An interesting twist on the ongoing "fight" about the Hallandale Diplomat Resort proposed condominium complex.
The following is an example (not quite accurate but significant) on how some developers can fail to "keep their promises" and leave beleaguered buyers stranded in an unbelievable mess. I just read this very interesting article in the Daily Business Review.
I am a natural observer. I prefer to deduce and understand events based on facts, past and present. Can this story be generalized? Not completely; I certainly know of great developers with absolutely perfect credentials, but it is also true that Developers will often leverage their risks at the cost of consumers' distress. This is a perfect case.
And that brings me to the conclusion that all this patriotic talk about developing our land, building homes for our citizens, vision, progress, and the like, has a bottom line: Money.
Suing the City? "I don't think"...said North Miami Beach Mayor? Is this an obnoxious thought?
Our elected officers should be very careful when planning our children's future.
I have read this in Daily Business Review - April 02, 2010
No quick fix for owners who feel duped by developers
Boca Developers and Biscayne Landing
Attracted by glossy promotional pitches, Rupert and Beverley Henry say they almost emptied their retirement account a few years ago to buy a condo where they hoped to spend the rest of their lives. They liked what the brochures and what the developer told them of the proposed Oaks at Biscayne Landing near Biscayne Bay in North Miami. Back in 2005, the couple envisioned themselves strolling to restaurants and shops in the town center of Biscayne Landing, spending afternoons by the pool and enjoying the view of Biscayne Bay. But after they moved into their newly built condo in 2007, they discovered reality didn’t match their dreams.
Their bay vistas have been replaced by mounds of dirt. They don’t have a pool, clubhouse, guardhouse or any other amenities because BLIA Developers, an affiliate of Deerfield Beach-based Boca Developers, never got around to building them before turning the two-tower Oaks project over to the lender. The twin 25-story buildings are surrounded by acres of dirt, a chain-link fence and construction debris. None of the promised retail, office and hotel space has been built. The Henrys and about 100 other owners at the Oaks have hired attorney Gary Poliakoff to help them escape from the Oaks. For now, their two options are limited and won’t provide a quick fix: They can sue the city of North Miami, which owns the land under their buildings and worked closely with the developer to plan the project, or they can negotiate with the construction lender, which is about to take control of the condo association.
North Miami Mayor Andre Pierre said he doesn’t believe the owners have grounds to sue the city. “Before the closing, they did a walk through, they investigated the property and they knew exactly what they were getting,” he said. “Coming after the city would be a frivolous lawsuit. We welcome their frivolous lawsuit if that is what they want to do.”
The Henrys have become consumed with the troubled project and their investment. The couple paid $406,000 for their two-bedroom condo in 2007. Units now are selling for $125,000, Rupert Henry estimates. “We used our retirement funds to buy this property, and this is the result,” Henry said, standing next to renderings of the Oaks hanging on the walls of the project’s vacant sales center. “Aren’t those pretty pictures?” he asked. Most owners don’t want their condos, which have depreciated in value because of the lack of amenities and the condition of the surrounding property. “Most of them are not interested in staying there because the lifestyle that they bought will never exist,” said Poliakoff, a shareholder in Becker & Poliakoff in Fort Lauderdale. “They want to recover as much of the money they invested as possible and, quite frankly, move on.” The owners have no hope of seeking compensation from Boca Developers’ BLIA, which turned over 160 units in the Oaks to construction lender iStar FM loans last year.
Unbuilt Town Center
North Miami approved Biscayne Landing in 2002. The community, east of Biscayne Boulevard and south of Northeast 151st Street, was to include nearly 6,000 residential units, 180,000 square feet of office space, a 200-room hotel, 300,000 square feet of retail space and an Olympic training facility. But Boca Developers only got to build the 373-unit Oaks before it defaulted on its construction loans and lost the project. Boca Developers owes iStar $35 million. A foreclosure sale of the 160 units is scheduled for May 11. If there are no bidders, iStar would end up taking title to the units. Boca Developers also defaulted on $45 million and $161 million construction loans granted by Credit Suisse and First Boston to develop a town center with shops, restaurants, offices and a hotel. Credit Suisse and First Boston foreclosed on the $45 million loan and a foreclose sale of the development rights is scheduled for July 15. “The only viable, non-bankrupt entity is the city,” Poliakoff said. “The city is a potential [target] in any litigation because they are the only remaining of the original promoters of Biscayne Landing.”
The Henrys and the other owners at the Oaks don’t even control their own building. Boca Developers never handed over the building’s association to the owners. Court-appointed receiver Andrew Hellinger is running the association until iStar gains control of the property. Hellinger, CEO of Liberty Pointe Advisors, recently met with a small group of owners at the shuttered Biscayne Landing sales center. He promised to build a pool, a playground, a basketball court and a garden for the Oaks residents. He also talked about building a wall around the Oaks and constructing a separate entrance road to isolate the community from the rest of Biscayne Landing. “The goal is to create an oasis within Biscayne Landing so when you are in the pool … you are not seeing the [dirt] that the developer” left behind,” Hellinger said.
He declined to comment on how much iStar would allocate for the job and said he didn’t know its probable cost. Pierre said iStar had committed $1 million for the amenities. A representative of iStar did not immediately return calls for comment. Hellinger said the Oaks parcel doesn’t have enough space to accommodate the new amenities, so he wants the city to give the Oaks about 4 acres from the undeveloped portion of the 167-acre Biscayne Landing. The city signed a land lease with Boca Developers’ BLIA Developers LLC to build the Oaks and signed a second land lease with Boca Developers’ Biscayne Landing LLC to build the rest of the project. The four acres are leased by the city to Biscayne Landing LLC and are collateral for the Credit Suisse loans. Charles DeSanti, the court-appointed receiver for the vacant land, said Credit Suisse and First Boston have agreed to give four acres to the Oaks.
Everyone’s Best Interest
Added Scott Galvin, a member of the North Miami City Counci: “We don’t mind giving a little bit of extra land over to the unit owners. [It] is not going to be a major deal. It’s in everybody’s best interest for those tenants and those residents at the Oaks to get their amenities done.” Pierre said the city will expedite the permitting process for construction of a guardhouse and pool, despite the owners threat of a lawsuit. “I am pushing to get the amenities built as soon as possible,” he said. But he said the city would defend itself against “frivolous lawsuits.”
Marcia O’Connor and Jerry McCarthy, who own a three-bedroom condo at the Oaks, pay about $700 a month in maintenance fees. In addition, each unit pays the city $1,500 a year for the land lease. Those expenses and their $2,100 monthly mortgage payments made their unit unaffordable, said O’Connor. They are renting the unit for $1,600 a month to cover part of their expenses, O’Connor said. “It is killing us, killing us,” she said, adding they paid $380,000 for the unit in 2007. She says some units are now selling for about $120,000. Pierre said most of the owners aren’t paying the $1,500 land lease fee, and the city has not filed liens against their condos. “We haven’t aggressively gone after those owners because we understand and we feel the pain,” he said. From the beginning, the project was marketed as a partnership between the city and the developer. Some buyers bought into it because the city was part of it, said McCarthy, McCarthy, a real estate broker that sold units at the Oaks, said he liked the developer’s sales pitch and believed in the project. He said the city should bear some of the responsibility for the failed project. In part, he blames the city for giving the developer the green light to start closing on the units before the Oaks’ amenities were built. “They should have told the developer they were not going to issue a certificate of occupancy until the clubhouse was built and the guardhouse was built and all the amenities that are part of this property were finished,” he said. “But they didn’t do that.” Pierre said the amenities were planned for a different section of Biscayne Landing, and the certificate of occupancy was issued because the developer built what it was supposed to build in that portion of the property. McCarthy said if the Oaks had been completed with the amenities, the units would not have depreciated as much as they did. “If we had got more of what we were promised,” he said. “We would have been better off than we are.”