter Codman, a commercial real estate brokerage in West Palm Beach. "They are admitting to the market that the units are worth half what they sold them for." Banks will see that and lower the property va
Source: South Florida Business Journal