I arrived at La Guardia Airport in New York City on Tuesday afternoon. The good news was that the weather was fantastic. It was in the high 60s, which was unprecedented in New York City for the month of January. The weather was just what I needed after arriving in Chicago last week on the coldest day of the Winter season (I think it was something like 15 degrees below zero with wind chill). Brrrrr!!! In fact, the first thing I did when arriving in Chicago was go to Target and buy some long underwear. It was that freakin’ cold! I used to live in downtown Chicago for 4 years so I should know cold, but that day was damn cold! Maybe living in Miami for so long has made my blood thin out a bit or something.
My arrival in New York City, however, soon turned sour after learning that my luggage was lost by American Airlines. Regardless, I checked into my hotel and tried to make the best of my trip. My luggage did finally arrive at 3am that night (the next morning).
Last week, I wrote a post mentioning that I would be in New York City from January 8-11 for the Real Estate Connect NYC 2008 Conference. I was contacted by one hedge fund analyst and two investment groups that wanted to meet me while I stayed in New York City. They each had an interest in the Miami condo market.
Today, I attended the first day of the Real Estate Connect Conference and listened to a few industry leaders speak about the market. I also picked up some great information in conversations with people in the hallways as well as the hedge fund analyst that I met with later in the evening.
Okay…enough with the boring stuff. Let’s get to the goods! The following is the rumor mill that was revealed to me throughout the day. This is just what I’ve heard. I am in no way saying that the rumors are true (although these rumors came from accredited sources).
- WCI will declare bankruptcy within the next two weeks. Shares of WCI, the developer of One Bal Harbour, dropped 52.98% today on worries that WCI will declare bankruptcy. Standard & Poor affirmed WCI’s junk rating status and provided a negative outlook for the company. (Can you say “Pink Sheet”?) WCI was provided an extension until January 16, 2008. That’s a very short extension. My source disclosed to me tonight that the bank is probably finally realizing that it is in their best interest to pursue bankruptcy proceedings rather than delay the inevitable. The mathematics makes sense for the bank to do so. Most banks loaned about 65 percent of the total construction costs. As of right now, according to public records, WCI has closed 50.3 percent of the condo units at One Bal Harbour. If I were the bank holding onto the construction loan for One Bal Harbour, I would foreclose on this development immediately. The lender could at least offset their other losses with the gains they may realize with the sale of the defaulted units at One Bal Harbour. They know that it’s a strong development…I know that it’s a strong development. Until the investment funds step in, however, there’s still a lot of risk.
- Marina Blue closings have been pushed back 2 months and possibly even longer. I heard this rumor when I was in Miami on Monday but I didn’t accept it until tonight. I’ve heard that Marina Blue has no clue when closings will begin. Somebody please tell me that I’m wrong! I’ve heard this one from multiple sources though.
- Opera Tower is delaying closings another month. I’ve heard this one from multiple sources as well. What the hell is going on with this development? It keeps delaying its closings. Weren’t closings supposed to realistically begin around September? I was recently misquoted about Opera Tower in the papers. I was quoted as saying something along the lines that Opera Tower will have a 50 percent default rate. I actually said that Opera Tower will have at least a 50 percent default rate. Just my opinion though. Also, just my opinion is that this development is doomed. There’s a large lawsuit against the developer of Opera Tower. You may think I’m crazy but I think in six months my 50 percent default rate for Opera Tower will be considered an overzealous prediction.
- Here’s the big one. Countrywide Financial Corporation is going to declare bankruptcy within the next three weeks. Countrywide has lost about 44 percent of its value within the past 5 days. Rumors around Wall Street are that this turkey is just about roasted and ready to be eaten. We should see this one fall soon…and it’ll make a huge thud on the Street when it does.
- This one isn’t so much a rumor. Quantum on the Bay began closings and the development isn’t even close to being completed. (From what I’ve heard) TCO was granted in order to avoid a lawsuit pertaining to how long the development took to be completed. My guess (and only my guess) is that some money (maybe a lot) was transferred between the developer and city to get the TCO done to avoid lawsuits against the developer.
25 responses so far ↓
1
Julian
/Jan 10, 2008 at 6:10 am
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As I said on the 8th, before WCI crashed 50%
“Let’s be honest though. If Mr Boyle’s statements were verifiable and true then the banks would be happy to negotiate the new loans because the cash to repay them would be in the bank. Instead they get week by week waivers. I.e. they are watching and waiting like we are. Further, if this is material non-public information that Mr Boyle is publishing (I think it is - it probably determines the future of WCI) then Mr Boyle should watch his door for an SEC notice and his managers at WCI should suspend him.
In addition, if the information is public (material or not) why isn’t their a PR newswire on my Bloomberg telling me that OBH is 2/3rds closed.
Either way, Mr Boyle and WCI have stirred up a hornets’ nest by writing these entries.”
I would imagine the City of Miami and Miami Beach is going to be on the receiving end of lawsuits for graft and illegal application of laws regarding TCO. If I was the State I’d act now before the reputation of the State/City falls to pieces.
To the potential buyers out there (which include myself) - sit this out, there’s a long way to go down, a lot of tax reform yet to come to get out this mess.
The good thing - the catharsis can start to happen soon.
2
english teacher
/Jan 10, 2008 at 10:58 am
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good post, thanks for the info.
FYI - it’s “wind chill” not “windshield”
3
Dave
/Jan 10, 2008 at 11:12 am
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The WCI bloomberg story can be read at
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=WCI:US&sid=ax9cJlmajdHA
It certainly looks like Mr. Boyle has some explaining to do!
4
Lucas Lechuga
/Jan 10, 2008 at 11:29 am
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English Teacher,
Thanks! I was going on very little sleep and it was a long day.
5
guillermo
/Jan 10, 2008 at 11:54 am
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Lucas,I heard that the developer on ONYX ON THE BAY may be declearing bankruptcy soon.
Any news that you can share with us on that issue??.
6
lara
/Jan 10, 2008 at 12:33 pm
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Hi Lucas,
Did you find conference to be interesting?
Please update us on the news and some interesting topics and speakers. Thank you
7
Lucas Lechuga
/Jan 10, 2008 at 12:42 pm
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Guillermo,
I do have news pertaining to Onyx on the Bay. At this time, however, I’m not going to disclose it. I’ll let everyone know likely within the next couple of weeks.
8
BFG
/Jan 10, 2008 at 12:52 pm
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WCI and Countrywide going BK? I’m shocked!!
Seriously though, I think mainstream financial news is now defunct. People can officially cancel their WSJ susbscriptions and stop watching CNBC–those guys are a bunch of hacks. All the “shocking” news they print has already been published in a blog somewhere on the internet about 6 months before the WSJ or CNBC gets it.
I’ve gotten more accurate and prophetic information from blogs over the past 2 years than anywhere else. The housing bubble bursting was accurately called by bloggers in the summer of 2005, the mortgage meltdown was predicted long before the Wall Street Journal mentioned it, and many bloggers have been forecasting the demise of WCI and Countrywide dating back over a year or more.
Whether or not these companies officially declare bankruptcy, I doubt they’ll exist much longer in their current forms. At the very least, we’ll be hearing about some companies buying up some of the pieces of one or both of those companies.
Thanks for the update.
9
Omar
/Jan 10, 2008 at 4:43 pm
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Countrwide shares up 65% today. Bank of America Corp. is in advanced talks to acquire.
10
Jorge
/Jan 10, 2008 at 5:25 pm
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POP!
11
Perez
/Jan 10, 2008 at 6:00 pm
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This might be relevant to Opera Tower
http://southflorida.bizjournals.com/southflorida/stories/2008/01/07/story5.html?b=1199682000^1572409
There is no Oversized, olympic-style pool. Evidently that was touted in promotional material, but not the condo docs. Sounds like a bait and switch.
And despite the name of the condo, there will be no nightly opera performances at the Opera Tower : (
12
Alejandro Diaz Bazan
/Jan 10, 2008 at 9:06 pm
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The same thing happened to countrywide when it was at $15 a share and bank of America put in 2 Billion, it shot up to $23 then rode all the way down to $5.70 I believe now that theres talks about Bank of America it shut up aggain lets remember when it was at $20 there was WSJ article saying that WQarren Buffet might buy it becuase it was so cheap, lets see where they go but my bet is they are going under…. Just by talking to REO officers I have been getting the idea that we will see many REO’s coming to the market
13
Samir Patel
/Jan 10, 2008 at 11:35 pm
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Lucas,
I called down to Marina Blue today and was told first round of closings were scheduled for February. However they did not give me an exact date. It keeps on changing and I am again dissapointed. I have clients out of state, which I’m sure you and many other agents also do which want to get in before purchasing. In reference to Quantum, North tower looks like it is still a month and a half to 2 months away. South tower has begun closing and I hear all new resales in Sout Tower will have to close in the month of January. The last time I walked through, I noticed some units were completely finished, others not. I expect they are probably putting together their schedule of closing and going through those units based on the schedule to finish up.
14
RA
/Jan 11, 2008 at 1:48 am
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I’m surprised Quantum got the TCO. Still looks to me like there’s alot of work to be done and they shouldnt be having residents moving in with all the construction. It’s not right or fair.
I wouldn’t doubt it that there was some shaddy stuff behind the scenes to get that TCO approved. Unbelievable. Wonder if the
ammenities will even be done. Wouldn’nt want to pay HOA fees if it’s not done. IF that’s the case developer should waive those HOA fees untill complete or atleast pro-rate.
Agee on Opera Tower. That just has the smell of death when you drive buy. However it does look pretty at night. Chezzy balcony material though for a supposedly mid-high end project as it was marketed when sales began.
15
Alejandro Diaz Bazan
/Jan 11, 2008 at 10:50 am
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I have been trying to figure out why it would be beneficial for a developer to stall or delay the closings in any project as the more they wait the more they will have to compete with other inventory getting delivered and the only reasonable explanation would be becuase they have another credit line that they fear might get cut or not aproved if its public information the percentage of closings versus the percentage of units vacant and available for sale. Anyone here have any ideas why a developer would delay the closing?
16
Juan
/Jan 11, 2008 at 10:53 am
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Lucas,
Is it really that much of a surprise that Quantum is closing without being completely done? Look at TMP! No Gym, Pool’s not ready, No Spa, Lobby looks pretty bad, Hallways look horrible.
17
Raffi
/Jan 11, 2008 at 11:50 am
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BofA stole countrywide, $7 a share, that is going to pay off so huge for BofA in a few years. Bravo kenneth Lewis for buying on the cheap. anyways i think this condo fiasco is going to come to a crash by end of summer, investors get your money ready cause this 4q will be shopping season.
18
Lipe Medeiros
/Jan 11, 2008 at 3:26 pm
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Just sharing some news in regards to Countrywide…
http://www.msnbc.msn.com/id/22606833/
And Raffi, you are right…the shopping season will start and there will be great new merchandise to choose from…all sizes and shapes and a lot of unsold inventory…sounds like a Barneys NY waresouse sale…
19
MiamiRealEstateKing
/Jan 11, 2008 at 4:33 pm
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Well, now we really know that some rumors are not worth following. Countrywide was actually purchased by BOA for $4B in stock. The deal to close later this year will put BOA at the forefront of the Mortgage business, probrably dwarfing Wells Fargo (now #2 after the acquisition) by about twice.
That is good news for the industry to some degree, because a disintegration of that magnitude would have really applied added pressure on the markets.
This announced purchase, coupled by Bernanke’s comments yesterday for a sure reduction in rates at the next Fed meeting should help ease buyer worries and let them know that the “perfect storm” we’re facing in real estate may be about to perfect itself some more.
As for Opera House…definitely a development to watch. Opportunities will abound after this but those who own will have a steep uphill battle to fight while keeping the COA solvent, owners actually paying association dues and other related headaches. Good luck!
20
RA
/Jan 11, 2008 at 9:14 pm
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I think it’s not always about delays or stalling. It has do also do with obtianing TCO Certificates from th ecity. these buildings have to pass numerous saftey tests fire etc…so sometimes that delays the process.
In my opinion regarding Quatum appears that they made sure all the things that would make them passible to the city were done ASAP to get the TCO. So talk of money behind the table may not be the true reason and perhaps a rumor as one would prob believe when you see how incomplete cosmetically it may be but solid on the passing of alarms and saftey mechanisms. Who knows.
21
Lucas Lechuga
/Jan 12, 2008 at 7:32 pm
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BFG,
Fortunately, or unfortunately (however you want to look at it), within the next 2-3 years the big media companies will slowly begin to acquire prominent bloggers within each industry. I think the media giants were hoping that blogging was just a fad and that we’d eventually go away.
That’s obviously not the case. Would you rather read an article written by a Realtor with an unbiased opinion about the real estate market or a journalist who needs to interview a Realtor in order to write a story? As long as the Realtor’s opinion is unbiased, then I think the answer is obvious.
22
Dave
/Jan 13, 2008 at 5:46 pm
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Hey eyes and ears on Miami thanks for the info as I’m rarely in town. Of what is finished on Quantum how is the quality? Bought a North tower 1b/1b Jan 04 and per earlier comments sounds like a March 1 close based on progress to date? Also any photos make my day.
23
Samir Patel
/Jan 23, 2008 at 2:04 am
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Dave,
They are still working on the common areas, the major things like paint and carpeting are done but they were in the process of assembling gym equipment etc when I did my walkthrough with clients that closed. They were also sealing the pool deck and were going to have the health inspector come out to test it so that it can start being used. This is going to be a great building and affordable compared to most other new construction.
24
perez
/Aug 4, 2008 at 9:58 am
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Lucas, your source’s rumor regarding WCI was off by a bit, but it’s official, WCI has filed for bankruptcy.
Check out the article in the Herald.
http://www.miamiherald.com/news/breaking-news/story/628582.html
Will One Bal Harbour and Mosaic finally become Affordable Housing?
25
Lucas Lechuga Puts Nail In Coffin Of WCI Communities, Inc. Gets His Facts and Prediction Right
/Aug 12, 2008 at 5:49 pm
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Way to go Lucas you really put the nail in WCI’s coffin on your blog, One Bal Harbour and Regent Hotel. Millions of investors around the world were alerted to WCI going bankrupt before they did, and the many valid issues about One Bal Harbour you pointed out. Glad to see you were able to steer investors and prospective buyers around the world on your high profile influencial investment blog, http://www.miamicondoinvestements.com away from a property and company with so many serious issues. I am sure Tim Hamilton wish he had not bought at One Bal Harbour.
I might add that after reading your blog I shorted the stock and steered many investors away from investing in One Bal Harbour and WCI, including fund manager in New York City.
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