Saturday, March 13, 2010

Feeling the pain

I have read in the news:

Africa Israel affiliate sells condo sites at big discount

Africa Israel Investments, one of the hardest-hit companies from South Florida’s real estate collapse, has unloaded two condominium development sites for a discount of about $17 miillion. AI Florida Holdings, an Africa Israel affiliate, sold the site of the proposed 288-condo project Soleil and an existing office building at 3050 Biscayne Blvd. in Miami for $8 million.

It also sold a property at 500 Alton Road in Miami Beach that was planned to be the site of a 66-condo tower called Vitri for $5 million. AI Florida paid a combined $29.6 million for the properties in 2004. The sales, first reported by, closed on Feb. 18. The buyers of both sites are affiliates of Miami developer Crescent Heights, according to state corporate records. Calls to AI Florida chief executive Richard Marin were not immediately returned.

Africa Israel, led by Israeli-Russian diamond billionaire Lev Leviev, has been unloading prime properties at steep discounts since late 2008. At that time, Africa Israel said it would sell off assets to cover $472 million in bonds maturing by the end of 2010. Since then, the company has sold 518,000 square feet of developable land for $52 million, or $100 per square foot, according to, a Bal Harbour real estate consulting firm. In the most expensive South Florida land sale of 2009, Africa Isael in September unloaded a 7-acre parcel in Miami’s Park West neighborhood to the developers of the proposed Miami Worldcenter for $39 million, less than half of the original $88.7 million contract price.

An affiliate of Africa-Israel also took a big loss last June in the sale of an office complex at 1101 Brickell Ave. in Miami. It sold the 488,449-square-foot tower for $33.2 million. Africa-Israel bought the property, which covers nearly 4 acres, for $70 million in 2005. “Despite being a very shrewd organization overall, Africa Israel came to town not understanding the Miami marketplace,” said Condo Vultures principal Peter Zalewski. “They overpaid for a bunch of different dirt, and in the end their timing was off. Now they’re paying the penalty for that.” The Soleil and Vitri sales also resulted in a more than 50 percent discount for 3050 Biscayne Properties and 500 Alton Road Ventures, both Crescent Heights affiliates. Crescent Heights president Russell Galbut and Crescent attorney Sharon Christenbury did not immediately return calls seeking comment. A 150,000-square-foot site, the Soleil property includes a 90,480-square-foot office building described by Zalewski as “antiquated” and “C-quality at best.”

The Vitri site, located near The 5th and Alton retail center, is more suited today for a hotel or small office development, he said. With the Soleil and Vitri acquisitions and late 2008 purchase of a 60,000-square-foot condo development site in the Brickell area, Crescent affiliates have made three bargain land acquisitions since the residential market tanked. The $9 million purchase of the Premiere Towers site near Brickell Avenue was less than the $13.57 million loan seller Willy Bermello got from Colonial Bank when he refinanced in July 2006.

The three purchases — particularly the Soleil and Vitril deals —indicate Crescent executives sense South Florida’s residential market has reached the bottom, Zalewski said. “As much as Africa Israel doesn’t understand the Miami market, the Crescent affiliates are the complete opposite,” he said. “Their people on the ground have knowledge, context and cash,” Zalewski said. “From what these people have accomplished previously, I’d bet my money on them being right” about the bottom.

Crescent historically has specialized in condo conversion projects, so buying undeveloped land could lead to the company’s selling the properties once pricing improves, Zalewski said. “Land banking makes sense — don’t underestimate the value of the approvals received to build both projects — but that doesn’t seem like their forte,” he said. “They might have a deal already cut [with another buyer] who didn’t have the direct access to Africa Israel. “[Crescent] always makes sure to have an exit strategy.”

March 04, 2010 - From Daily Business Review

Henry B. Nathan is a Florida Realtor at United Realty Group Inc.
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