With buildable land drying up, more condo owners in older buildings are receiving deal-of-a-lifetime offers from developers who want to raze and rebuild.

FORT LAUDERDALE, Fla. – For some South Florida condo dwellers, that tap on the shoulder could lead to the deal of a lifetime.

The tri-county’s white hot real estate market is prompting developers to take stock of the region’s older beach front high rises as potential buyout candidates for redevelopment. While not new, the trend has taken on greater importance as vacant land disappears and more out-of-state residents move to South Florida in search of luxury digs.

Owners who would not have given a thought to selling previously are now taking the idea of moving seriously when confronted with lofty buyout offers, industry analysts and attorneys say.

“It does seem to be a growing trend,” said Gerard Yetming.” “Really there are very few opportunities to build a new high rise somewhere as desirable as on the beach.”

How it works

The obvious attraction for owners selling their older units is the premium prices developers are willing to pay for them.

“They begin to realize this is something we should explore in an organized fashion.”  “It is only with the right collective goals and an advisor where you can get something done.”

He said there are a lot of buyout initiatives you don’t hear about. Many fail, he said, amid bidding wars or internal disagreements over whether a sale should occur in the first place. It always takes a consensus among the unit owners to move forward. “These are more the exceptions than the rule,” he said of the successful buyouts.

“This is not for every building.”  “There are a lot of buildings that were well built and well located and well run that are probably not good candidates. There needs to be a very specific set of circumstances for these deals to work.”

Once an older building is acquired, the time from sale to the construction of a new project runs from 18 to 24 months..

“After the buyout happens it takes anywhere from 6 to 9 months to obtain site plan approval.”  “Then, the sales and marketing process varies per market but generally takes 6 to 9 months as well. From the time we release construction documents to obtaining a permit generally takes 12 months as well.”

The Champlain Towers factor

Some sales drivers include the rising cost of maintenance for the buildings. For years, members of many condo associations have deferred repair projects because of their expense. A potential consequence of deferred maintenance came into sharp relief after the terrifying collapse of the Champlain Towers in Surfside, which took 98 lives. The disaster caused a major ripple effect of concern among residences of other older buildings along the Gold Coast.

“The Champlain Towers incident really, really is pushing this trend.”

“The trend’s been going for some time.”  “I’ve been doing these transactions for ten years. The trend really started because we’re getting into the period where condos developed in the ‘70s or ‘80s are becoming functionally obsolete. Now people are much more in tune to the issue.”  “They’re focused on trying to band together and sell their property in a way they weren’t before.”

He added that he’s seen “probably a two- to three-fold interest in these transactions in the past year since Champlain Towers.”

“Normally I work on a couple of these transactions” each year,” he said. “I’m working on 7 or 8 major transactions right now.”

Prime prices for prime properties

Still, it’s bottom-line economics that decides whether a deal will materialize..

“The only time this makes sense is when the value of the underlying land is significantly more than what the collective units are currently selling for.”  “Why else would somebody want to sell their property unless they can make a significant profit?”

“All-time records” are being paid for multi-family buildings as new residents arrive in South Florida from out-of-town and out-of-country. “I would say the vast majority of the sites being targeted are on the beach, in light of what happened in Surfside.”

Many owners are snowbirds who see this as “an opportune time … to cash out at the top of the market and avoid having to pay these special assessments” for heavy repair projects in older buildings.

“Ultimately it was the price they were getting for their units.”  “I would say they were getting well above their market price for their units. No one has to sell. Luckily, I was the only one trying to acquire all of the units and I didn’t have a bidding war.”

He said he met with 26 or 27 of the 49 owners.

“There was a little bit of hand holding.”  “They didn’t want to leave the beach.”

“The ultimate deciding factor was if they were to sell to another end user versus the offer I was proposing, they would have gotten a substantially less amount of money.” 

But sales data unearthed by Zillow, the national online real estate research and investment firm, found some owners received up to $800,000 for their 302-square-foot, one-bath, one-bedroom units with market values just below $200,000.

 

 

 

 

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